File No. 70-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1
APPLICATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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DQE, Inc.
Cherrington Corporate Center
Suite 100
500 Cherrington Parkway
Coraopolis, PA 15108-3184
and
DQE Energy Services, Inc.
One North Shore Center
12 Federal Street
Suite 200
Pittsburgh, PA 15212
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(Name of companies filing this statement and
address of principal executive offices)
None
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(Name of top registered holding company
parent of each applicant or declarant)
Linda S. Ackerman, Esq.
DQE, Inc.
411 Seventh Avenue, 15th Floor
Pittsburgh, PA 15230-1930
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(Name and address of agent for service)
The Commission is requested to mail copies of
all orders, notices and communications to:
William S. Lamb, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-4513
Pursuant to Section 9(a)(2) and 10 of the Public Utility Holding
Company Act of 1935, as amended (the "Act"), DQE, Inc., a Pennsylvania
corporation and a public utility holding company ("DQE"), and DQE Energy
Services, Inc., a Pennsylvania corporation and a wholly owned subsidiary of DQE
("Energy Services"), hereby request that the Securities and Exchange Commission
(the "Commission") authorize (a) the assignment to DH Energy, Inc., a
Pennsylvania corporation and a wholly owned subsidiary of Energy Services ("DH
Energy") by Allegheny Development Corporation, a Pennsylvania corporation and an
indirect wholly owned subsidiary of DQE ("ADC"), of all of ADC's rights and
obligations under (i) the Heinz Facility Lease (the "Lease") dated as of January
22, 1997 between Heinz USA, a division of H.J. Heinz Company ("Heinz"), and ADC
and (ii) the Energy Supply Agreement (the "Supply Agreement") dated as of
January 22, 1997 between Heinz, ADC and Duquesne Energy, Inc., a Pennsylvania
corporation and wholly owned subsidiary of Energy Services ("Duquesne Energy")
and (b) the execution of an Operation and Maintenance Services Agreement (the
"O&M Agreement") between ADC and Newco, an entity to be formed under the laws of
the Commonwealth of Pennsylvania which will be a wholly owned subsidiary of
Energy Services ("Newco"), pursuant to which Newco will serve as operator of
ADC's energy facility (the "Airport Facility") located at the Midfield Terminal
Complex at the Greater Pittsburgh International Airport. The Lease, the Supply
Agreement and the assignment of ADC's rights thereunder may hereinafter be
referred to herein as the Heinz Transaction and the O&M Agreement may
hereinafter be referred to herein as the Airport Transaction. DQE and Energy
Services may hereinafter be referred to herein as the Applicants.
Following the consummation of the transactions described herein, DQE
will continue to be a public utility holding company entitled to an exemption
under Section 3(a)(1) of the Act. In addition, upon the consummation of the
transactions for which authority is sought herein, Energy Services will become a
holding company within the meaning of the Act, and will be entitled to an
exemption under Section 3(a)(1) of the Act.
Item 1 DESCRIPTION OF PROPOSED TRANSACTIONS
a. Description of DQE.
DQE is an energy services company organized in 1989 for the purpose of
becoming a holding company for Duquesne Light Company ("Duquesne"), an electric
utility company, and other energy related subsidiaries. Its principal office is
in Pittsburgh, Pennsylvania. For the year ended December 31, 1995, DQE reported
consolidated operating revenues of approximately $1.22 billion. DQE is currently
a public utility holding company exempt from all provisions of the Act except
Section 9(a)(2) under Section 3(a)(1) pursuant to Rule 2. DQE owns all of the
issued and outstanding common stock of two public utility companies as defined
under the Act: Duquesne and ADC, both of which are organized and operate
virtually exclusively in the Commonwealth of Pennsylvania. Consolidated assets
of DQE at December 31, 1995 were approximately $4.459 billion.
Duquesne is an electric utility engaged in the generation,
transmission, distribution and sale of electric energy in the Commonwealth of
Pennsylvania. Duquesne provides electric service to approximately 580,000
customers in Allegheny County, Pennsylvania and sells electricity to other
utilities beyond its service area. For the year ended December 31, 1995,
Duquesne Light Company reported consolidated operating revenues of approximately
$1.18 billion. Consolidated assets of Duquesne Light Company at December 31,
1995, were approximately $4.07 billion.
ADC is an electric utility company engaged in the business of owning
facilities to provide complete energy services to the Midfield Terminal Complex
at the Greater Pittsburgh International Airport/1/. The energy services provided
by ADC to the Midfield Terminal Complex are generated by four boilers and seven
chillers to provide hot and chilled water to the complex and three unitized
capacitors which connect Duquesne's facilities to Allegheny County's facilities.
For the year ended December 31, 1995, ADC earned operating revenues of
approximately $10.5 million. Total assets of ADC at December 31, 1995, were
approximately $10.3 million.
Energy Services was formed on August 2, 1995 and is presently
providing energy services and solutions for customers in domestic and
international markets.
DH Energy was formed on January 9, 1997, for the purpose of entering
into the Lease and Supply Agreement.
Newco will be formed as a Pennsylvania corporation for the purpose of
entering into the O&M Agreement.
b. Description of the Proposed Transactions.
(i) The Heinz Transaction. On January 22, 1997, Heinz and ADC entered
into the Lease and the Supply Agreement. Each of the Lease and the Supply
Agreement provides for the right of ADC to assign its rights and obligations
under the respective agreement to DH Energy.
Pursuant to the Lease, ADC and, after the assignment to DH Energy, DH
Energy will lease, operate and maintain an inside the fence energy facility (the
"Energy Facility"), that provides energy in form of steam, electricity and
compressed air to the Heinz manufacturing plant (the "Manufacturing Plant")
located in Pittsburgh, Pennsylvania. The Energy Facility has two 3 MW steam
turbine generators capable of generating 40 million kilowatt hours of
electricity per year and coal/gas fired boilers capable of generating 1 million
mlbs of steam per year.
The Lease also provides that ADC and, after the assignment by ADC to
DH Energy, DH Energy, may enter into an agreement to supply steam to Pittsburgh
Thermal, L.P., a district heating and cooling system located approximately one
mile from the Manufacturing Plant.
Pursuant to the Supply Agreement, ADC and, after the assignment by ADC
to DH Energy, DH Energy, are obligated to sell to Heinz electricity and steam
produced by the Energy Facility for use by Heinz in the Manufacturing Plant.
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1 See, In the Matter of DQE, Inc., et al., HCAR No. 35-26257 (1995).
ADC and, after the assignment by ADC to DH Energy, DH Energy, will
provide an energy facility supervisor to the Energy Facility who shall supervise
the operating and maintenance staff during the term of the Lease. ADC and, after
the assignment by ADC to DH Energy, DH Energy, will assume control and be
responsible for the day-to-day operation of the Energy Facility, including the
care and custody of all equipment at the Energy Facility. As a result of its
operation of the Energy Facility following the Assignment, DH Energy will be an
electric utility company under Section 2(a)(3) of the Act and Energy Services
will become a holding company as defined in Section 2(a)(7) of the Act. Revenues
of the Energy Facility are estimated to be approximately $2.7 million per year
during the 15 year term of the Lease and Supply Agreement.
(ii) The Airport Transaction. ADC and Newco intend to enter into the
O&M Agreement with respect to the operation and maintenance by Newco of the
Airport Facility. The term of the O&M Agreement will be 5 years and the
aggregate price to be paid to Newco under the O&M Agreement will be
approximately $4.5 million. Presently, Michael Baker Corporation, an independent
third party, serves as the operator of the Airport Facility. The Airport
Facility is presently operated by nine employees who perform all routine
preventive and corrective maintenance of the boilers and chillers, and supervise
any repairs performed by third party contractors. The Airport Facility personnel
also monitor in the in-house information systems to determine when to bring any
particular boiler or chiller on or off-line. As a result of the O&M Agreement,
Newco will be an electric utility company under Section 2(a)(3) of the Act by
virtue of the fact that it will operate the Airport Facility, a facility used
for the generation of electric energy for sale.
Item 2 FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the transactions
described above are estimated as follows:
(a) Heinz Transaction
Legal Fees..................................................$15,000
Miscellaneous.................................................1,200
Total..................................................16,200
(b) Airport Transaction
Legal Fees...................................................$5,000
Miscellaneous...................................................500
Total....................................................5,500
Item 3 APPLICABLE STATUTORY PROVISIONS
The following sections of the Act are directly or indirectly
applicable to each of the Heinz Transaction and the Airport Transaction:
Sections 9(a)(2) and 10.
Section 9(a)(2) makes it unlawful, without approval of the Commission
under Section 10, "for any person ... to acquire, directly or indirectly, any
security of any public utility company, if such person is an affiliate ... of
such company and of any other public utility or holding company, or will by
virtue of such acquisition become such an affiliate." DQE presently is the
parent of two public utility companies, Duquesne and ADC. By virtue of the
transactions described herein, DQE will become the parent of a third and fourth
public utility company, DH Energy and Newco respectively. Accordingly, DQE is
seeking approval under Sections 9(a)(2) and 10 for the proposed transactions.
The Applicants believe that both of the proposed transactions meet the
requirements of Sections 9(a)(2) and 10.
A. Section 10(b)(1)
Section 10(b)(1) provides that, if the requirements of Section 10(f)
are satisfied, the Commission shall approve a transaction unless:
(1) such acquisition will tend towards interlocking relations or the
concentration of control of public utility companies, of a kind or to an
extent detrimental to the public interest or the interest of investors or
consumers.
Section 10(b)(1) requires a finding that control is "of a kind or to an extent
detrimental to the public interest or the interest of investors or consumers."
The framers of the Act sought through Section 10(b)(1) to avoid "an excess of
concentration and bigness" while preserving the "opportunities for economies of
scale, the elimination of duplicative facilities and activities, the sharing of
production capacity and reserves and generally more efficient operations"
afforded by certain combinations. American Electric Power Co., Inc., 46 S.E.C.
1299, 1309 (1978). The Heinz Transaction has not created an "excess of
concentration and bigness" and the assignment of ADC's rights to DH Energy will
not alter the situation in any respect. The Energy Facility is a small utility
facility whose customers are large, sophisticated entities and the Applicants do
not believe the Heinz Transaction will be detrimental to the interests of the
public or shareholders. Similarly, the Airport Facility is a small utility
facility with a capacity of 20 MW and only one customer, the Midfield Terminal
Complex. Consequently, the Applicants do not believe the Airport Transaction
will be detrimental to the interests of the public or shareholders. Thus,
neither the Heinz Transaction nor the Airport Transaction rise to the level of
transaction that the Act's framers were attempting to avoid.
B. Section 10(b)(2)
Section 10(b)(2) provides that a transaction should be approved unless
the price paid:
is not reasonable or does not bear a fair relation to the sums invested in
or the coming capacity of the utility assets to be acquired or the utility
assets underlying the securities to be acquired.
In the Heinz Transaction, the payments under the Lease and the Supply
Agreement are the result of arms length negotiations between commercially
sophisticated parties and the payments under the Lease constitute a small
portion of DQE's overall capital expenditures./2/ Consequently, the payments to
be made under the Lease and the Supply Agreement are fair and do not warrant any
of the negative findings that call for disapproval under Section 10(b)(2).
Similarly, the payments to be made under the O&M Agreement will
constitute a small portion of DQE's overall capital expenditures. In addition,
the payments will be within the range commonly found in the industry.
Consequently, The Airport Transaction does not warrant any of the negative
findings that call for disapproval under Section 10(b)(2).
C. Section 10(b)(3)
Section 10(b)(3) directs approval of the transaction unless the
Commission finds that:
(3) such acquisition will unduly complicate the capital structure of the
holding-company system of the applicant ... or will be detrimental to ...
the proper functioning of such holding-company system.
Section 10(c)(1) provides that the Commission not approve a transaction that is
"unlawful under the provisions of section 8 or is detrimental to the carrying
out of the provisions of section 11." Together they relate to the corporate
simplification standards of Section 11(b)(2), which require that each registered
holding company take the necessary steps
to ensure that the corporate or continued existence of any company in the
holding-company system does not unduly or unnecessarily complicate the
structure ... of such holding-company system.
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2 The terms of the Lease require an initial rent payment of $1.0 million,
plus monthly base rent payments of approximately $71,000 for 180 months,
for the lease of the Energy Facility.
Capital Expenditures for DQE were approximately $94 million, $121 million
and $124 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
The intent of these requirements is to assure the financial soundness of the
holding-company system, with a proper balance of debt and equity. No such
complexities will result from either the Heinz Transaction or the Airport
Transaction.
D. Section 10(c)(1) and 10(c)(2)
Section 10(c) provides for two distinct findings with respect to a
proposed transaction, and both are related to the standards prescribed in
Section 11(b). Section 10(c)(1) requires that the proposed transaction not be
"unlawful under the provisions of section 8 or is detrimental to the carrying
out of the provisions of Section 11." Section 8 by its terms applies only to
registered holding companies and prohibits such companies from combining
electric and gas utilities in a manner that violates state law. Both the Heinz
Transaction and the Airport Transaction involve only electric utilities. As
discussed below, Section 11 of the Act relates to the simplification of holding
company systems, which was one of the major purposes behind the passage of the
Act. The terms of Section 11 are also only directly applicable to registered
holding companies, although through the operation of Section 10(c)(2) discussed
below, the larger policy concerns animating this section must be taken into
account with respect to both the Heinz Transaction and the Airport Transaction.
Section 10(c)(2) is a more specialized provision. It requires that any
acquisition not be approved unless the Commission finds that:
[S]uch acquisition will serve the public interest by tending towards the
economical and efficient development of an integrated public-utility
system.
Section 2(a)(29)(A) defines an "integrated public utility system" as applied to
electric utility companies as:
[A] System consisting of one or more units of generating plants and/or
transmission lines and/or distributing facilities, whose utility assets,
whether owned by one or more electric utility companies, are physically
interconnected or capable of physical interconnection and which under
normal conditions may be economically operated as a single area or region
in one or more States, not so large as to impair (considering the state of
the art and the area or region affected) the advantages of localized
management, efficient operation, and the effectiveness of regulation.
Both the Heinz Transaction and the Airport Transaction satisfy the
integration standard set forth in Section 2(a)(29)(A) of the Act because DQE's
four utility company subsidiaries will constitute a system so located and
related that substantial economies may be effectuated by their operation as a
single coordinated system confined in its operation to a single area or region
not so large as to impair the advantages of localized management, efficient
operation, and the effectiveness of regulation. Both the Energy Facility and the
Airport Facility are located in Pittsburgh, the center of Duquesne's service
territory. Because the Energy Facility is an inside-the-fence facility serving
only one customer, it is not interconnected with the Duquesne transmission
system. It is, however, located in the same area and is capable of
interconnection. Similarly, the Airport Facility is not interconnected with the
Duquesne transmission system but is capable of such interconnection. Moreover,
the de minimis size of the Energy Facility and the Airport Facility relative to
the existing system in the DQE holding company system further underscores the
fact that the Heinz Transaction and the Airport Transaction will not materially
increase the size of or effect the operation of the DQE utility system as a
single coordinated system. The capacity of the Energy facility is 2-3 MW and the
size and capacity of the Airport Facility is 20 MW as compared to DQE's total
capacity of 3,374 MW. Given that no changes in the overall system's management
or regulatory status will occur as a result of the Heinz Transaction or the
Airport Transaction, neither transaction will impair the advantages of local
management, or effective regulation or operation. The Heinz Transaction will
also result in economies and efficiencies accruing to the benefit of the Energy
Facility and the Applicants and DQE's integrated system and thus should be
approved by the Commission. The benefits of the Heinz Transaction to Heinz
include (i) cost containment (ii) the expertise of DQE to support the Energy
Facility capital upgrades and modernization of the Energy Facility resulting in
increased capacity. The benefit of the Heinz Transaction to the Applicants is
that it results in an expansion of the Applicants' service to their existing
customer, Heinz.
Similar benefits will result from the Airport Transaction. In
addition, the Airport Transaction will permit an affiliate of ADC to operate the
Airport Facility owned by ADC.
E. Section 10(f)
Section 10(f) provides that the Commission shall not approve an
acquisition unless it appears as though all state laws are satisfied. As noted
in Item 4 below, neither the Heinz Transaction nor the Airport Transaction
requires any state regulatory approvals and the Applicants undertake to complete
the transactions in a manner consistent with the laws of the Commonwealth of
Pennsylvania.
F. Section 3(a)(1)
DQE is currently exempt from all provisions of the Act except Section
9(a)(2). Upon consummation of the transactions contemplated herein, DQE will
continue to be entitled to such exemption because it and each of its public
utility subsidiaries from which it derives a material part of its income will be
predominantly intrastate in character and will carry on their businesses
substantially within the Commonwealth of Pennsylvania. In addition, as a result
of the transactions, Energy Services will become a public utility holding
company over DH Energy and Newco. Energy Services will also be entitled to an
exemption from all provisions of the Act except Section 9(a)(2) under the same
analysis. Energy Services intends to claim an exemption under Section 3(a)(1) of
the Act pursuant to Rule 2.
Item 4 REGULATORY APPROVALS
No federal or state commission, other than this Commission has
jurisdiction over the Heinz Transaction or the Airport Transactions as described
herein.
Item 5 PROCEDURE
The Applicants hereby request that there be no hearing on this
Application and that the Commission issue its order as soon as practicable after
the filing hereof. The Commission is respectfully requested to issue and publish
the requisite notice under Rule 23 with respect to the filing of this
Application not later than March 21, 1997, and notice to specify a date not
later than April 15, 1997, by which comments may be entered and a date not later
than April 18, 1997, as the date after which an order of the Commission granting
and permitting the Application to become effective may be entered by the
Commission. A Form of Notice is filed herewith as Exhibit H.
Without prejudice to their right to modify the same if a hearing
should be ordered on this Application, the Applicants submit that a recommended
decision by a hearing officer or any other responsible officer of the Commission
is not needed for approval of the transactions described herein. The Division of
Investment Management may assist in the preparation of the Commission's decision
and/or order. There should be no waiting period between issuance of the
Commission's order and the date on which the order is to become effective.
It is requested that the Commission send copies of all communications
to the Applicants as follows:
Linda S. Ackerman, Esq.
DQE, Inc.
411 Seventh Avenue
15th Floor
Pittsburgh, PA 15230-1930
with concurrent copies to:
William S. Lamb, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019-4513
Item 6 EXHIBITS AND FINANCIAL STATEMENTS
a) Exhibits
B-1 Heinz Facility Lease dated as of January 22, 1997 between
Heinz and ADC
B-2 Energy Supply Agreement dated as of January 22, 1997 between Heinz and
ADC
B-3 Draft Operation and Maintenance Services Agreement between ADC and
Newco
F-1 Opinion of counsel
F-2 Past Tense Opinion of Counsel (to be filed by amendment)
G. Financial Data Schedule
H. Form of Notice
b) Financial Statements
FS-1 Consolidated Balance Statement of DQE for the year ended December
31, 1995 (incorporated by reference to the Form 10-K of DQE filed on
March 29, 1996 (File No. 1-10290).
FS-2 Consolidated Statement of Income for the Preceding Three Years
(incorporated by reference to the Form 10-K of DQE filed on March 29,
1996 (File No. 1-10290).
Item 7 INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this Application and
declaration involve a "major federal action" nor do they "significantly affect
the quality of the human environment" as those terms are used in section
102(2)(C) of the National Environmental Policy Act. The transaction that is the
subject of this Application will not result in changes in the operation of the
company that will have an impact on the environment. The Applicants are not
aware of any federal agency that has prepared or is preparing an environmental
impact statement with respect to the transactions that are the subject of this
Application.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned have duly caused this application and declaration to be
signed on their behalf by the undersigned thereunto duly authorized.
DQE, INC.
By: /s/ Victor A. Roque
Name: Victor A. Roque
Title: Vice President
DQE ENERGY SERVICES, INC.
By: /s/ Alexis Tsaggaris
Name: Alexis Tsaggaris
Title: President
EXHIBIT F-1
March 21, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
This opinion is furnished to the Securities and Exchange Commission
(the "Commission") in connection with the filing with the Commission of the
Application on Form U-1 (File 70-____) (the "Application") of DQE, Inc. ("DQE")
and DQE Energy Services, Inc. ("Energy Services") under the Public Utility
Holding Company Act of 1935, as amended (the "Act"). DQE and Energy Services
shall be referred to herein as the "Applicants". The Application requests that
the Commission issue an order authorizing (i) the assignment by Allegheny
Development Corporation ("ADC") to DH Energy, Inc. ("DH Energy") of all of ADC's
rights and obligations under the Heinz Facility Lease between ADC and Heinz USA,
a division of H.J. Heinz Company ("Heinz"), dated as of January 22, 1997 and the
Energy Supply Agreement among ADC, Heinz and Duquesne Energy, Inc., a
Pennsylvania corporation and a wholly owned subsidiary of Energy Services, dated
as of January 22, 1997 and (ii) the execution of an Operation and Maintenance
Services Agreement between ADC and Newco, an entity to be formed under the laws
of the Commonwealth of Pennsylvania which will be a wholly owned subsidiary of
Energy Services ("Newco") pursuant to which Newco will serve as operator of
ADC's energy facility located at the Midfield Terminal Complex at the Greater
Pittsburgh International Airport.
In connection with this opinion, I have examined originals or copies
certified or otherwise identified to our satisfaction of such corporate records
of DQE, Energy Services, DH Energy and Heinz, certificates of public officials,
certificates of officers and representatives of DQE, Energy Services, DH Energy
and Heinz and other documents as I have deemed necessary in order to render the
opinions hereinafter set forth.
In such examination, I have assumed the genuineness of all signatures,
the authenticity of all documents submitted to me as originals and the
conformity to the original documents of all documents submitted to me as copies.
As to any facts material to our opinion, I have, when relevant facts were not
independently established, relied upon the aforesaid agreements, instruments,
certificates and documents.
Based on the foregoing, and subject to the assumptions and conditions
set forth herein, I am of the opinion that when the Commission has taken the
action requested in the Application:
1. All state laws applicable to the proposed transactions will have
been complied with.
2. DH Energy is a corporation validly organized, duly existing and in
good standing in the Commonwealth of Pennsylvania.
3. The common stock of DH Energy issued to Energy Services is validly
issued, fully paid and non-assessable and Energy Services as the
holder thereof, is entitled to the rights and privileges appertaining
thereto as set forth in the corporate documents defining such rights
and privileges.
4. Energy Services has legally acquired all of the issued and
outstanding common stock of DH Energy.
5. DH Energy may legally enter into and consummate the transactions.
6. The consummation of the transactions will not violate the legal
rights of the holders of any securities issued by the Applicants.
I am a member of the Bar of Commonwealth of Pennsylvania and do not
purport to be expert on, nor do I opine as to, the laws of any jurisdiction
other than the Commonwealth of Pennsylvania and the federal laws of the United
States of America.
I hereby consent to the use of this opinion as an exhibit to the
Application.
Very truly yours,
/s/ Linda S. Ackerman
Linda S. Ackerman
Assistant General Counsel
HEINZ FACILITY LEASE
This Facility Lease Agreement ("Agreement") is made and entered into
this 22nd day of January, 1997 by and between Heinz USA, a Division of H.J.
Heinz Company, a Pennsylvania corporation having its principal place of business
at 1062 Progress Street, Pittsburgh, PA 15212 ("Heinz") and Allegheny
Development Corporation, a Pennsylvania corporation having its principal place
of business at Cherrington Corporate Center, 500 Cherrington Parkway, Suite 110,
Coraopolis, PA 15212 ("ADC").
W I T N E S S E T H :
WHEREAS, Heinz currently owns and operates an inside-the- fence energy
facility that provides energy in the form of steam, electricity and compressed
air to its Pittsburgh, Pennsylvania manufacturing plant; and
WHEREAS, Heinz and ADC desire to enter in to a contractual arrangement
pursuant to which ADC would (i) be granted a license to use the Real Property
associated with the Energy Facility and (ii) lease certain equipment and assets
associated with the Energy Facility;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants, agreements and conditions set forth herein, Heinz and ADC, intending
to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the following terms shall have
the following meanings for the purposes of this Agreement, and shall include the
plural as well as the singular form:
"Agreement" shall have the meaning set forth in the first paragraph of
this Agreement.
"Base Rent" shall have the meaning set forth in Section 3.03 hereof.
"Base Shift Premium" shall mean the shift premium established for each
job classification covering members of the O&M Staff under the UFCW Local 325
Collective Bargaining Agreement, as in effect on the Lease Commencement Date and
set forth on Exhibit D hereto.
"Base Wage Rate" shall mean the hourly wage rates established for each
job classification covering members of the O&M Staff under the UFCW Local 325
Collective Bargaining Agreement, as in effect on the Lease Commencement Date and
set forth on Exhibit D hereto.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Pennsylvania.
"Calendar Year" means any twelve-month period commencing on January 1
and ending the following December 31.
"Current Capacity" means with respect to (i) electric energy, the
maximum steady state full load capacity of two turbine generators (2 times
3,000kw); and (ii) compressed air, the maximum capacity of the Energy Facility's
installed compressed air system (5,300 cfm) as of the Lease Commencement Date.
Current Capacity with respect to steam means the maximum steady state full load
capacity of the operating coal/natural gas fired boilers at the Energy Facility
(operating coal/natural gas fired boilers for this purpose means boilers 1,2,3
and 4). Current Capacity for steam shall be equal to 160,000 lbs of coal fired
steam per hour during the Initial Capacity Measuring Period. Should an opacity
excursion occur preventing the Energy Facility from achieving 160,000 lbs of
coal fired steam per hour as required herein, Current Capacity for steam shall
be reduced to 150,000 lbs of coal fired steam per hour. After the conclusion of
the Initial Capacity Measuring Period and for the remainder of the Term, Current
Capacity for steam shall be equal to the greater of (i) 170,000 lbs of coal
fired steam per hour or (ii) actual steady state full load capacity, except as
required under Section 5.01(b) hereof.
"Emergency" means any circumstance that may arise and constitute a
serious hazard to the safety of, or a material interference with, the safe,
economical or environmentally sound operation of the Energy Facility or the
Manufacturing Facility and which requires immediate action.
"Energy Facility" means all personal property and fixtures that are
now or hereafter used in any capacity whatsoever (including, without limitation,
all machinery, equipment, spare parts, tools, materials, supplies and
maintenance equipment) in connection with the production of electricity, steam
energy and compressed air and the delivery thereof. For the purposes of this
Agreement, the Energy Facility assets shall not be deemed to include the Real
Property, the Manufacturing Facility or any component thereof. Exhibit A hereto
provides a list of the primary Energy Facility assets in existence on the date
of this Agreement and includes a diagram of the battery limits of the Energy
Facility for the purpose of defining the maintenance responsibilities of the
Parties. Heinz shall retain and the Energy Facility shall not include the
Retained Assets.
"Energy Facility Improvements" means the proposed initial capital
improvements, modifications and upgrades to the Energy Facility to be
implemented by ADC under the terms of this Agreement, all as generally
identified on Exhibit B hereto.
"Energy Facility O&M Documentation" means Standing Orders, Operating
and Emergency Procedures, CMM System and Safety and Health Accident Reduction
Plan (SHARP) and other applicable Energy Facility record-keeping requirements.
"Event of Loss" means the following events with respect to the Energy
Facility: (i) loss of all or substantially all of the Energy Facility or the use
thereof due to destruction, damage beyond economical repair or rendition of the
Energy Facility permanently unfit for normal use for any reason whatsoever; (ii)
anything that results in an insurance settlement with respect to the Energy
Facility on the basis of total loss or constructive total loss; and (iii) the
condemnation or taking, or requisition of title to or use by any governmental
authority, of either all or substantially all of the Energy Facility or all or
such substantial portion of the Energy Facility such that the remainder is not
sufficient to permit operation on a commercially feasible basis.
"Fiscal Year" means Heinz's fiscal year ending on the Wednesday
falling closest to April 30th in each year during the Term.
"Force Majeure" shall mean, but not be limited to, acts of God,
storms, war, official strikes or industrial disputes beyond the control of the
parties (provided each party shall use every reasonable effort in good faith to
resolve any such strike or dispute), acts of the public enemy, quarantine,
epidemic, blockade, civil disturbance, riots, insurrection, fire, rules or
regulations of any governmental authority having or claiming jurisdiction,
compliance with which is beyond a party's reasonable control and which makes
continuance of operations impossible, or any other cause beyond the reasonable
control of such party, whether or not similar to the causes specified herein. An
Event of Loss shall constitute Force Majeure. Inability of either party to
secure funds, arrange bank loans or other financing, or to obtain credit shall
not be regarded as Force Majeure.
"Hazardous Materials" shall mean any substance or material that is
regulated by any state, federal or local governmental authority having
jurisdiction over the Energy Facility and Real Property, including all those
materials and substances designated as hazardous or toxic by any such
governmental authority . Without limiting the generality of the foregoing, the
term "Hazardous Materials" shall include asbestos or asbestos containing
material, polychlorinated biphenyls, all petroleum products and petroleum
hydrocarbons, including, without limitation, petroleum products, used oil, waste
oil and petroleum hydrocarbons that have escaped from any tanks or other storage
units, whether such tanks are located above or below ground level, hazardous
waste identified in accordance with Section 3001 of the Federal Resource
Conservation and Recovery Act of 1976, as amended, substances defined as
"hazardous substances", "toxic substances" or "hazardous waste" in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Sec. 9061, et, seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Sec. 1802; and the Resource Conservation and Recovery Act, 42
U.S.C. Sec. 6901 et seq., pollutants, contaminants or any other materials
requiring remediation under applicable federal, state or local statutes,
ordinances, regulations or policies.
"Initial Capacity Measuring Period" means the period prior to the time
that the steam capacity related Energy Facility Improvements are completed
(which for the purposes of this definition shall in any event not extend beyond
the last day of the eighteenth (18th) calendar month commencing after the Lease
Commencement Date).
"Lease Commencement Date" means the first Business Day after this
Agreement has been executed and delivered by each of Heinz and ADC.
"Manufacturing Facility" means all of the real, personal and
intangible property now hereafter used in any capacity whatsoever in connection
with the manufacturing plant that is owned and operated by Heinz and located at
1062 Progress Street, Pittsburgh, PA 15212. For the purposes of this Agreement,
the Manufacturing Facility shall not be deemed to include the Energy Facility or
the Real Property.
"O&M Labor Costs" means the costs (including straight time, overtime,
shift premium, training related and grievance related man-hours and employee
benefits) incurred or accrued by Heinz relative to the O&M Staff during any
period. Grievance related man-hours for this purpose shall not include man-hours
incurred in connection with a grievance resulting from ADC's exercise of its
contractual rights under Section 6.02 hereof.
"O&M Staff" means the Heinz employees assigned to the Energy Facility
as defined under Section 6.02 hereof. At no time will the O&M Staff be deemed to
be employees of ADC under this Agreement.
"Operations Commencement Date" means the first day on which ADC
assumes operational control of the Energy Facility immediately following the end
of the Phase-In- Period.
"Party" means Heinz or ADC, severally, and "Parties" means Heinz and
ADC, collectively.
"Phase-In-Period" means the thirty (30) day period commencing on the
Lease Commencement Date and ending on the Operations Commencement Date as more
fully described under Section 6.01 hereof.
"Real Property" shall mean the real property housing the Energy
Facility but shall not include the Energy Facility. Building systems, piping,
fixtures or property of any nature whatsoever that is not used in connection
with the production of electricity, steam energy and compressed air and the
delivery thereof (e.g., building fire protection) shall constitute Real Property
for the purposes of this Agreement.
"Retained Assets" means certain personal property listed on Exhibit
A-1 hereto that is used in connection with the production of electricity, steam
energy and compressed air and the delivery thereof, but that is also used in
some capacity at the Manufacturing Facility.
"ROI" shall mean return on investment derived by dividing (i)
cumulative operating income over the Term to date by (ii) the sum to date of
ADC's year-end investment balances. For this purpose, the terms: (x) "operating
income" shall mean income generated by the operation of the Energy Facility
before income taxes and interest expense on capital improvements and (y)
"year-end investment balances" shall equal the sum of the following capital
items: (1) Energy Facility Improvements and any further or additional capital
improvements, upgrades, overhauls or replacements made by ADC under Section
5.01(b) hereof; (2) the cost of major overhauls and equipment replacements made
by ADC under Section 6.04 hereof; (3) the cost of capital improvements made by
ADC under Section 7.02; and (4) the initial rent payment made by ADC under
Section 3.02 hereof. The calculation period contemplated herein will commence on
the first day of the first calendar month following the Lease Commencement Date.
"Regulatory Requirements" shall have the meaning set forth in Section
7.02 hereof.
"Stipulated Loss Value" means for any rent payment date specified
under Section 3.03 hereof, the amount stated for each month during the Term on
Exhibit F hereto.
"Term" shall have the meaning set forth in Section 3.01 hereof. The
Term shall be deemed to include any Renewal Term as defined in Section 12.01.
"UFCW Local 325" means the United Food and Commercial Workers Union
Local 325.
ARTICLE II
REAL PROPERTY LICENSE/LEASE OF THE ENERGY FACILITY
2.01 License Grant. Subject to the terms and conditions of this
Agreement, and for the purposes of enabling ADC to take possession of and use
the Energy Facility as contemplated herein, Heinz grants to ADC, for the Term, a
non-exclusive, non- transferable, royalty-free license to enter upon and use the
Real Property and the Retained Assets. In addition to the foregoing license, ADC
shall be granted such licenses, rights of way or leases of Heinz-owned land or
property associated with the Manufacturing Facility as are necessary for the (i)
operation and maintenance of the Energy Facility; (ii) construction of the
Energy Facility Improvements; and (iii) construction of the steam export
pipeline in accordance with Article XIV hereof. Without limiting the generality
of the foregoing, ADC is hereby granted (i) a right to access the Energy
Facility through Gate No. 8 and Canal Street and (ii) a license to use the truck
scales located on River Road in connection with coal deliveries and ash removal.
The parties shall from time to time agree upon the extent and duration of such
licenses, rights of way or leases in order to minimize any disruption of the
operation of the Manufacturing Facility. Such licenses shall be subject to the
security, safety and confidentiality rules and regulations, and other reasonable
restrictions, generally applicable to visitors to the Manufacturing Facility.
Heinz shall have no obligation to replace any Retained Assets; however, to the
extent Heinz does replace Retained Assets, the same shall be subject to the
licenses granted by this Section 2.01.
2.02 Energy Facility Lease. Effective as of the Lease Commencement
Date, Heinz hereby leases to ADC, and ADC hereby leases from Heinz, the Energy
Facility and any and all improvements or additions to the Energy Facility after
the Lease Commencement Date for the duration of the Term.
ARTICLE III
TERM AND RENT
3.01 Term. Except as otherwise provided herein, the term of this
Agreement (the "Term") shall commence on the Lease Commencement Date and shall
terminate on the 15th anniversary of the Lease Commencement Date.
3.02 Initial Rent Payable for the Lease of Energy Facility. On the
date of execution of this Agreement, ADC shall pay to Heinz $1,000,000 in
immediately available funds as an initial rent payment associated with the lease
of the Energy Facility hereunder.
3.03 Base Rent Payable for Lease of Energy Facility. Commencing on the
first day of the first calendar month following the Lease Commencement Date and
thereafter on the first day of each calendar month during the Term, ADC shall
pay to Heinz, in arrears, base rent for the previous month for the Energy
Facility in an amount equal to $70,922.44 (the "Base Rent"). The Base Rent shall
be paid within twenty (20) days after the last day of each full calendar month
during the Term.
3.04 Contingent Rent/Benchmark ROI. If, upon termination of this
Agreement, ADC's cumulative ROI over the Term has exceeded 18.8% (the "Benchmark
ROI"), ADC shall pay to Heinz a contingent rent payment (the "Contingent Rent
Payment") equal to fifty (50%) percent of the amount by which the ROI received
by ADC over the Term exceeded the Benchmark ROI. The Contingent Rent Payment
shall be paid to Heinz in immediately available funds within thirty (30) days
following the end of the Term.
3.05 Taxes. ADC shall pay all taxes and assessments of any nature
whatsoever levied on the Energy Facility and all improvements made to the Energy
Facility.
3.06 Utilities and Services. Heinz shall be responsible for and pay
all charges related to (i) city water; (ii) well water; (iii) sewage; (iv)
electrical energy; and (v) steam associated with the production of energy for
the Manufacturing Facility. ADC shall be responsible for and pay all charges
related to (i) city water; (ii) well water; (iii) sewage; (iv) electrical
energy; and (v) steam associated with the production of energy for all other
purposes. The then current utilities and services rates payable by Heinz for
water will apply in calculating the payment amount.
ARTICLE IV
USE
4.01 Use. At all times during the Term, ADC shall permit the Energy
Facility and each component part thereof to be used only for the purposes for
which it was designed and intended and in accordance with the terms of this
Agreement. ADC will operate and maintain or cause the Energy Facility to be
operated and maintained in accordance with:
(i) such written operating standards as shall be required to enforce
warranty claims for any material parts or equipment associated with the
Energy Facility;
(ii) the terms and conditions of all insurance policies (whether
maintained by Heinz or ADC) in effect at any time with respect to the
Energy Facility or any component part thereof;
(iii) all applicable requirements of law and any governmental body
having jurisdiction;
(iv) Energy Facility O&M Documentation (as defined in Section
6.01(b)(i), (c) and (d) hereof);
(v) the same operating and maintenance practices as companies of
established reputation operating similar energy facilities observe in
operating such facilities;
(vi) ADC shall not, without prior written approval of Heinz, bring any
Hazardous Materials (excluding any materials customarily used in the
operation of the Energy Facility, in the quantities required for such use)
into the Manufacturing Facility, the Real Property or the Energy Facility,
and shall not install in the Energy Facility any tanks (underground or
otherwise) containing Hazardous Materials; and
(vii) the actions of ADC and its contractors shall conform to the
security, safety and confidentiality rules and regulations, and other
reasonable restrictions, generally applicable to visitors to the
Manufacturing Facility.
ARTICLE V
CAPITAL IMPROVEMENTS
5.01 Upgrade and Modernization of the Energy Facility.
(a) ADC shall supply the capital, project management and technical
support services necessary to implement certain capital improvements,
modifications and upgrades to the Energy Facility (the "Energy Facility
Improvements"). It is currently proposed that (i) the Energy Facility
Improvements shall consist of the improvements set forth on Exhibit B hereto,
with the understanding that the Parties can mutually agree to such changes as
they deem appropriate or advisable and (ii) the capital investment in the Energy
Facility Improvements shall not be less than $2,500,000. If steam export is
undertaken under Article XIV hereof, it is contemplated that certain additional
Export Improvements set forth on Exhibit B-1 hereto will be implemented by ADC.
The total amount to be spent on the Energy Facility Improvements will depend on
factors such as final operating criteria (including export), detailed equipment
and material assessments and final design. The Energy Facility Improvements are
expected to be completed and fully operational within approximately eighteen
(18) months after the Operations Commencement Date, but in no event more than
twenty-four (24) months thereafter (except with respect to components (such as
boiler grates) scheduled for replacement whose useful life will continue beyond
such 24 month period). ADC shall be responsible for taking, or causing to be
taken by independent contractors to be retained by ADC, all actions necessary to
complete the Energy Facility Improvements in a good, workmanlike and expeditious
manner. Without limiting the generality of the foregoing, it is understood that
material capital purchases shall be subject to competitive bids with the
exception of certain vendor guaranteed technologies (such as micronized coal).
ADC, in its sole and absolute discretion, shall contract for engineering
services required in connection with the design of the Energy Facility
Improvements. Engineering services shall not exceed 10% of the cost of project
capital unless otherwise agreed by the parties. When possible, ADC shall invite
union contractors to participate in any bidding process.
(b) As soon as practicable after the completion of the steam capacity
related Energy Facility Improvements but not later than the conclusion of the
Initial Capacity Measuring Period, ADC, with the prior approval and in the
presence of a Heinz representative, shall conduct steady state boiler testing to
measure the Current Capacity of steam produced at the Energy Facility. If such
testing indicates that Current Capacity is less than 180,000 lbs of coal fired
steam per hour (the "Target Steam Capacity"), ADC shall make such capital
improvements, upgrades, overhauls, modifications or replacements at the Energy
Facility as ADC deems to be necessary or appropriate in order to meet the Target
Steam Capacity, provided, however, that under no circumstance shall ADC be
required to invest more than $500,000 (in addition to the $2,500,000 capital
investment in Energy Facility Improvements contemplated under Section 5.01(a))
in such endeavor. ADC shall use best efforts to complete the steam capacity
related Energy Facility Improvements prior to December 31, 1997.
(c) ADC shall make any further or additional capital improvements,
upgrades, overhauls, modifications or replacements at the Energy Facility as are
necessary from time to time to: (i) maintain Current Capacity; (ii) operate the
Energy Facility in accordance with Regulatory Requirements (subject to Section
7.05 hereof); and (iii) maintain the reliable and efficient operation of the
Energy Facility.
(d) Any alterations, upgrades, modifications, additions or
improvements made to the Energy Facility by or on behalf of ADC, whether
identified on Exhibit B or otherwise, shall be built or made strictly in
accordance with the following terms and conditions:
(i) before the commencement of such work, preliminary and final
detailed plans and specifications shall be submitted to and subject to the
approval of Heinz;
(ii) such work shall be done subject to and in accordance with the
requirements of law and applicable regulations of all governmental
departments or authorities having jurisdiction thereover;
(iii) such work shall be performed in a skilled workmanlike manner and
in accordance with the plans and specifications reviewed by Heinz and by
contractors reasonably satisfactory to Heinz; and
(iv) such work shall conform to the then current General Conditions of
Heinz for contractors and subcontractors; set forth on Exhibit E hereto is
a copy of the General Conditions in effect on the date hereof.
(e) ADC shall cause each contractor with whom it contracts to execute
and file in the Office of the Prothonotary of the Court of Common Pleas of
Allegheny County, a waiver of the right to file a mechanic's lien which shall be
effective against claims by contractor and all subcontractors, materialmen,
workmen arising out of any work done by ADC or by ADC' contractors or
subcontractors. If any such liens shall arise, ADC shall promptly cause such
liens to be removed. ADC will indemnify, hold harmless, and defend Heinz from
any and all claims, liens, or charges of any nature whatsoever arising out of
any work done by ADC or ADC's contractors or subcontractors.
(f) Heinz may direct ADC to implement, at Heinz's expense,
improvements to increase Current Capacity.
ARTICLE VI
GENERAL OPERATING AND
MAINTENANCE RESPONSIBILITIES
6.01 Phase-In-Period.
(a) In order to ensure a professional and orderly transition in
operating responsibility at the Energy Facility, the parties have agreed to
establish a thirty (30) day phase-in period (the "Phase-In-Period"), which shall
begin to run on the Lease Commencement Date and end on the Operations
Commencement Date. During this period ADC personnel (including, without
limitation, the Energy Facility Supervisor referenced under Section 6.02(a)
below) will work with the Heinz staff in order to become familiar with current
Energy Facility operations and develop the operating procedures, quality
control, safety and business management systems that will control and direct the
operation of the Energy Facility after the Operations Commencement Date. Without
limiting the generality of the foregoing, Heinz shall be in control of and
responsible for the day-to-day operation of the Energy Facility at all times
prior to the Operations Commencement Date.
(b) Prior to the end of the Phase-In-Period, ADC shall complete the
following for review and approval by Heinz:
(i) become familiar with all significant abnormal conditions existing
in the Energy Facility and prepare Standing Orders for operators and
maintenance personnel regarding these abnormal conditions. The purpose of
these Standing Orders is to ensure that plant personnel are aware of, on a
day to day basis, these conditions and the operating and maintenance
protocols required until these conditions are corrected. Standing Orders
shall be continually updated as additional significant abnormal conditions
are identified. Once an abnormal condition is corrected, the related
Standing Order shall be deleted.
(ii) identify and describe Energy Facility record keeping
requirements.
(iii) establish an Employee Training Plan ("ETP") and a Safety and
Health Accident Reduction Plan ("SHARP"). ETP shall include an annual
review and employee demonstration of complete understanding of Energy
Facility O&M Documentation and safety requirements. ADC shall maintain a
matrix of O&M Staff training status by O&M Staff employee. As a minimum,
the matrix shall include the status of O&M Staff Energy Facility O&M
Documentation training by area (e.g., boiler operation ) by O&M Staff
employee.
(iv) identify all Energy Facility operating routines requiring
documented procedures.
(v) identify all known Energy Facility emergency conditions requiring
documented procedures.
(c) Because the development and maintenance of Energy Facility O&M
Documentation is considered significant to the efficient operation of the Energy
Facility, within three months following the Operations Commencement Date, ADC
shall:
A.
B.
(i) develop and implement an Energy Facility O&M Documentation control
system. All Energy Facility O&M Documentation shall be professionally
formatted, neatly typed, identified by a reference number, recorded on a
master reference listing, properly maintained and available to Heinz for
review during the Term.
C.
(i) complete written basic Operating Procedures for the operating
routines identified in (b)(iv) above.
(ii) complete written Emergency Procedures for the emergency
conditions identified in (b)(v) above. These procedures shall include the
identification of personnel at both ADC and Heinz who should be notified.
(iii) complete a CMM System implementation plan.
(iv) submit the above plans and procedures to Heinz for review and
approval prior to implementation.
(d) Within six months following the Operations Commencement Date, ADC
shall develop written procedures for all Energy Facility alarms. These
procedures shall include a condition (set-point) description, a level of
urgency, and a bullet-point summary of appropriate operator actions, and shall
be submitted to Heinz for review and approval prior to implementation.
6.02 Staffing.
(a) Prior to the Operations Commencement Date, ADC shall assign and
dedicate to the Energy Facility, on a full time basis, a qualified individual
employed by ADC or an affiliate of ADC with appropriate training, experience and
interpersonal skills who shall fill the position of Energy Facility Supervisor.
Unless (i) required under Section 6.02(g) hereof or (ii) otherwise requested by
Heinz, all other members of the operating and maintenance staff associated with
the Energy Facility during the Term (the "O&M Staff") shall be (i) employees of
Heinz that are leased to ADC under the terms of this Section 6.02 and (ii)
represented by the UFCW Local 325. During the absence (e.g., vacations) of the
Energy Facility Supervisor, ADC shall provide coverage, either at the Energy
Facility, or on call from its Pittsburgh office, by a senior energy engineer.
(b) During the 3-month period immediately following the Operations
Commencement Date, ADC shall prepare an assessment of the staffing at the Energy
Facility, which shall include an evaluation of the manpower and skill sets
required in connection with the efficient operation of the Energy Facility.
Through the Term of this Agreement, if ADC proposes changes in skill
requirements, ADC shall prepare relevant job descriptions and implement staffing
changes in accordance with the then effective Collective Bargaining Agreement.
ADC shall coordinate with Heinz's Human Resources Department in these matters.
(c) At the commencement of each subsequent Calendar Year during the
Term, ADC shall determine the number and composition of the O&M Staff required
in order to optimize the efficiency of the Energy Facility. In connection with
this assessment, the parties shall establish a budget covering costs (including,
base salary, overtime and employee benefits) expected to be incurred or accrued
relative to the O&M Staff during the Fiscal Year. At ADC's request, the parties
may review any annual assessment on a quarterly basis and make such adjustments
to the number and composition of the O&M Staff as ADC deems necessary or
desirable.
(d) In accordance with good supervisory practices, ADC shall document
employee performance problems and, if necessary, ensure that employee discipline
is appropriately administered. The administration of employee performance
problems shall be conducted in accordance with the then effective Collective
Bargaining Agreement. ADC shall coordinate with Heinz's Human Resources
Department in these matters.
(e) For each full or partial month beginning with the first day of the
first calendar month following the Lease Commencement Date, ADC shall pay to
Heinz an amount determined by:
A.
(i) applying the following formula to each O&M Staff employee:
(straight-time man-hours worked+ premium-time man-hours worked) x the
applicable Base Wage Rate + (shift hours worked x the applicable Base Shift
Premium)
(ii) totaling the sums derived for each O&M Staff employee;
(iii) multiplying the total by one (1) plus the Base Burden Rate of
58%; and
(iv) Adding the costs associated with grievance related man-hours and
applicable benefits incurred in connection with grievances as contemplated
under the definition of "O&M Labor Costs" (see Article I hereof).
On or before the 15th day of each calendar month, Heinz shall submit
to ADC an invoice for O&M Labor Costs for the preceding month itemizing for each
member of the O&M Staff each category of O&M Labor Costs and the Base Wage Rate
or Base Shift Premium applicable thereto. Such invoice shall be due and payable
by ADC within twenty (20) days after receipt by ADC. If the aggregate O&M Labor
Costs calculated utilizing the methodology set forth above during any Heinz
Fiscal Year exceed $936,000 (the "Base Labor Cost"), ADC shall pay to Heinz an
additional amount equal to the excess of the O&M Labor Costs over the Base Labor
Cost within 30 days after the end of the Fiscal Year.
(f) ADC shall review and approve daily records of the O& M Staff to
verify hours worked in support of the Energy Facility.
(g) Without limiting the generality of the foregoing, in the event
that Heinz is unable to supply ADC with a sufficient number of qualified
operators (as determined in Section 6.02(c)) to maintain the safe and efficient
operation of the Energy Facility, ADC shall have the right to temporarily staff
the Energy Facility with non-Heinz employees. This right is conditional upon ADC
having (i) fully attempted to arrange for qualified operators in accordance with
the then effective Collective Bargaining Agreement and (ii) provided thirty (30)
days prior notice of deficiency to Heinz. The requirement for thirty (30) day
prior notice of the deficiency shall not be required in the event of a labor
strike at the Manufacturing Facility. ADC shall coordinate with Heinz's Human
Resources Department in these matters.
(h) Each Party hereby agrees to protect, defend, indemnify and hold
harmless the other Party from and against any claim or liability for
compensation under the Workman's Compensation Act arising out of injuries
sustained by any employees of the other Party. Provided, however, that in the
event an injury or occupational sickness occurs with respect to an O&M Staff
employee, Heinz shall be responsible for any claim or liability for compensation
therefor under the Workman's Compensation Act. Provided further, however, that
in the event an injury or occupational sickness occurs with respect to an O&M
Staff employee acting, pursuant to instructions from ADC, not in accordance with
the ETP and SHARP procedures instituted by ADC, ADC shall be responsible for any
claim or liability for compensation therefor under the Workman's Compensation
Act.
(i) All members of the O&M Staff shall be provided with the
opportunity to participate in any training programs offered by Heinz to its
employees during the Term.
(j) ADC shall perform all acts under this Article VI in accordance
with the then current Heinz Collective Bargaining Agreement with its employees.
(k) Without limiting the generality of Article VI hereof, ADC shall
indemnify, defend, and hold harmless Heinz and its officers, directors, and
employees as indemnitees from and against any and all losses, liabilities,
damages, demands, claims, actions, judgments, or causes of action, assessments,
costs, and expenses (including, without limitation, interests, penalties, and
reasonable attorneys' and accountants' fees) asserted against, resulting to,
imposed upon, or incurred or suffered by any such indemnitee as a result of,
based upon, or arising from, any claim by any member of the O&M Staff of
employment discrimination, retaliation, or wrongful termination suffered as a
proximate result of any action or direction of ADC or its employees. Heinz shall
make available to ADC the internal resources it provides to its affiliates in
defending any claims or actions by Heinz employees alleging employment
discrimination, retaliation, or wrongful discharge. The provisions of Article
XIII shall control the defense of any action contemplated under this Section
6.02(k), provided, however, that Heinz shall not be entitled to settle any
claim, suit, demand or proceeding contemplated under this Section 6.02(k)
without the prior written consent of ADC, which shall not be unreasonably
withheld.
6.03 Operating Responsibility.
(a) Effective on the Operations Commencement Date, ADC shall assume
control of and be responsible for the day-to-day operation of the Energy
Facility. In this capacity, ADC shall supervise and direct the activities of the
O&M Staff so as to operate and maintain the Energy Facility in compliance with
all applicable laws, ordinances, rules, regulations and permit conditions, as
well as all standards set forth in this Agreement and in a manner consistent
with industry standards.
(b) At the beginning of each Calendar Year during the Term, ADC shall
prepare and submit to Heinz for its review and approval an ETP and a SHARP (as
each such term is defined in Section 6.01(b)(iii) hereof).
(c) ADC shall be responsible for the monitoring of Energy Facility O&M
Documentation to ensure such is in accordance with accepted operating and
maintenance practices followed by companies of established reputation in its
industry. Amendments to Energy Facility O&M Documentation shall be issued in the
form of a bulletin. Each bulletin shall be reviewed and initialed by all O&M
Staff and forwarded to Heinz for review. Within thirty (30) days, the amendments
contemplated by the bulletin shall be incorporated into all copies of related
Energy Facility O&M Documentation.
6.04 Maintenance and Repair Responsibility.
(a) ADC shall be responsible for the care, custody and control of all
Energy Facility equipment/plant systems, including but not limited to pressure
vessel inspections, housekeeping and the maintenance of a computerized
maintenance management system ("CMM System"). ADC shall be responsible for
managing and completing all periodic, routine/preventive maintenance and
inspections and all major overhauls and equipment replacements; all such
activities shall be conducted at ADC's expense unless a provision of this
Agreement expressly provides to the contrary.
(i) Periodic, Routine/Preventive Maintenance and Inspection. ADC shall
take, or cause to be taken, such actions as are required to keep and
maintain the Energy Facility, and the component parts thereof, in good
working order and repair, subject to ordinary wear and tear, in accordance
with the standards set forth in subsections (i) through (v) of Article IV.
In connection with these activities, the O&M Staff shall be expected to
utilize spare parts, tools and supplies in existence and associated with
the Energy Facility on or after the Lease Commencement Date. ADC shall be
responsible for purchasing at ADC's cost the materials and any additional
spare parts, tools or supplies required to perform its obligations under
this Section 6.04(a)(i).
(ii) Major Overhauls/Equipment Replacements. Major overhauls and
equipment replacements required from time to time during the Term will be
scheduled, managed and documented by ADC.
(iii) CMM System. Within the first year following the Operations
Commencement Date, ADC shall implement the CMM System for scheduling and
record keeping activities associated with the maintenance responsibilities
under this Section 6.04, which, at a minimum, will automate the following
functions: (1) work order generation and tracking; (2) preventive
maintenance scheduling and record keeping; (3) corrective maintenance
scheduling and record keeping; (4) instrument calibration; (5) spare parts
inventory and control; and (6) vendor and equipment lists. The CMM System
may be a new system or an enhancement/upgrade as provided by ADC to the
existing system.
(b) Without limiting the generality of the foregoing, ADC shall
conduct boiler maintenance and routine turbine maintenance on a rotating basis.
ADC shall coordinate its maintenance activities with the Manufacturing Facility
production schedule.
(c) If at any time Heinz has reason to believe that inadequate care,
custody, control, operation or maintenance of the Energy Facility may exist due
to a breach by ADC of its obligations under this Agreement, in addition to any
other remedies available to Heinz in law or equity, Heinz may arrange for an
assessment of the overall or equipment specific condition and repair of the
Energy Facility to be conducted by a firm or person selected by the Parties who
customarily makes such evaluations and is independent of each of Heinz and ADC
(the "O&M Consultant"). At the conclusion of such evaluation, the O&M Consultant
shall deliver to each of Heinz and ADC a written report setting forth the
results of his or its investigation and assessment. The parties may agree to
amend the O&M Consultant's recommendations. ADC shall correct any deficiencies
identified in current operations, maintenance and repair procedures or practices
and shall use best efforts to do so within thirty (30) days. Each of Heinz and
ADC will be responsible for 50% of all professional fees and expenses of the O&M
Consultant (the "Assessment Costs and Expenses") . In no event shall Assessment
Costs & Expenses associated with any assessment exceed $10,000 (as adjusted
during the term for inflation based upon the Consumer Price Index).
(d) Heinz shall be solely and absolutely responsible for all normal
and periodic maintenance, repair and upgrade of the Real Property. Repairs to
the Real Property which are necessary due to the activities of ADC shall be the
responsibility of ADC.
(e) Costs and expenses associated with equipment malfunction,
breakdown or replacement incurred as a direct result of sabotage or reckless or
willful disregard by members of the O&M Staff of written or verbal directives of
ADC management shall constitute an event triggering Heinz's indemnification
obligations under Section 13.01.
(f) ADC shall comply with all recommendations of any qualified boiler
and machinery inspection firm that Heinz has retained to inspect such boilers
and machinery periodically, unless Heinz agrees in writing that ADC is not
required to comply with a particular recommendation with which ADC disagrees.
Any such agreement by Heinz shall not otherwise affect ADC's obligations
concerning maintenance of the Energy Facility set forth in this Agreement.
6.05 Manufacturing Facility Maintenance Schedule. Heinz, in its sole
and absolute discretion, shall schedule downtime associated with routine
maintenance of the Manufacturing Facility. Where possible, Heinz shall give ADC
five (5) days' prior written notice of any scheduled downtime that is expected
to materially affect the Energy Facility. Heinz agrees to use all reasonable
efforts to coordinate with ADC so that scheduled downtime for the Manufacturing
Facility and maintenance activities for the Energy Facility can be made to
coincide with each other to the maximum extent possible. In the event that
routine maintenance of the Manufacturing Facility requires the isolation of
steam, electricity, water or compressed air, ADC shall assist Heinz in
coordinating of such.
6.06 Certain Stand-By Equipment Awaiting Repair. The Parties
acknowledge that certain stand-by equipment that is intended to be included as
part of the Energy Facility is in need of repair or replacement. Heinz (itself
or through its contractor) shall repair or replace such equipment at its sole
cost. If the foregoing can be accomplished prior to the Lease Commencement Date
and the repair or replacement is capitalized by Heinz, the equipment shall be
itemized on Exhibit A hereto. Equipment (i) not repaired or replaced prior to
the Lease Commencement Date or (ii) repaired or replaced prior to the Lease
Commencement Date, but not reflected on Exhibit A, shall be identified on
Exhibit A-2 hereto and delivered to ADC for installation as soon as practicable
after its repair or replacement. Upon delivery, Exhibit A shall be amended to
include a reference to such equipment.
6.07 Entry. Heinz shall have the right to enter onto the Energy
Facility from time to time to inspect the Energy Facility for compliance with
this Agreement provided such entry and inspection does not interfere with the
ordinary operations of the Energy Facility. Heinz may in connection with such
inspection take environmental samples from the Energy Facility. Heinz shall
notify ADC of such entry and inspection at the time the same commences, or if
such entry and inspection occurs after 5:00 p.m., shall notify the Energy
Facility Supervisor by 9:00 a.m. the following day.
ARTICLE VII
PERMITS AND REGULATORY COMPLIANCE
7.01 Permits to be held by Heinz. Heinz shall hold, and be responsible
for the maintenance of, all of the governmental permits, approvals,
certifications and authorizations listed on Exhibit C hereto, as the same may be
modified from time to time and all governmental permits, approvals,
certifications, and authorizations that come into effect during the term of this
Agreement as the same may be modified from time to time (the "Heinz Permits").
Commencing immediately upon the Lease Commencement Date, Heinz shall use all
reasonable efforts to obtain and maintain any and all permits necessary for the
construction of the Energy Facility Improvements and the ongoing operation of
the Energy Facility as contemplated by this Agreement. ADC shall be responsible
for all costs associated with obtaining and maintaining any and all permits
necessary for (i) the construction and continued operation of the Energy
Facility Improvements or (ii) the export of steam. ADC agrees to cooperate fully
with Heinz in its efforts to obtain and maintain the Heinz Permits, and may, at
Heinz's option and expense, except as provided in the immediately preceding
sentence, participate in any applications or proceedings necessary therefor.
Heinz shall have the exclusive right to negotiate the terms and conditions of
any Heinz Permit and shall have sole discretion regarding regulatory decisions
or appeals during any permitting process.
7.02 Regulatory Compliance. Subject to Section 7.05 hereof, ADC shall
operate and maintain the Energy Facility so as to be in compliance with all (i)
legal and regulatory requirements and (ii) the Heinz Permits as the same may be
modified from time to time (collectively, the "Regulatory Requirements"). ADC
shall pay all costs for and implement any capital improvements, upgrades,
overhauls, modifications, replacements or permits required in order to achieve
compliance with Regulatory Requirements in effect as of the Lease Commencement
Date or arising after the Lease Commencement Date that become applicable solely
as a result of (i) the implementation of the Energy Facility Improvements or
(ii) the export of steam by ADC. Where changes in Regulatory Requirements (or in
the regulatory agency methodology used to determine compliance) which become
applicable after the Lease Commencement Date, regardless of the implementation
of (A) the Energy Facility Improvements or (B) the export of steam by ADC,
require action to achieve compliance, Heinz, at its option, shall (i) implement
any capital improvements, upgrades, overhauls, modifications or replacements
required in order to achieve compliance with such changes or (ii) direct ADC
(itself or through subcontractors to be retained by ADC) to do so.
7.03 Compliance Testing. With the exception of compliance testing
required in connection with interim compliance matters under Section 7.05, ADC
shall be responsible for and perform at ADC's expense all compliance testing
required in connection with the Heinz Permits. Heinz shall cooperate with ADC so
as to facilitate such compliance testing.
7.04 Transfer to ADC. Upon any transfer of title to the Energy
Facility to ADC under this Agreement, then ADC may request in writing, and Heinz
shall to the extent permitted by law, use its reasonable efforts to effect a
transfer to ADC of each of the Heinz Permits as are necessary to operate the
Energy Facility. ADC shall assume all liabilities under the transferred Heinz
Permits arising subsequent to the time of transfer. All costs to transfer or
re-permit the Energy Facility related Heinz Permits to ADC shall be the
responsibility of ADC.
7.05 Interim Compliance Matters. Heinz shall be responsible for and
pay all costs associated with (i) increased operation and maintenance costs and
expenses mutually determined by the parties incurred in connection with attempts
to remediate noncompliance , if any , with Regulatory Requirements concerning
air quality and emissions existing on the Lease Commencement Date and continuing
until the Energy Facility Improvements are completed (including, without
limitation, costs associated with cleaning and refurbishing multiclones,
emissions testing and co-firing the Energy Facility with natural gas) and (ii)
fines or other penalties imposed by regulatory authorities as a result of such
noncompliance. Costs associated with subsection (i) above shall be recovered by
ADC through an off-set to the Base Rent payable by ADC under Section 3.03.
Regulatory fines and penalties imposed upon Heinz or ADC shall be paid by Heinz
by the date on which the payment is due. Notwithstanding the foregoing, Heinz
may, if it has a good faith basis, contest or appeal any such fine or penalty
and shall not be obligated to pay such fines or penalties until such contests or
appeals are exhausted. This Section shall terminate and be void and of no effect
if Heinz receives confirmation from appropriate regulatory authorities that is
reasonably acceptable to ADC that air emissions compliance tests conducted by
Heinz during the final weeks of December 1996 demonstrate that the Energy
Facility is in compliance with current air emissions standards.
7.06 Notices-Environmental. ADC shall immediately notify Heinz of any
release or threatened release of any Hazardous Material from the Energy Facility
or boiler stacks (i) onto the Real Property, (ii) onto the Manufacturing
Facility, (iii) off the premises of Heinz or (iv) into the environment,
regardless of whether such release is reportable under regulatory law. ADC shall
also immediately notify Heinz of any stack emissions exceeding Regulatory
Requirements. Where notification to a regulatory agency is required, ADC shall
complete such actions, including without limitation the completion of written
reports, investigations or communications under the supervision of Heinz and at
the expense of ADC.
7.07 Reports. ADC shall submit to Heinz any and all information and
data required for the preparation and submission by Heinz of regulatory reports
regarding the Energy Facility or its operations. Such information and data shall
be submitted on a timely basis to permit submission of such reports by Heinz
within the timeframes required by applicable law.
7.08 Communications. ADC shall immediately notify Heinz about any and
all substantive communications with a regulatory agency or third party regarding
regulatory matters, or communications that may cause communication with a
regulatory agency or third party regarding regulatory matters. During any period
in which Heinz maintains the Permits and where possible, ADC shall obtain the
approval of Heinz prior to entering into such communications.
7.09 Investigations and Inspections. ADC shall notify Heinz of any and
all regulatory investigations or inspections. Such notice shall define the scope
of the investigation or inspection and identify all potential involved parties.
Heinz approval shall be necessary before commencing any part of such
investigation or inspection. Heinz shall have the right to inspect the Energy
Facility or Real Property at any time for regulatory compliance. Heinz's right
to inspect shall be subject to the notice and non-interference provisions set
forth in Section 6.07.
7.10 Cleanup, Fines or Penalties. Where (A) the release of any
Hazardous Material from the Energy Facility or boiler stacks (i) onto the Real
Property, (ii) onto the Manufacturing Facility, (iii) off the premises of Heinz
or (iv) into the environment, or (B) any violation of Regulatory Requirements,
requires (a) investigation or cleanup or (b) results in a fine or penalty, ADC
shall be responsible for any and all costs, expenses, fines or penalties;
provided, however, that Heinz shall be responsible for any costs, expenses,
fines or penalties resulting from such a release or violation of Regulatory
Requirements caused by Heinz personnel (other than the O&M Staff). ADC and Heinz
shall agree upon the appropriate cleanup standard. Where the parties cannot
reach agreement, they shall select a firm or person who customarily makes such
evaluations and is independent of each of Heinz and ADC to determine the
appropriate cleanup standard. Such determination shall be binding on the
parties. The evaluation and determination of the appropriate cleanup standard
shall be considered a cost of the cleanup.
7.11 Health and Safety-Notices. ADC shall immediately notify Heinz of
any O&M Staff employee injury or occupational sickness, or any employee injury
within the Energy Facility or Real Property. Where notification to a regulatory
agency is required, ADC shall complete such actions, including without
limitation the completion of written reports, investigations or communications
that would normally be the responsibility of the Energy Facility Supervisor,
under the supervision of Heinz and at the expense of ADC.
7.12 Waste Disposal. ADC shall have title to all solid waste that the
Energy Facility generates during the Term. All shipping documents and regulatory
reports regarding such solid waste shall identify ADC as the generator of such
waste. ADC shall, at the option of Heinz, either file, or cooperate with Heinz
in the filing of, any regulatory reports regarding such waste.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.01 Representations and Warranties of Heinz. Heinz represents and
warrants to ADC that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Lease Commencement
Date:
(i) Heinz is a division of a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and has all requisite corporate power and authority to own
and operate its properties and to carry on its business as now conducted
and as proposed to be conducted, and enter into and carry out the terms of
this Agreement.
(ii) The execution, delivery and performance by Heinz of this
Agreement have been duly authorized by all necessary corporate action on
the part of Heinz, and none of such execution, delivery or performance
shall violate any law, governmental rule, regulation or order binding on
Heinz or the articles of incorporation of by-laws of Heinz or contravene
the provisions of, or constitute a default under any mortgage, loan
agreement, deed of trust, or other agreement or contract to which Heinz is
a party by which it or its properties may be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of Heinz and constitutes the valid and legally binding
obligation of Heinz.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of Heinz is required as
a condition to the valid execution, delivery or performance of this
Agreement by Heinz.
(v) There is not outstanding and in effect any option to purchase, or
right of first refusal, or any lease or option to enter into any lease, any
mortgage or security agreement, or any other obligation granting any
license, easement or other right with respect to the Real Property or the
Energy Facility, which would preclude or restrict, diminish or otherwise
impair the exercise or enjoyment of ADC's rights under this Agreement.
8.02 Representations and Warranties of ADC. ADC represents and
warrants to Heinz that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Lease Commencement
Date:
(i) ADC is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and authority to own and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted and enter into and carry out the terms of this Agreement.
(ii) The execution, delivery and performance by ADC of this Agreement
have been duly authorized by all necessary corporate action on the part of
ADC, and none of such execution, delivery or performance shall violate any
law, governmental rule, regulation or order binding on ADC or the articles
of incorporation of by-laws of ADC or contravene the provisions of, or
constitute a default under any mortgage, loan agreement, deed of trust, or
other agreement or contract to which ADC is a party by which it or its
properties may be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of ADC and constitutes the valid and legally binding
obligation of ADC.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of ADC is required as a
condition to the valid execution, delivery or performance of this Agreement
by ADC.
ARTICLE IX
DEFAULT; FORCE MAJEURE
9.01 Events of Default.
(a) The following events shall be deemed to be an act of default by
ADC under this Agreement (an "ADC Event of Default") regardless of the pendency
of any bankruptcy, reorganization, receivership, insolvency or other proceeding
which has or might have the effect of preventing ADC from complying with the
terms of this Agreement:
(i) Failure to pay any sums to be paid hereunder within thirty (30)
days after the date the payment is due, provided that the sum shall have
remained unpaid for (20) days after written notice of such failure has been
given to ADC.
(ii) Failure to comply with any term, provision, representation,
warranty or covenant of this Agreement, other than the payment of money
required to be paid hereunder, if such failure (x) reasonably can be cured
and is not cured within ninety (90) days after written notice thereof or
(y) reasonably cannot be cured within ninety (90) days after written notice
thereof and ADC has not commenced to cure such failure within such period
and thereafter proceeded with reasonable diligence and good faith to
accomplish a cure; provided, however, all violations of federal, state and
local environmental and/or safety laws and regulations that may have a
materially adverse effect on the operations of the Energy Facility or the
Manufacturing Facility or result in the imposition of material monetary
penalties on Heinz must be cured in accordance with the requirements and
within the timeframes of the applicable governmental law, regulations or
agency.
(iii) Filing, or consent to the filing of a petition for relief or
reorganization or arrangement or any other petition in bankruptcy by ADC,
for liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction; or ADC shall make an assignment for the benefit of
creditors; or ADC shall consent to the appointment of a custodian,
receiver, trustee, or other officer with similar powers, for substantially
all of ADC's property or be adjudicated insolvent; or an order for relief
shall be entered against ADC in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding
upon liquidation of all or any part of a ADC's property; or any petition
for any such relief shall be filed against ADC and shall not be dismissed
within sixty (60) days.
(b) It shall be an act of default by Heinz (a "Heinz Event of
Default") if at any time Heinz fails to (i) provide ADC with access to the Real
Property or the Energy Facility or (ii) grant or comply with the licenses
contemplated under Section 2.01 hereof, if such failure (x) reasonably can be
cured and is not cured within ninety (90) days after written notice thereof or
(y) reasonably cannot be cured within ninety (90) days after written notice
thereof and the Heinz has not commenced to cure such failure within such period
and thereafter proceeded with reasonable diligence and good faith to accomplish
a cure.
9.02 Remedies.
(a) Upon the occurrence of any ADC Event of Default and at any time
thereafter so long as the same shall be continuing, Heinz may declare this
Agreement to be in default. At any time thereafter, so long as ADC shall have
not remedied all outstanding ADC Events of Default, Heinz may do one or more of
the following with respect to any and all of the Real Property and the Energy
Facility and the component parts thereof as Heinz in its sole discretion may
elect to:
(i) Proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by ADC of the applicable covenants and
terms of this Agreement or to recover damages for the breach thereof;
(ii) By notice in writing to ADC, terminate this Agreement, whereupon
all rights of ADC under Section 2.01 and 2.02 shall absolutely cease and
terminate as though this Agreement had never been made, and Heinz may
demand that ADC, and ADC shall upon written demand of Heinz, return sole
and exclusive custody and use of the Real Property and the Energy Facility
promptly to Heinz; or Heinz, at its option may enter upon the premises and
take immediate possession of the same by summary proceedings or otherwise,
all without liability to ADC for or by reason of such entry or taking of
possession, whether for the restoration of damage to property caused by
such taking or otherwise.
In addition, ADC shall be liable, except as otherwise provided above, for
any and all unpaid Base Rent or Contingent Rent due hereunder before or
during the exercise of any of the foregoing remedies and for all legal fees
an other costs and expenses incurred by reason of the occurrence of any ADC
Event of Default or the exercise of Heinz's remedies with respect thereto,
including all costs and expenses incurred in connection with the return of
the Real Property and the Energy Facility.
(b) If Heinz shall have not have cured or commenced to cure any
outstanding Heinz Event of Default within the time periods set forth in Section
9.01(b), ADC shall declare this Agreement to be in default and, by notice in
writing to Heinz, terminate this Agreement, whereupon all obligations of ADC
under this Agreement shall absolutely cease and terminate as though this
Agreement had never been made. In connection with such termination, ADC shall
pay to Heinz the Stipulated Loss Value applicable on the date of termination.
Nothing in this Section 9.02(b) shall be deemed to preclude ADC from also
proceeding by appropriate court action or actions to recover Damages incurred in
connection with a Heinz Event of Default.
The parties acknowledge that a Heinz Event of Default shall preclude
ADC from bringing normal coal deliveries onto the Energy Facility for use in its
operations. During the period from the occurrence of the Heinz Event of Default
until a cure is completed or this Agreement is terminated, as the case may be,
Heinz shall reimburse ADC for all additional costs and expenses ADC incurs by
using natural gas instead of coal in its operation of the Energy Facility.
Notwithstanding the foregoing, to the extent the Heinz Event of Default is cured
within 72 hours of its initial occurrence, Heinz shall not be responsible for
reimbursing ADC for that portion of its additional costs and expenses incurred
by using natural gas instead of coal with respect to the production of steam
under Steam Export Agreement. This right of ADC to reimbursement shall be in
addition to the remedies listed in (i) and (ii) above.
9.03 Force Majeure.
(a) Effect. In the event that either party is rendered unable, by
reason of an event of Force Majeure, to perform, wholly or in part, any
obligation or commitment set forth in this Agreement, then, provided such party
gives prompt written notice describing the particulars of such event, including,
but not limited to, the nature of the occurrence and its expected duration, and
continues to furnish monthly reports with respect thereto during the period of
the Force Majeure, the obligations of both parties, except for obligations to
pay money (including, without limitation, the Base Rent), shall be suspended to
the extent and for the period of such Force Majeure condition; provided,
however, that (a) the suspension of performance is of no greater scope and no
longer duration than is required by the Force Majeure and (b) the party whose
performance is being excused shall use its reasonable efforts to perform its
obligations hereunder and remedy its inability to perform.
(b) Termination for Force Majeure. If a Force Majeure continues which
prevents either party from performing an obligation hereunder for more than six
(6) consecutive months, either party may terminate this Agreement upon thirty
(30) days prior written notice. Upon any such termination, ADC shall pay to
Heinz the Stipulated Loss Value established for the termination date.
ARTICLE X
INSURANCE
10.01 Insurance.
(a) ADC shall maintain the following insurance with respect to the
Energy Facility and ADC's performance under this Agreement:
(i) Statutory Workers' Compensation Insurance covering ADC employees
in full compliance with the Pennsylvania Workers' Compensation Act.
(ii) Commercial General Liability Insurance including contractual
liability and products/completed operations liability coverage with a
combined single limit of $5,000,000 per occurrence.
(iii) Automobile Liability Insurance covering all owned, hired and
non-owned vehicles with a combined single limit of $5,000,000 per
occurrence.
ADC shall maintain all such insurance with insurers acceptable to
Heinz. All such insurance shall contain a waiver of subrogation. The insurance
described in subsection (a)(ii) and (iii) shall name Heinz as an additional
insured. All deductibles shall be for the account of, and shall be payable by,
ADC. Coverage under ADC's policy shall be deemed primary over any valid and
collectible insurance that Heinz maintains. At the commencement of the Term and
from time to time thereafter upon the expiration of any such certificate of
insurance, ADC shall furnish Heinz with certificates of insurance evidencing the
above coverages. Each such certificate shall contain a clause for notification
of Heinz thirty (30) days before cancellation, reduction or change in coverage.
(b) Heinz shall maintain the following insurance:
(i) Statutory Workers' Compensation Insurance covering Heinz employees
in full compliance with the Pennsylvania Workers' Compensation Act.
(ii) All Risk Property and Boiler and Machinery Insurance covering the
building and equipment of the Energy Facility on a replacement cost basis.
Such insurance shall list ADC as an additional insured and Loss Payee (As
Their Interest May Appear) and contain a Waiver of Subrogation.
Heinz shall provide ADC with a Certificate of Insurance evidencing
said insurance. For so long as the foregoing insurance is maintained by Heinz,
ADC shall pay to Heinz $10,000 per annum in order to reimburse Heinz for its
costs. Such amount shall be payable commencing on the Lease Commencement and
thereafter on each anniversary thereof during the Term.
(c) Application of Proceeds. The proceeds of any insurance received by
Heinz on account of or for any loss or casualty in respect of the Energy
Facility shall be applied as follows:
(i) except as provided in Section 11.02, if the Energy Facility or
component part thereof has been repaired, restored or replaced by ADC, such
proceeds (or a portion thereof in the case of progress payments) shall be
paid to ADC or at the direction of ADC, upon a written application signed
by any authorized officer of ADC for the payment of, or to reimburse ADC
for the payment of, or to pay for, the reasonable cost of repairing,
restoring or replacing the Energy Facility or component part thereof so
long as the restoration, replacement and repair parts become immediately
subject to all of the terms and conditions of this Agreement. Heinz shall
be entitled to any such proceeds exceeding the costs of such repair,
replacement or restoration; or
(ii) if this Agreement is terminated as a result of an Event of Loss,
such proceeds shall be applied in accordance with Article XI.
ARTICLE XI
EVENT OF LOSS
11.01 Event of Loss. If any Event of Loss with respect to the Energy
Facility shall occur during the Term, ADC shall give to Heinz written notice
(herein called a "Loss Notice") within one (1) business day after the occurrence
thereof, which Loss Notice shall specify the circumstances resulting in such
Event of Loss. ADC shall pay to Heinz, on the rent payment date on or next
succeeding the date on which such Event of Loss occurred, in addition to the
payment of the Base Rent or Contingent Rent otherwise due under Sections 3.03
and 3.04, the Stipulated Loss Value established for such rent payment date under
Exhibit F hereto." Upon (and not until) payment of such Stipulated Loss Value
and the payment of Base Rent and Contingent Rent then due, this Agreement shall
terminate and no further Base Rent or Contingent Rent shall be payable for or in
respect of the Energy Facility.
11.02 Insurance Payments. Heinz shall be entitled to receive any
proceeds of any claims for damage, property insurance or award received as a
result of an Event of Loss.
11.03 Application of Payments from Governmental Authorities for
Requisition of Title. Heinz shall be entitled to receive any payments received
by Heinz or ADC from any governmental authority or instrumentality or agency
with respect to an Event of Loss.
ARTICLE XII
RENEWAL ELECTION/PASSAGE OF TITLE
12.01 Renewal Election. Not later than 90 days prior to the end of the
initial Term, Heinz may deliver to ADC written notice of its election to renew
this Agreement for a period of fourteen (14) years or less (the "Renewal Term")
commencing upon expiration of the Term and subject to substantially the terms
and conditions applicable to the initial Term, except that the Base Rent and
Contingent Rent for the Renewal Term shall be established by negotiation of the
Parties and the Stipulated Loss Value during the Renewal Term shall be zero. The
Parties will then commence good faith negotiations to resolve any outstanding
issues and renew this Agreement.
12.02 Title on Termination. Upon expiration of this Agreement or any
extension hereof for any reason whatsoever other than (x) Heinz's exercise of
its rights under Section 9.02(a)(ii) or ADC's exercise of its rights under
9.02(b), (y) termination for Force Majeure under Section 9.03(b) or (z) the
occurrence of an Event of Loss within the meaning of Section 11.01, all right,
title and interest in and to the Energy Facility shall vest in ADC.
12.03 Prepayment of Rent Obligations by ADC. At any time during the
Term or any Renewal Term provided that termination of this Agreement is
subsequent to, the termination of any and all contractual arrangements between
Heinz and ADC relating to the Manufacturing Facility, ADC shall have the right
to prepay its rent obligations under and terminate this Agreement upon (i)
delivery of thirty (30) days prior written notice to Heinz, which notice shall
state a date on which the termination is to become effective (the "Termination
Date") and (ii) payment of the Stipulated Loss Value and any Base Rent or
Contingent Rent payable as of the Termination Date. The Termination Date shall
occur no less than 30 days after delivery of the foregoing notice to Heinz and
payment of the amounts due under subsection (ii) above shall be made in
immediately available funds on the Termination Date. Upon such payment, title to
the Energy Facility will pass under Section 12.02.
ARTICLE XIII
INDEMNIFICATION
13.01 Reciprocal General Indemnification.
(a) Each Party, respectively, as indemnitor, will indemnify, defend
and hold harmless the other Party and its officers, directors, employees,
affiliates, agents and assigns, as indemnitees, from and against any and all
losses, liabilities, damages, demands, claims, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' and accountants' fees, but
excluding amounts described in Section 15.15 hereof (collectively, the "Losses")
asserted against, resulting to, imposed upon or incurred or suffered by any such
indemnitee as a result of, based upon or arising from, the failure by the
indemnitor or its respective agents or employees to comply with any applicable
law, rule, or regulation of any authority having proper jurisdiction, or the
breach or nonfulfillment of any of the representations, covenants or agreements
made by the indemnitor pursuant to this Agreement, excepting only such Losses as
may be caused by the negligence or misconduct of any indemnitee or its
respective agents or employees.
(b) Notwithstanding any provision to the contrary set forth in this
Agreement, in no event shall any party's liability for any and all Losses exceed
the lesser of (i) all amounts paid by Heinz to ADC hereunder; or (ii) $2,500,000
(as adjusted during the Term for inflation based on the consumer price index),
regardless of the form of action or legal theory under which liability may be
asserted.
13.02 Reciprocal Environmental Indemnification. Heinz and ADC,
respectively, as indemnitor, will indemnify the other as indemnitee, and hold
it, its officers, directors, employees, affiliates, agents and assigns as
indemnitees, harmless from and against any and all investigation and remediation
costs, losses, damages, fines, penalties, or expenses (excluding amounts
described in Section 15.15 hereof), and liability suffered or paid as a result
of any and all claims, demands, suits, causes of action, proceedings, judgments
and liabilities, including, without limitation, reasonable attorney's fees,
incurred or sustained by or against any such party with respect to or resulting
from spill, discharge, emission, or release of any Hazardous Materials, if the
spill, discharge, emission, or release is caused by indemnitor, its agents,
employees, representatives, contractors or other person under the supervision of
the indemnitor during the Term of this Agreement, or from any non-compliance
with regulatory requirements for which a party was responsible under this
Agreement. Notwithstanding any other provision of this Agreement to the
contrary, Heinz shall further indemnify ADC and hold it, its officers,
directors, employees, affiliates, agents and assigns harmless, from and against
any and all investigations and remediation costs, and all losses, damages or
expenses (excluding amounts described in Section 15.15 hereof), and liability
suffered or paid as a result of any and all claims, demands, suits, causes of
action, proceedings, judgments and liabilities, including, without limitation,
reasonable attorneys' fees, incurred or sustained by or against ADC, its
officers, directors, employees, affiliates, agents and assigns, with respect to
or resulting from, spill, discharge, emission, or release or any Hazardous
Materials, to, at, from, over, on, under, or above the Real Property and the
Energy Facility if the spill, discharge, emission, or release occurs or results
from acts or omissions (including failure to comply with applicable law) of
Heinz, its agents, contractors, employees, representatives or other persons
acting under the supervision of Heinz, occurring prior to the Lease Commencement
Date. Regarding the matters that this Section 13.02 covers, the indemnification
set forth in this Section 13.02 shall be the exclusive remedy. The
indemnification provisions of Section 13.01 shall have no application to such
matters.
13.03 Duty to Defend.
(a) Indemnitor, at its sole cost and expense, shall defend with
counsel reasonably satisfactory to indemnitee, any claim, demand, suit, cause of
action or proceeding covered by the indemnities set forth in Section 13.01 or
13.02. Indemnitor shall have the right to control the defense of any claim,
demand, suit, cause of action or proceeding, provided that the indemnitor shall
first confirm in writing to indemnitee that such claim is within the scope of
the indemnities contained herein and that indemnitor shall pay all amounts
required to be paid in respect of such claim, demand, suit, cause of action or
proceeding. The indemnitee shall have the right, but not the obligation, at its
sole cost and expense, to participate in the defense of any such claim, demand,
suit, cause of action or proceeding. Indemnitee shall have the right at any
time, by notice to indemnitor, to assume exclusive control of the defense of any
claim, demand, suit, cause of action or proceeding at the sole cost and expense
of indemnitor, if (a) indemnitor fails to diligently defend such claim, demand,
suit cause of action or proceeding, (b) there is a conflict in the interests of
indemnitor and indemnitee with respect to such claim, demand, suit, cause of
action or proceeding or (c) at any time during the pendency of such claim,
demand, suit, cause of action or proceeding, indemnitor shall disaffirm its
responsibility for the claim involved. If the indemnitee assumes exclusive
control of the defense of any claim, demand, suit, cause of action, or
proceeding as set forth in the preceding sentence, the indemnitor shall pay all
costs that may be incurred by the indemnitee in such defense. In addition, the
indemnitor shall pay all costs that the indemnitee may incur in enforcing this
indemnity, including without limitation reasonable attorneys' fees, within ten
(10) days after the request therefor.
(b) Indemnitor shall have the right to settle any claim, demand, suit,
cause of action, or proceeding which results only in the payment of money,
Indemnitor shall have no right, without the prior written consent of indemnitee,
to settle any claim, demand, suit, cause of action, or proceeding or settlement
thereof, involves non-monetary obligations of indemnitee.
(c) Notwithstanding the foregoing, in any case where the
indemnification under Section 13.02 involves the remediation of the presence of
Hazardous Materials, (i) if ADC is the Indemnitor, ADC and Heinz jointly shall
decide upon the proper method of remediation of the Hazardous Materials, (ii) if
Heinz is the indemnitor, Heinz shall solely decide upon the proper method of
remediation of the Hazardous Material. If the indemnification involves an
alleged violation of a Heinz Permit, regardless of the provisions of this
Section 13.03, Heinz in all cases shall control the defense of such alleged
violation. In addition, ADC, as indemnitor, shall not be entitled to settle any
environmental claim, demand, suit, causes of action, or proceeding in which a
violation of environmental law or permit may be admitted or implied without the
written consent of Heinz to such settlement.
13.04 Survival. The provisions of this Article XIII shall survive the
Term.
ARTICLE XIV
EXPORT STEAM SALES
14.01 Pittsburgh Thermal Steam Sales. Pittsburgh Thermal, L.P.
("Pittsburgh Thermal") owns and operates a district heating and cooling system
that provides steam, chilled water and hot water service to customers in the
21st and 22nd Wards of the City of Pittsburgh. Pittsburgh Thermal's production
plant is located approximately one-mile from the Manufacturing Facility. Given
the proximity of the Manufacturing Facility and Pittsburgh Thermal plant, the
Parties desire to exploit the business opportunity presented by a contractual
arrangement under which ADC would agree to supply and Pittsburgh Thermal would
agree to purchase certain quantities of steam that are available for export by
the Energy Facility. Concurrently with the execution of this Agreement, ADC and
Pittsburgh Thermal are proposing to enter into a certain agreement for the
export and purchase of steam (the "Steam Export Agreement"). Execution and
delivery of the Steam Export Agreement shall not be a condition precedent to the
effectiveness of this Agreement.
14.02 Construction of Export Pipeline. The steam to be purchased and
sold under the Steam Export Agreement would be supplied to Pittsburgh Thermal by
way of a newly-constructed pipeline (the "Export Pipeline") running from the
Energy Facility to the Heinz property line in accordance with the plans to be
developed by ADC and approved by Heinz. Provided that the Steam Export Agreement
is executed and delivered as contemplated under Section 14.01, ADC (or, in ADC's
discretion, Pittsburgh Thermal) shall undertake and pay all costs associated
with the engineering, construction and all other work or approvals necessary in
connection with the construction of the Export Pipeline. Heinz shall provide a
staging area and all reasonable assistance, at ADC's expense, to facilitate such
construction. ADC or its contractors shall perform the construction in a manner
that will not disrupt the operations at the Manufacturing Facility.
14.03 Energy Facility Modifications. Provided that the Steam Export
Agreement is executed and delivered as contemplated under Section 14.01, ADC
shall supply the capital and take, or cause to be taken by independent
contractors retained by ADC, all actions related to plant modifications and
upgrades that are required to export steam as contemplated by this Article XIV.
14.04 Heinz Energy Requirements. The energy requirements of the
Manufacturing Facility shall at all times be given priority by ADC when making
commitments to supply export steam to Pittsburgh Thermal, and the Steam Export
Agreement shall so provide. ADC shall maintain a high level of awareness of and
coordinate plant operations with Heinz's service/schedule requirements.
14.05 Assignment and Assumption of Steam Export Agreement. After a
definitive Steam Export Agreement has been finalized and prior to the execution
thereof, ADC shall deliver a copy of such document to Heinz for its review and
comment. Provided that the terms and conditions of the Steam Export Agreement
are reasonably acceptable to Heinz, the Parties shall enter into an agreement
stating that upon any termination of this Agreement prior to the end of the Term
(other than any termination caused by Force Majeure or an ADC Event of Default),
ADC shall assign and Heinz shall assume all of ADC's rights and obligations
under the Steam Export Agreement. In connection therewith, Heinz shall
indemnify, hold harmless, and defend ADC from any and all claims, liens or
charges of any nature whatsoever that arise out of a breach or nonfulfillment by
Heinz of any of its representations, covenants, agreements or obligations under
the Steam Export Agreement, and ADC shall indemnify, hold harmless and defend
Heinz from any and all claims, liens or charges of any nature whatsoever that
arise out of a breach or nonfulfillment by ADC prior to such assignment of any
of its representations, covenants, agreements or obligations under the Steam
Export Agreement.
14.06 Export Steam Expenses. ADC shall be responsible for any and all
expenses associated with the production, distribution or administration of
export steam, including but not limited to emission fees, fuel, parasitic loads,
maintenance and repair of the Export Pipeline.
ARTICLE XV
MISCELLANEOUS
15.01 Governmental Notices. If either Party shall receive any notice
from any governmental authority regarding the operation of the Energy Facility,
it shall as soon as practicable deliver a copy of such notice to the other
Party.
15.02 Compliance with Law. Except as otherwise specified herein, each
Party shall, at its own cost and expense, obey and comply with all laws,
ordinances, rules, requirements, regulations and orders of the federal, state,
county and city governments, or any of them, and of any and all of their
departments and bureaus, or of any other competent authority, as they may
pertain to the Energy Facility, to the protection and maintenance thereof, to
the business operated therein, or the sanitary conditions thereof, or otherwise
to the performance of either Party under this Agreement.
15.03 No Partnership or Joint Venture. Nothing in this Agreement shall
be construed as creating a partnership or joint venture between the Parties, or
making either Party an agent or employee of the other Party. No employee of
Heinz or ADC who renders any service hereunder shall be construed or deemed to
be an employee of the other Party as a result thereof. Neither party shall have
any authority, or represent that it has any authority, to bind the other party
contractually.
15.04 Emergency Response. If an Emergency arises with respect to the
Real Property and/or Energy Facility, Heinz and ADC shall each have the right to
take reasonable action to respond to it without first advising the other,
provided that it advises the other Party of such action as soon thereafter as
practicable.
15.05 Severability. If, pursuant to a final, non-appealable judgment
by a court of competent jurisdiction, any provision of this Agreement is found
to be illegal, invalid or otherwise enforceable, such provision shall be
construed to be deleted from this Agreement and the remainder of it shall remain
in full force and effect as though such provision had not been included herein.
15.06 Entire Agreement. This Agreement and all exhibits thereto
constitute the entire and sole understanding of the Parties with respect to the
matters covered hereby or by any transactions contemplated herein, and
supersedes and cancels any and all oral or written prior agreements,
understandings, statements and representations between the Parties with respect
to the management and conduct of the Energy Facility.
15.07 Waivers and Amendments. No waiver, modification or amendment of
a term, condition or provision of this Agreement shall be valid or of any effect
unless made in writing specifying with particularity the manner and extent of
such waiver, modification or amendment, signed by the Party to be bound or its
duly authorized representative. Any waiver by any Party of any default of the
other shall not affect or impair any right arising from any subsequent default.
15.08 Governing Law. This Agreement and the legal relations between
the Parties shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Pennsylvania, without regard to conflict of law
principles.
15.09 Section Headings. Section headings are inserted herein for
convenience only and are not to be construed as a part of this Agreement or as a
limitation of the scope of the particular sections to which they refer.
15.10 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the respective Parties hereto, their respective successors and
assigns.
15.11 Estoppel Certificates. Each Party shall, from time to time, upon
twenty (20) days prior written request by the other Party, execute, acknowledge
and deliver to the other Party, or any other person, firm or corporation
specified by such Party, a certificate signed by its authorized representative
stating that (i) this Agreement is unmodified and in full force and effect, or
if there have been modifications, that this Agreement is in full force and
effect as modified, and setting forth such modifications; (ii) the dates to
which any payments which are due hereunder have been made, (iii) stating that to
the knowledge of the signer of such certificate no default exists hereunder or
specifying each default of which the signer has knowledge, and (iv) stating that
to the knowledge of the signer of such certificate that other Party has observed
and performed all of the terms, covenants and conditions on its part to be
performed, and if not, specifying the same.
15.12 No Merger. There shall be no merger of this Agreement with any
other estate in the Manufacturing Facility, the Real Property or Energy Facility
by reason of the fact that the same person acquires or holds, directly or
indirectly, this Agreement as well as any other estate in the facilities.
15.13 Cooperation. The Parties hereto will cooperate with each other
in every way carrying out the transactions contemplated by this Agreement, in
obtaining any and all required approvals, consents, permits and authorizations,
in filing the notification and reports, if any, which may be required, and in
executing and delivering all documents, instruments and copies thereof as shall
be reasonably agreed upon or as other Party may reasonably request for the
purpose of carrying out the terms and conditions of this Agreement.
15.14 Attorneys' Fees. In the event of any arbitration or judicial
proceedings relating to this Agreement or the breach thereof, the prevailing
Party shall be entitled to recover from the losing Party its reasonable costs,
expenses and attorneys' fees.
15.15 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE FOR ANY
LOST REVENUE, LOST PROFITS, OR OTHER INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES,
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF ANY BREACH OF
THIS AGREEMENT OR FAILURE TO PERFORM ITS OBLIGATIONS HEREUNDER.
15.16 Notices. All notices, forms of approval and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person by telegram, telex or other
standard form of telecommunications and by certified mail, postage prepaid
return receipt requested, addressed as follows:
(a)
If to Heinz to:
James Vuksic
Pittsburgh Factory Manager
Heinz USA
P.O. Box 57
Pittsburgh, PA 15230
Fax: (412) 237-3590
With copies to:
Ken G. Campbell
General Manager Manufacturing
Services
Heinz USA
P.O. Box 57
Pittsburgh, PA 15230-0057
Fax: (412) 237-5541
Senior Vice President
General Counsel
H. J. Heinz Company
P.O. Box 57
Pittsburgh, PA 15230
Fax: ( 412) 456-6102
(b) If to ADC to:
Alexis Tsaggaris, President
DQE Energy Services
One NorthShore Center
Pittsburgh, PA 15212
Phone: (412) 322-6090
Fax: (412) 322-6085
With a copy to:
Linda S. Ackerman, Esquire
DQE, Inc.
411 Seventh Avenue
Pittsburgh, PA 15230-1930
Phone: (412) 393-6041
Fax: (412) 393-6605
or to such other address as one party may have furnished to the other in
writing.
15.17 Assignments. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either Party without the
prior written consent of the other, provided, however, that upon receipt of (i)
an appropriate order from the Securities and Exchange Commission under Section
9(a)(2) of the Public Utility Holding Company Act of 1935, as amended or (ii)
written confirmation reasonably acceptable to Heinz that such an order is not
required, ADC shall assign this Agreement to a special purpose subsidiary of DQE
Energy Services, Inc. that has been formed solely for the purpose of
facilitating this transaction and any subsequent transactions with Heinz and its
affiliates (the "Special Purpose Subsidiary"). After assignment, all such
references to ADC herein shall be deemed to refer to the Special Purpose
Subsidiary. Nothing contained herein, express or implied, is intended to confer
on any person other than the Parties hereto and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement. Notwithstanding the foregoing, Heinz may assign this
Agreement to any subsidiary, parent company, or corporate affiliate of Heinz, or
to any person or entity that (i) acquires the Manufacturing Facility; (ii) is
reasonably acceptable to Energy Services or the Special Purpose Subsidiary; and
(iii) agrees to assume all of Heinz's rights and obligations under this
Agreement.
15.18 Executive Review. Either Heinz or ADC shall have the right at
any time after good faith efforts have failed to resolve a dispute under this
Agreement related to a material matter effecting the parties rights and
obligations hereunder, to request review of such matter by the Executive Vice
President of HNA Operations and the Chief Executive Officer of ADC. Heinz or ADC
shall exercise its right to request executive review by providing a written
notice to the other Party. The above-referenced executives shall meet within 30
days of date of such notice is delivered to the other Party, and shall engage in
good faith efforts to resolve the deadlock. Within 30 days of such meeting, the
executives shall provide notice to the Parties stating whether they have been
able to resolve the deadlock and the nature of their decision if they have
resolved the deadlock. Any such decision shall be binding on the Parties.
15.19 Mediation. If a disagreement exists between the Parties
concerning this Agreement, or a breach thereof, executive review under Section
15.18 is unsuccessful, and the continued failure to settle such disagreement is
likely to have material adverse effect on any Party's rights and obligations
under this Agreement, either Party may elect to submit the matter to mediation
under the Commercial Mediation Rules of the American Arbitration Association. If
either Party so elects, the other Party shall submit to mediation. The mediator
shall not have the authority to impose a settlement on the Parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATTEST: HEINZ USA
By: By:
Title: Title:
ATTEST: ALLEGHENY DEVELOPMENT
CORPORATION
By: By:
Title: Title:
EXHIBIT A
ENERGY FACILITY ASSETS
[December 31 Asset List]
EXHIBIT A-1
RETAINED ASSETS
Machine Shop, Pipe Shop, and Tin Shop equipment and services.
Examples: Drill Press, Spot Welded, Sewer Snake, Lathe, Shear and
Brake Work, Fire Line Repairs, etc.
Building Maintenance equipment and services.
Examples: Power Hand Tools, Pressure Washers, Vacuum Cleaners, Snow
Removal, etc.
Other equipment.
Examples: Scissor Lift, Bucket Lift, Hand Trucks, Parker Filter Cart,
Welders, Plasma Cutters, Pipe Bender/Threader, Instrument & Electrical
Diagnostic/Calibration Equipment, Portable Pumps, Scaffolding, Picks &
Ladders, etc.
EXHIBIT A-2
STAND-BY EQUIPMENT TO BE REPAIRED OR REPLACED
Equipment DescriptionProjected Cost
1. Heat recovery pump set
$
10,426
2. Turbine room sub-station
batteries $
11,450
3. Hotwell pump
$
7,500
4. Ash tumbler
$
17,500
5. Feedwater pump
$
26,000
6. Turbine room 4160 feeder
$
9,788
7. Boiler #1 grate
$
21,648
8. Turbine/Generator #2
bearing $
18,572
9. Case unloader
$
28,600
Total $151,484
EXHIBIT B
ENERGY FACILITY IMPROVEMENTS
Specific Improvement Estimated
Cost
1. Rebuild underside of boilers. $ 400,000
2. Modify material handling system. $ 200,000
3. Boiler and turbine control system $ 665,000
retrofit.
4. Air Emissions Control System. $1,200,000
5. Balance of plant and demolition. $ 200,000
6. Rebuild Turbine/Generator. $ 300,000
7. Contingency. $ 145,000
8. Engineering and Construction $ 240,000
Management. -----------
TOTAL ESTIMATE $ 3,350,000
EXHIBIT B-1
EXPORT IMPROVEMENTS
Specific Improvement
Estimated Cost
9. Convert Boilers #1 and #2 to spreader stokers. $ 300,000
10. Upgrade material handling system. $ 200,000
11. Export reducing, desuperheating, and metering station. $ 50,000
12.Contingency. $ 30,000
13.Engineering and Construction Management. $ 70,000
TOTAL ESTIMATE $ 650,000
EXHIBIT C
UTILITIES DEPARTMENT PERMITS-CERTIFICATES
BOILERS
OPERATING PERMITS
Pa. CERTIFICATES
SERIAL #
#1 C.E. -3033609-000-00801
25101B
#2 C.E. -3033609-000-00801
25102B
#3 B&W -3033609-000-00802
25119B
#4 B&W -3033609-000-00802
25120B
#5 B&W -3033609-000-00802
25121B
#7 B&W -3033609-000-00802
25122B
#8 Zurn -3033609-000-00802
186561B
TITLE V PERMIT (application)
NITROGEN OXIDE EMISSIONS AGREEMENT NO. 211
Allegheny County
STORAGE TANK REGISTRATION
Pa.
DIESEL TANK
NALCO CHEMICAL TANK
PRESSURE VESSEL CERTIFICATES
Serial #
Air tank
499535
Feedwater Heater
214254
Condensate Tank
079037
Air Tank
219090
Flash Tank
450860
After cooler
499592
Air Tank
519510
Deaerator
499530
Air compressor
499404
PITTSBURGH FACTORY PERMITS
CLEAR WATER DISCHARGE Pa.
ALCOSAN INDUSTRIAL DISCHARGE PERMIT
Allegheny County
VOC EMISSIONS AGREEMENT NO. 247
Allegheny County
EXHIBIT D
BASE WAGE RATE/BASE SHIFT PREMIUM
Job Grade Rate (per hour)
1 $11.585
2 $11.765
3 $11.945
4 $12.125
5 $12.305
6 $12.485
7 $12.665
8 $12.845
9 $13.025
10 $13.205
11 $13.385
12 $13.565
13 $13.745
14 $13.925
15 $14.105
16 $14.285
17 $14.465
18 $14.645
19 $14.825
20 $15.005
21 $15.185
22 $15.365
Starting rate for new hires: $7.75
Shift Premiums and Overtime Premiums utilized for the purposes of this Agreement
shall be those stated in the 1994 Collective Bargaining Agreement as in effect
on the Lease Commencement Date.
EXHIBIT F
STIPULATED LOSS VALUE
<PAGE>
FIRST AMENDMENT
TO
HEINZ FACILITY LEASE
This First Amendment ("First Amendment") to the Heinz Facility Lease
dated January 22, 1997 (the "Facility Lease") by and between Heinz USA, a
Division of H.J. Heinz Company ("Heinz") and Allegheny Development Corporation
("ADC") is entered into as of March 11, 1997.
W I T N E S S E T H :
WHEREAS, Heinz and ADC, as parties thereto, desire to amend the
Facility Lease in certain respects as more fully set forth below:
NOW, THEREFORE, in consideration of the foregoing premise and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
1. Amendments to Article I. Article I is hereby amended by (i) adding
the following definition in the proper alphabetical order:
"'Interest Payment Date' means any date on which Interest Payments are
made under Section 3.03(b).
'Maturity Date' shall mean the last Business Day of the Term."; and
(ii) deleting the words "rent payment date" in the definition of "Stipulated
Loss Value" and substituting the words "Interest Payment Date" therefor:
2. Amendment to Section 3.03. Section 3.03 is hereby deleted in its
entirety and the following substituted therefor:
"3.03
Base Rent and Interest Payable for Lease of Energy Facility.
(a) ADC shall pay to Heinz base rent in an amount equal to
$8,343,118.09 ("Base Rent") over the Term. The Base Rent
shall be payable in immediately available funds in one
balloon payment, which shall be due on the Maturity Date
without notice, presentment or demand.
(b) The Base Rent shall bear interest on the unpaid
principal balance thereof from time to time outstanding. ADC
shall make payments of accrued interest (the "Interest
Payments") in equal, consecutive monthly installments of
$41,715.00 commencing on March 1, 1997 and thereafter on the
1st day of each of the succeeding 179 calendar months."
3. Amendment to Section 7.05. The second sentence in Section 7.05 is
hereby deleted and the following sentence substituted therefor: "Cost associated
with subsection (i) above shall be recovered by ADC through an off-set to the
Interest Payments payable by ADC under Section 3.03(b) hereof."
4. Amendments to Section 9.02. Section 9.02(a) is hereby deleted in
its entirety and the following substituted therefor:
"9.02
Remedies.
(a) Upon the occurrence of any ADC Event of Default and at
any time thereafter so long as the same shall be continuing,
Heinz may declare this Agreement to be in default. At any
time thereafter, so long as ADC shall have not remedied all
outstanding ADC Events of Default (other than a failure to
pay Base Rent on the Maturity Date), Heinz may do one or
more of the following with respect to any and all of the
Real Property and the Energy Facility and the component
parts thereof as Heinz in its sole discretion may elect to:
(i) Proceed by appropriate court action or actions, either
at law or in equity, to enforce performance by ADC of the
applicable covenants and terms of this Agreement or to
recover damages for the breach thereof;
(ii) By notice in writing to ADC, terminate this Agreement,
whereupon all rights of ADC under Section 2.01 and 2.02
shall absolutely cease and terminate as though this
Agreement had never been made, and Heinz may demand that
ADC, and ADC shall upon written demand of Heinz, return sole
and exclusive custody and use of the Real Property and the
Energy Facility promptly to Heinz; or Heinz, at its option
may enter upon the premises and take immediate possession of
the same by summary proceedings or otherwise, all without
liability to ADC for or by reason of such entry or taking of
possession, whether for the restoration of damage to
property caused by such taking or otherwise.
(b) In the event that ADC fails to pay to Heinz the Base
Rent on the Maturity Date, Heinz's sole remedy shall be to
terminate this Agreement under Section 9.02(a)(ii). The
Parties hereby acknowledge that in (i) such event or (ii)
the event that ADC defaults under any other provision of
this Agreement and Heinz exercises its rights under
9.02(a)(ii), the Interest Payments received by Heinz and the
value of the capital improvements made to the Energy
Facility over the Term (which shall revert to Heinz under
Section 12.02) constitute liquidated damages in an amount
sufficient to make Heinz whole for any and all losses or
damages suffered as a result of any such breach. The Parties
further agree, and Heinz hereby acknowledges, that Heinz
shall not be entitled to any other remedy available at law
or equity upon the occurrence any ADC Event of Default
referred to in this Section 9.02(b). Under no circumstances
shall ADC be contractually obligated to pay Base Rent or any
component thereof prior to the Maturity Date. Under no
circumstances will Interest Payments to be made hereunder be
considered a component of Base Rent." and
Section 9.02 (b) is hereby redesignated as Section 9.02(c).
5. Amendment to Section 9.03. The words "Base Rent" in the
parenthetical "(including, without limitation, the Base Rent)" are deleted and
the words "Interest Payments" substituted therefor.
6. Amendment to Section 11.01. Section 11.01 is hereby deleted in its
entirety and the following substituted therefor:
"11.01 Event of Loss. If any Event of Loss with respect to the Energy
Facility shall occur during the Term, ADC shall give to Heinz written
notice (herein called a "Loss Notice") within one (1) business day after
the occurrence thereof, which Loss Notice shall specify the circumstances
resulting in such Event of Loss. ADC shall pay to Heinz, on the Interest
Payment date occurring on or next succeeding the date on which such Event
of Loss occurred, in addition to the payment of the Interest Payments and
Contingent Rent otherwise due under Section 3.04, the Stipulated Loss Value
established for such Interest Payment date under Exhibit F hereto." Upon
(and not until) payment of such Stipulated Loss Value and the payment of
the Interest Payments and Contingent Rent then due, this Agreement shall
terminate and no further Interest Payments, Contingent Rent or Base Rent
shall be payable for or in respect of the Energy Facility."
7. Amendment to Section 12.01. The first sentence of Section 12.01 is
hereby deleted and the following substituted therefor:
"Not later than 90 days prior to the end of the initial Term, Heinz may
deliver to ADC written notice of its election to renew this Agreement for a
period of fourteen (14) years or less (the "Renewal Term") commencing upon
expiration of the Term and subject to substantially the terms and
conditions applicable to the initial Term, except that the Base Rent,
Contingent Rent and Stipulated Loss Value for the Renewal Term shall be
established by negotiation of the Parties."
8. Amendment to Section 12.03. Section 12.03 is hereby deleted and the
following substituted therefor:
"12.03
Prepayment of Contractual Obligations by ADC. At any time during the Term
or any Renewal Term provided that termination of this Agreement is
subsequent to the termination of any and all contractual arrangements
between Heinz and ADC relating to the Manufacturing Facility, ADC shall
have the right to prepay its obligations hereunder and terminate this
Agreement upon (i) delivery of thirty (30) days prior written notice to
Heinz, which notice shall state a date on which the termination is to
become effective (the "Termination Date") and (ii) payment of the
Stipulated Loss Value and any Interest Payments or Contingent Rent payable
as of the Termination Date. The Termination Date shall occur no less than
30 days after delivery of the foregoing notice to Heinz and payment of the
amounts due under subsection (ii) above shall be made in immediately
available funds on the Termination Date. Upon such payment, title to the
Energy Facility will pass under Section 12.02."
9. Amendment to Section 14.05. Section 14.05 is hereby amended by
adding the following provision at the end thereof:
"Irrespective of (i) any indemnification obligations that Heinz may
have as a result of such assignment and assumption and (ii) whether such
assignment and assumption in fact takes place, Heinz hereby agrees that if
Heinz terminates this Agreement for any reason other than upon the
occurrence of an ADC Event of Default or Force Majeure and such termination
results in a claim being brought against ADC by Pittsburgh Thermal, to
recover the unamor itized cost of the export pipeline to be constructed by
Pittsburgh Thermal then Heinz shall indemnify ADC and hold ADC harmless
against any costs, liens or charges associated in any way whatsoever with
such claim."
10. New Exhibit F. Exhibit F (Stipulated Loss Value) to the Facility
Lease is hereby deleted in its entirety and the new Exhibit F attached hereto is
substituted therefor.
11. Effective Date of Amendment. This First Amendment shall be
effective immediately upon the execution hereof.
12. Confirmation of Agreement. Except as explicitly set forth above,
all of the provisions of the Facility Lease are hereby ratified and confirmed.
13. Governing Law. This First Amendment shall be construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
14. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same document.
IN WITNESS WHEREOF, Heinz and ADC have caused this First Amendment to
be executed by their duly authorized officers, as of the date first above
written.
ATTEST: HEINZ USA
ALLEGHENY DEVELOPMENT
CORPORATION
ENERGY SUPPLY AGREEMENT
This Energy Supply Agreement ("Agreement") is made and entered into
this 22nd day of January, 1997 by and among Heinz USA, a Division of H.J. Heinz
Company, a Pennsylvania corporation having its principal place of business at
1062 Progress Street, Pittsburgh, PA 15212 ("Heinz"), Allegheny Development
Corporation, a Pennsylvania corporation having its principal place of business
at Cherrington Corporate Center, 500 Cherrington Parkway, Suite 110, Coraopolis,
PA 15212 ("ADC") and Duquesne Energy, Inc., a Pennsylvania corporation having
its principal place of business at 411 Seventh Avenue, 16th Floor, Pittsburgh,
PA 15230-1930 ("DEN").
W I T N E S S E T H :
WHEREAS, Heinz currently utilizes energy produced by an
inside-the-fence energy facility (the "Energy Facility") that provides energy in
the form of steam, electricity and compressed air to its Pittsburgh,
Pennsylvania manufacturing plant;
WHEREAS, ADC is in the business of, and has considerable expertise in,
energy and fuel management, energy facility development, cogeneration,
independent power production and utility management services; and
WHEREAS, DEN, an affiliate of ADC, has complementary expertise in
energy and fuel procurement;
WHEREAS, Heinz, ADC and DEN desire to enter into a contractual
arrangement pursuant to which (i) ADC would provide to Heinz electricity, steam
energy, and compressed air and (ii) DEN would procure the coal required to
produce such energy, each under the terms more specifically set herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants, agreements and conditions set forth herein, Heinz, ADC and DEN,
intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the following terms shall have
the following meanings for the purposes of this Agreement, and shall include the
plural as well as the singular form:
"Agreement" shall have the meaning set forth in the first paragraph of
this Agreement.
"Baseline UECCE" shall have the meaning set forth in Section 3.01(b)
hereof.
"Baseline UECCS" shall have the meaning set forth in Section 3.01(b)
hereof.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Pennsylvania.
"Calendar Year" means any twelve-month period commencing on January 1
and ending the following December 31.
"Consolidating Statement" means the monthly invoice generated by ADC
on behalf of itself and DEN under Section 3.02 hereof that itemizes the payments
to be made to ADC and DEN by Heinz hereunder, including, without limitation, the
payments required under Sections 3.01 hereof.
"Current Capacity" means with respect to (i) electric energy, the
maximum steady state full load capacity of two turbine generators (2 times
3,000kW); and (ii) compressed air, the maximum capacity of the Energy Facility's
installed compressed air system (5,300 cfm) as of the Effective Date. Current
Capacity with respect to steam means the maximum steady state full load capacity
of the operating coal/natural gas fired boilers at the Energy Facility
(operating coal/natural gas fired boilers for this purpose means boilers 1,2,3
and 4). Current Capacity for steam shall be equal to 160,000 lbs of coal fired
steam per hour during the Initial Capacity Measuring Period. Should an opacity
excursion occur preventing the Energy Facility from achieving 160,000 lbs of
coal fired steam per hour as required herein, Current Capacity for steam shall
be reduced to 150,000 lbs of coal fired steam per hour. After the conclusion of
the Initial Capacity Measuring Period and for the remainder of the Term, Current
Capacity for steam shall be equal to the greater of (i) 170,000 lbs of coal
fired steam per hour or (ii) actual steady state full load capacity.
"Demand Energy Charge" means the charge set forth under Section
3.01(a) hereof.
"Effective Date" means the first Business Day after this Agreement has
been executed and delivered by each of Heinz, ADC and DEN.
"Energy Consumption Charges" means the charges stated under Section
3.01(b) hereof.
"Energy Facility" means the cogeneration facility that provides energy
in the form of steam, electricity and compressed air to the Manufacturing
Facility.
"Energy Facility Improvements" means certain proposed initial capital
improvements, modifications and upgrades to the Energy Facility to be
implemented by ADC within 18-24 months after the Effective Date.
"Force Majeure" shall mean, but not be limited to, acts of God,
storms, war, official strikes or industrial disputes beyond the control of the
Parties (provided each Party shall use every reasonable effort in good faith to
resolve any such strike or dispute), acts of the public enemy, quarantine,
epidemic, blockade, civil disturbance, riots, insurrection, fire, rules or
regulations of any governmental authority having or claiming jurisdiction,
compliance with which is beyond a party's reasonable control and which makes
continuance of operations impossible, or any other cause beyond the reasonable
control of such Party, whether or not similar to the causes specified herein.
Loss of all or substantially all of the Energy Facility or the use thereof due
to destruction, damage or rendition of the Energy Facility unfit for normal use
for any reason whatsoever shall constitute Force Majeure. Inability of any Party
to secure funds, arrange bank loans or other financing, or to obtain credit
shall not be regarded as Force Majeure. The inability of ADC or DEN to obtain
fuel shall not be regarded as Force Majeure.
"Initial Capacity Measuring Period" means the period prior to the time
that the steam capacity related Energy Facility Improvements are completed
(which for the purposes of this definition shall in any event not extend beyond
the last day of the eighteenth (18th calendar month) commencing after the
Effective Date).
"kwh" means kilowatt hour.
"mlb" means thousand pounds.
"Manufacturing Facility" means all of the manufacturing plant that is
owned and operated by Heinz and located at 1062 Progress Street, Pittsburgh, PA
15212.
"Manufacturing Interruption" shall mean either (i) any interruption in
Heinz's production of finished goods at the Manufacturing Facility or (ii) any
delay of more than 30 minutes in the commencement by Heinz of its production
schedule at the Manufacturing Facility.
"Party" means Heinz, ADC or DEN, severally, and "Parties" means Heinz,
ADC and DEN, collectively.
"Payment Commencement Date" means the first day of the first calendar
month following the Effective Date.
"Regulatory Requirements" means all legal and regulatory requirements
and permit specifications related to the operation of the Energy Facility, as
the same may be modified from time to time.
"Stipulated Buy-Out Price" means, on any date during the Term, the
amount determined in accordance with Schedule A, B, or C of Exhibit B hereto.
"Term" shall mean the fifteen (15) year period commencing on the
Effective Date.
ARTICLE II
ANNUAL ENERGY PURCHASE AND
SUPPLY REQUIREMENTS
2.01 Energy Supply and Purchase Requirements. Commencing on the
Payment Commencement Date, ADC hereby agrees to sell and Heinz hereby agrees to
purchase, (i) all of the steam required from time to time to meet the
operational demands of the Manufacturing Facility up to, but not exceeding,
942,000 mlbs per Calendar Year and (ii) electric energy required in connection
with the operation of the Manufacturing Facility that exceeds the annual minimum
take or pay obligation under Heinz's primary electric supply contract (which
take or pay obligation shall in no event be greater than 20 million kwh during
any Calendar Year), to the extent steam demand at an annual average rate of not
less than 24.36 kwhs per mlbs of steam production permits. If ADC fails to meet
the annual average rate of 24.36 kwhs per mlbs of steam produced, ADC shall pay
Heinz the difference between the then current purchased primary electrical cost
per kwh and the then current Baseline UECCE, multiplied by the total kwh
shortfall. Total kwh shortfall shall equal the difference between 24.36 and the
actual annual average kwh per mlbs of steam produced , multiplied by the actual
mlbs of steam produced. Without limiting the generality of the foregoing, ADC
shall use best efforts to supply electrical energy so that Heinz may purchase no
more than the annual minimum take or pay obligation under Heinz's primary
electric supply contract. ADC shall supply compressed air required in connection
with the operation of the Manufacturing Facility, provided, and solely to the
extent that, it is able to do so by utilizing the Current Capacity. DEN shall
procure all coal or coal-based stoker fuel required to produce the energy to be
delivered to Heinz under this Agreement.
2.02 Term. Except as otherwise provided herein, the term of this
Agreement (the "Term") shall commence on the Effective Date and shall terminate
on the 15th anniversary of the Effective Date, unless extended by mutual
agreement of the Parties.
2.03 Increased Steam Demand Requirements. In the event that the steam
demand of the Manufacturing Facility exceeds 942,000 mlbs in any Calendar Year,
Heinz, at its option, may (i) institute at its sole expense such improvements,
upgrades, overhauls or replacements at the Energy Facility as are required to
increase steam production; (ii) requisition coal-fired steam (up to, but not
exceeding, 58,000 mlbs in any Calendar Year) that would otherwise be exported to
third parties; or (iii) require the operation of the gas-fired Boiler Number 8
and/or natural gas burners on Boilers Number 1 through 4 to provide additional
steam in amounts up to, but not exceeding 120,000 pounds per hour above Current
Capacity; provided, however, that to the extent any of the boilers described in
the previous sentence is off-line to allow ADC to perform maintenance thereon,
and Heinz has consented to such boiler or boilers being off-line, Current
Capacity shall be reduced by the capacity of such off-line boiler or boilers. If
the steam demand of the Manufacturing Facility exceeds the combined threshold
amounts established under Sections 2.01(i) and 2.03(ii) (1,000,000 mlbs), ADC
shall determine whether sufficient quantities of coal-fired steam can be made
available to Heinz without compromising ADC's export obligations to third
parties ("Excess Coal-Fired Steam"). Excess Coal-Fired Steam will be made
available to Heinz at Heinz's request. Any steam required that exceeds the
available Excess Coal- Fired Steam will be made available to Heinz only upon
Heinz's exercise of its option under 2.03(i) or (iii).
2.04 Peak Demand Requirements. In the event that steam demand of the
Manufacturing Facility at any time exceeds Current Capacity, ADC will operate
gas-fired Boiler Number 8 and/or natural gas burners on Boilers Number 1 through
4 to increase steam production to the required level during the peak demand
period; provided, however, that to the extent any of the boilers described in
the previous sentence is off-line to allow ADC to perform maintenance thereon,
and Heinz has consented to such boiler or boilers being off-line, Current
Capacity shall be reduced by the capacity of such off-line boiler or boilers. If
Heinz at any time determines that it would be advisable to deal with peak demand
requirements in another fashion, Heinz may exercise its option to institute
improvements, upgrades, overhauls or replacements under Section 2.03(i) or take
such other actions as it may deem appropriate.
2.05 Interruption in Energy Services. The parties acknowledge that
from time to time there may be brief interruptions in the delivery of steam,
electric energy or compressed air hereunder. Exhibit D hereto sets forth and
defines the number and nature of such interruptions that reasonably can be
expected to occur during any Calendar Year. If in any Calendar Year
interruptions in the delivery of steam, electric energy or compressed air (i)
exceed the applicable thresholds set forth on Exhibit D and (ii) cause a
Manufacturing Interruption, ADC shall pay to Heinz $20,000 (as adjusted during
the Term for inflation based on the Consumer Price Index) per incident that
exceeds the stated thresholds. Such payment shall be made within twenty (20)
days following of the occurrence of the incident and shall be deemed to
constitute liquidated damages and not a penalty. To the extent an incident
commences prior to 11:00 p.m., and continues beyond midnight of that same
calendar day, each portion of such incident occurring after midnight on that
calendar day and on each subsequent calendar day shall be deemed a separate
incident for the purposes of this Section 2.05. ADC and Heinz acknowledge that
any expenses, costs or damages that are likely to be incurred as a result of the
incidents contemplated under this Section 2.05 would be difficult to ascertain
and agrees that payment of the amount stated herein constitutes a fair and
reasonable estimate of the liquidated damages that are likely to be suffered by
Heinz. No liquidated damages shall be paid by ADC to Heinz under this Section
2.05 with respect to any manufacturing interruption caused by (i) an event
constituting Force Majeure or (ii) any failure of any solely inert system
(including, without limitation, the main steam header piping) unaffected by
operating or maintenance practices or negligence (including, without limitation,
any water hammer) related to the Energy Facility. For purposes of this Section
2.05 only, "Force Majeure" shall not include any event caused by the negligence
of, or failure to comply with the terms of this Agreement by, ADC.
Notwithstanding and in addition to the liquidated damages provided for above, in
the event of a "Manufacturing Interruption", Heinz shall have the right to
obtain energy services from an alternative source and to the extent such
alternative energy services are more expensive than the services to be provided
hereunder, ADC shall pay a sum to Heinz equal to the additional cost of such
alternative energy services.
2.06 Steam Specifications. Steam delivered to the Manufacturing
Facility hereunder shall satisfy (i) the Regulatory Requirements applicable to
food processing operations as established from time to time by the United States
Department of Agriculture or other governmental body having jurisdiction over
the operation of the Manufacturing Facility and (ii) Oregon Tilth standards (as
a reference, such steam to meet the following nominal conditions: 115 psig and
365o F to the factory, 220 psig and 415o F to the carrot room, 600 psig and 750o
F to the rig room, and 7 to 10 psig and 220 o F to the factory and offices). Any
increase in cost associated with delivered steam that is incurred by ADC as a
result of changes in Regulatory Requirements or Oregon Tilth standards that
become effective after the Effective Date shall be recovered by ADC through an
adjustment to the energy charges payable under Article III. Any such adjustment
shall be made after consultation with and subject to the agreement of Heinz.
2.07 Electrical Energy Specifications. The electrical energy delivered
to the Manufacturing Facility shall satisfy the now current primary electrical
utility requirements and now current Manufacturing Facility requirements with
regard to service voltage and power quality.
2.08 Compressed Air Specifications. The compressed air delivered to
the Manufacturing Facility shall satisfy the now current Manufacturing Facility
requirements with respect to particulate, oil and moisture content
ARTICLE III
PAYMENTS FOR ENERGY SERVICES
3.01 Energy Charges.
(a) Demand Energy Charge. Commencing on the Payment Commencement Date,
Heinz shall pay to ADC a monthly fixed charge equal to $181,516.00 which has
been calculated based upon Current Capacity and Regulatory Requirements in
effect on the date of this Agreement (the "Demand Energy Charge"). Any
reasonable costs associated with changes in Regulatory Requirements
(individually, a "New Regulatory Cost" and collectively, "New Regulatory
Costs"), including without limitation, construction, engineering and consulting
fees of unaffiliated third parties, increased reporting or compliance costs and
legal fees, and excluding costs resulting from Energy Facility Improvements or
the export of steam, shall result in a one-time or recurring adjustment to the
Demand Energy Charge. Any New Regulatory Cost that is a one-time charge shall be
itemized on the first Consolidating Statement delivered to Heinz after the New
Regulatory Cost is incurred. New Regulatory Costs that are recurring in nature
(such as the amortization of capital costs associated with modifications to the
Energy Facility necessary to achieve compliance with changes in Regulatory
Requirements) shall be recouped through a mutually agreed-upon adjustment to the
on-going Demand Energy Charge and reflected on the Consolidating Statement
commencing with the first month after such New Regulatory Costs are incurred.
(b) Baseline Unit Energy Consumption Charges. The initial base monthly
unit energy consumption charges for steam and electricity (collectively, the
"Baseline Unit Energy Consumption Charges") shall be: (i) $2.75 per mlb of steam
("Baseline UECCS") and (ii) $.02 per kwh of electricity (the "Baseline UECCE").
Commencing on the Payment Commencement Date, Heinz shall pay to DEN and ADC,
respectively, monthly consumption charges equal to:
(i) in the case of DEN, $x per mlb of steam delivered to the
Manufacturing Facility during the previous calendar month, with
"x" being equal to:
1,220 x 1,000 x Actual Coal Price per Ton
Coal Heating Value (Btu's/Ton) x .82;
in no event shall "x" exceed the then current Baseline UECCS;
(ii) In the case of ADC, $y per each mlb of steam and the then
current Baseline UECCE per each kwh of electricity delivered to
the Manufacturing Facility during the previous calendar month,
with "y" being equal to the then current Baseline UECCS minus x
as calculated under subsection (i) above.
The initial Baseline Unit Energy Consumption Charges shall remain constant for
the sixty (60) month period (the "Initial Unit Energy Period") commencing on the
Payment Commencement Date. Thereafter, the Baseline Unit Energy Consumption
Charges shall be adjusted annually in accordance with the Producer Price Index
for Southern Appalachian Coal for Industrial Users (PPI 11211-412) (the "SAC
Index") to compensate for market changes in fuel costs. At the conclusion of the
48th month in the Initial Unit Energy Period, the average of the SAC Index rates
for the previous twelve (12) months (the "Base Index Rate") shall be
established. Upon the first day immediately following the expiration of the
Initial Unit Energy Period (the "Recalculation Date") and on each anniversary of
the Recalculation Date thereafter, the average of the SAC Index rates for the
previous twelve (12) months (the "Current Index Rate") shall be divided by the
Base Index Rate and the quotient shall be deemed to be the "Market Index
Factor", which in no event shall be less than one (1). On the Recalculation Date
and each subsequent anniversary thereof, the initial Baseline Unit Energy
Consumption Charges shall be adjusted by the effective Market Index Factor.
(c) Baseline Unit Energy Consumption Charges Applicable to Increased
Steam Demand. Baseline Unit Energy Consumption Charges payable in connection
with (i) requisitioned coal-fired steam under Section 2.03(ii) and Excess
Coal-Fired Steam, if any, shall equal the lowest unit energy charge in effect
and payable by any third party to ADC for export steam and (ii) the production
of gas-fired steam under Sections 2.03(iii) and 2.04 shall be determined by
adding (i) the current Baseline Unit Energy Consumption charge for steam and
(ii) a charge associated with the difference between the then current energy
cost of natural gas versus coal fired steam as calculated in accordance with
Exhibit C hereto.
(d) If at any time during the Term Heinz demonstrates to through the
production of a bona fide third party offer that (i) the Demand Energy Charge
and the Baseline Unit Energy Consumption Charges do not reflect fair market
rates and (ii) it could materially reduce the aggregate annual cost paid by
Heinz for steam and electricity under this Agreement by more than $250,000, then
Heinz may exercise its termination rights under Section 7.03 hereof.
(e) The Parties hereby confirm that the energy charges set forth in
this Section 3.01 have been negotiated at arms-length, reflect the fair market
value of the energy services supplied to Heinz and have been calculated so as to
include the cost to ADC and DEN, respectively, for fuel, chemicals, consumables,
ash hauling and disposal and other ancillary costs incurred in connection with
the supply of energy services hereunder.
3.02 Billing and Payment Mechanism. ADC shall submit to Heinz a
monthly invoice (the "Consolidating Statement") itemizing the charges payable to
each of ADC and DEN under this Article III. Each invoice submitted to Heinz for
energy services furnished hereunder shall contain the steam and electric meter
reading for the previous and the current month and shall be due and payable
twenty (20) days after receipt of invoice by Heinz. If Heinz shall contend that
the Consolidating Statement is erroneous or unreasonable, the Parties shall
promptly meet with respect thereto. The payment obligation for the portion of
any Consolidating Statement that is in dispute shall be suspended until the
Parties resolve the dispute. In case a meter is temporarily out of repair, the
quantity of services used during the time that the meter is out of repair shall
be reasonably estimated by ADC (and concurred in by Heinz, which concurrence
shall not be unreasonably withheld), upon the basis of the amount of services
registered by the meter when in proper working order under similar circumstances
(taking into account the duration of such period, the season, prevailing
temperatures and other factors). Within approximately six (6) months after the
Payment Commencement Date subject to equipment availability and Manufacturing
Facility operating cycle, ADC shall install and implement an integrated
circuit/CRT based Energy Distribution Monitoring System under which it will
provide Heinz with a real-time, daily and month-to-date summary of energy
consumption and delivery conditions. The Parties shall mutually agree and
designate a third party to calibrate the metering devices on an annual basis,
with calibration costs to be paid by ADC . Any Party may in its discretion
arrange for additional meter calibrations. The costs associated with these
additional activities shall be the sole responsibility of the requesting Party.
Prior to any meter calibration, the Parties shall meet to review the proposed
activity. The Parties agree to review meter calibration results in effect on the
Effective Date; after installation of the Energy Distribution Monitoring System,
metering corrections may alter the fiscal year 1996 baseline steam production
assumption (which is currently 811,118 mlbs), and the Parties agree to estimate
the corrected fiscal year 1996 baseline steam production figure and recalculate
the Baseline UECCS and the electricity to steam ratio set forth in Section 2.01
to mutually agreed upon figures; provided that the product of the new fiscal
year 1996 baseline steam production figure multiplied by the recalculated
Baseline UECCS equals $2,230,575. Steam and electric meters in place and
operational on the Effective Date shall be utilized by ADC and will be read by
ADC (i) on a daily basis during the Term at 12:00 noon; and (ii) on December 31
of each year during the Term at 12:00 midnight. Steam and electric meters in
place and operational on the Effective Date will be upgraded in connection with
the installation of the Energy Distribution Monitoring System. ADC agrees to
permit Heinz and its representatives to audit ADC's meter reading and billing
records to verify any and all fees and charges payable under this Section 3.02.
ADC agrees to keep such readings and records in satisfactory form and content
for a period of three (3) years after submittal of the Consolidating Statement
to permit such audit and verification. The price payable for any compressed air
delivered to Heinz under this Agreement shall be zero dollars. A form of
Consolidating Statement is attached hereto on Exhibit A.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Heinz. Heinz represents and
warrants to ADC that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Effective Date:
(i) Heinz is a division of a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and has all requisite corporate power and authority to
own and operate its properties and to carry on its business as now
conducted and as proposed to be conducted, and enter into and carry
out the terms of this Agreement.
(ii) The execution, delivery and performance by Heinz of this
Agreement have been duly authorized by all necessary corporate action
on the part of Heinz, and none of such execution, delivery or
performance shall violate any law, governmental rule, regulation or
order binding on Heinz or the articles of incorporation of by-laws of
Heinz or contravene the provisions of, or constitute a default under
any mortgage, loan agreement, deed of trust, or other agreement or
contract to which Heinz is a party by which it or its properties may
be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of Heinz and constitutes the valid and legally
binding obligation of Heinz.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of Heinz is
required as a condition to the valid execution, delivery or
performance of this Agreement by Heinz.
4.02 Representations and Warranties of ADC. ADC represents and
warrants to Heinz that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Effective Date:
(i) ADC is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has
all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted and enter into and carry out the terms of
this Agreement.
(ii) The execution, delivery and performance by ADC of this Agreement
have been duly authorized by all necessary corporate action on the
part of ADC, and none of such execution, delivery or performance shall
violate any law, governmental rule, regulation or order binding on ADC
or the articles of incorporation of by-laws of ADC or contravene the
provisions of, or constitute a default under any mortgage, loan
agreement, deed of trust, or other agreement or contract to which ADC
is a party by which it or its properties may be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of ADC and constitutes the valid and legally
binding obligation of ADC.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of ADC is required
as a condition to the valid execution, delivery or performance of this
Agreement by ADC.
4.03 Representations and Warranties of DEN. DEN represents and
warrants to Heinz that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Effective Date:
(i) DEN is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has
all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted and enter into and carry out the terms of
this Agreement.
(ii) The execution, delivery and performance by DEN of this Agreement
have been duly authorized by all necessary corporate action on the
part of DEN, and none of such execution, delivery or performance shall
violate any law, governmental rule, regulation or order binding on DEN
or the articles of incorporation of by-laws of DEN or contravene the
provisions of, or constitute a default under any mortgage, loan
agreement, deed of trust, or other agreement or contract to which DEN
is a party by which it or its properties may be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of DEN and constitutes the valid and legally
binding obligation of DEN.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of DEN is required
as a condition to the valid execution, delivery or performance of this
Agreement by DEN.
ARTICLE V
DEFAULT
5.01 Default, Insolvency and Remedies of Heinz and ADC.
(a) The following events shall be deemed to be acts of default ("Acts
of Default") by Heinz or ADC under this Agreement regardless of the pendency of
any bankruptcy, reorganization, receivership, insolvency or other proceeding
which has or might have the effect of preventing such Party from complying with
the terms of this Agreement:
(i) Failure to pay any sums to be paid hereunder within thirty (30)
days after the date the payment is due, provided that the sum shall
have remained unpaid for (20) days after written notice of such
failure has been given to the defaulting Party.
(ii) Failure to comply with any term, provision, representation,
warranty or covenant of this Agreement, other than the payment of
money required to be paid hereunder, if such failure (x) reasonably
can be cured and is not cured within ninety (90) days after written
notice thereof or (y) reasonably cannot be cured within ninety (90)
days after written notice thereof and the defaulting Party has not
commenced to cure such failure within such period and thereafter
proceeded with reasonable diligence and good faith to accomplish a
cure; provided, however, all violations of federal, state and local
environmental and/or safety laws and regulations that may have a
materially adverse effect on the operations of the Energy Facility or
the Manufacturing Facility or result in the imposition of material
monetary penalties on Heinz must be cured in accordance with the
requirements and within the time frames of the applicable governmental
law, regulation or agency.
(iii) Filing, or consent to the filing of a petition for relief or
reorganization or arrangement or any other petition in bankruptcy by
Heinz or ADC, for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction; or Heinz or ADC shall make an
assignment for the benefit of creditors; or a Heinz or ADC shall
consent to the appointment of a custodian, receiver, trustee, or other
officer with similar powers, for substantially all of Heinz or ADC's
property or be adjudicated insolvent; or an order for relief shall be
entered against Heinz or ADC in any case or proceeding for liquidation
or reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding upon liquidation of all or any part of Heinz or ADC's
property; or any petition for any such relief shall be filed against a
Heinz or ADC and shall not be dismissed within sixty (60) days.
(b) Upon the occurrence of any Act of Default, the non-defaulting
Party may, at its option, and in addition to any other rights the non-defaulting
Party may have at law or in equity, terminate this Agreement by notice to the
other Party, or enforce, by all proper and legal suits and other means, its
rights hereunder, including, without limitation, the collection of sums due
hereunder, without terminating this Agreement, and should it be necessary for
any Party to take any legal action in connection with such enforcement, the
defaulting Party shall pay such other Party all costs, including reasonable
attorneys' fees so incurred, all without prejudice to any remedies that might
otherwise be used by any Party for recovery of arrearages of sums due hereunder
or damages as herein provided.
(c) The Parties hereby agree that no failure by DEN to procure fuel as
contemplated by this Agreement shall constitute a default under this Agreement.
Should such a failure occur, ADC shall be responsible for procurement of fuel
from an alternative source. In such event, all Baseline Unit Energy Consumption
Charges payable under Article III shall be payable to ADC during such period of
failure by DEN. Any failure by DEN to procure fuel shall not alleviate ADC's
obligations to provide steam or electrical energy under this Agreement.
ARTICLE VI
FORCE MAJEURE
6.01 Effect. In the event that any Party is rendered unable, by reason
of an event of Force Majeure, to perform, wholly or in part, any obligation or
commitment set forth in this Agreement, then, provided such Party gives prompt
written notice describing the particulars of such event, including, but not
limited to, the nature of the occurrence and its expected duration, and
continues to furnish monthly reports with respect thereto during the period of
the Force Majeure, the obligations of both Parties, except for obligations to
pay money (including, without limitation, the Demand Energy Charge), shall be
suspended to the extent and for the period of such Force Majeure condition;
provided, however, that (a) the suspension of performance is of no greater scope
and no longer duration than is required by the Force Majeure and (b) the Party
whose performance is being excused shall use its reasonable efforts to perform
its obligations hereunder and remedy its inability to perform.
6.02 Termination for Force Majeure. If a Force Majeure continues which
prevents any Party from performing an obligation hereunder for more than six (6)
consecutive months, any Party may terminate this Agreement upon thirty (30) days
prior written notice.
ARTICLE VII
TERMINATION
7.01 Termination. This Agreement shall terminate (i) upon the
expiration of the Term; or (ii) in accordance with the provisions of Section
7.02, 7.03, 7.04, Article V, or Article VI. If this Agreement is terminated
prior to the end of the Term:
(i) as a result of Force Majeure, Heinz shall pay to ADC the
Stipulated Buy-Out Price calculated in accordance with the terms set
forth on Schedule A of Exhibit B hereto;
(ii) as a result of ADC's exercise of its rights under Section
5.01(b), pursuant to Section 7.02 or pursuant to Section 7.04 (to the
extent the cessation or withdrawal of ADC's access to the steam
producing assets of the Energy Facility does not result from acts or
omissions of ADC which are illegal or in breach of this Agreement or
any material contract between Heinz and ADC), Heinz shall pay to ADC
the Stipulated Buy-Out Price set forth on Schedule B of Exhibit B
hereto;
(iii) pursuant to Section 7.03 hereof, Heinz shall pay ADC the
Stipulated Buy-Out Price set forth on Schedule C of Exhibit B hereto;
and
(iv) as a result of Heinz's exercise of its rights under Section
5.01(b), or pursuant to 7.04 (to the extent the cessation or
withdrawal of ADC's access to the steam producing assets of the Energy
Facility results from acts or omissions of ADC which are illegal or in
breach of this Agreement or any material contract between Heinz and
ADC), no Stipulated Buy-Out Price will be payable to ADC.
7.02 Extended Shutdown or Closure of Manufacturing Facility. If at any
time during the Term, Heinz (i) ceases to operate the Manufacturing Facility (or
materially reduces the Manufacturing Facility's energy consumption requirements)
for a period exceeding six (6) months or (ii) transfers ownership of the
Manufacturing Facility to a third party who (x) does not have the financial
capability acceptable to ADC (such acceptance not to be unreasonably withheld)
to carry out Heinz's obligations under this Agreement and/or (y) does not assume
all of Heinz's obligations under this Agreement, ADC shall have the right to
terminate this Agreement upon thirty (30) days prior written notice to Heinz.
7.03 Termination by Heinz. If at any time during the Term, Heinz
demonstrates through the production of a bona fide third party offer that (i)
the Demand Energy Charge and the Baseline Unit Energy Consumption Charges do not
reflect fair market rates and (ii) could materially reduce the aggregate annual
cost paid by Heinz for steam and electricity under this Agreement by more than
$250,000, Heinz shall have the right to terminate this Agreement upon sixty (60)
days prior written notice to ADC and DE. Prior to any such termination, Heinz
and ADC shall use good faith efforts to renegotiate the terms of the Agreement
in order to address Heinz's concern. If the Parties cannot reach an
accommodation, ADC shall take all reasonable actions to assist Heinz in the
transition period, which shall not exceed 60 days.
7.04 No Access to Steam Producing Assets If at any time during the
Term, ADC is unable to access and operate the steam producing assets at the
Energy Facility, this Agreement shall terminate effective on the date that
access ceases or is withdrawn, provided, however, that if ADC's access is
prohibited by an event constituting Force Majeure hereunder, any termination of
this Agreement shall be governed in accordance with Section 6.02 hereof.
ARTICLE VIII
INDEMNIFICATION
8.01 Reciprocal Indemnification.
(a) Each Party, respectively, as indemnitor, will indemnify, defend
and hold harmless the other Party and its officers, directors, employees,
affiliates, agents and assigns, as indemnitees, from and against any and all
losses, liabilities, damages, demands, claims, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' and accountants' fees, but
excluding amounts described in Section 9.10 hereof (collectively, the "Losses")
asserted against, resulting to, imposed upon or incurred or suffered by any such
indemnitee as a result of, based upon or arising from, the failure by the
indemnitor or its respective agents or employees to comply with any applicable
law, rule, or regulation of any authority having proper jurisdiction, or the
breach or nonfulfillment of any of the representations, covenants or agreements
made by the indemnitor pursuant to this Agreement, excepting only such Losses as
may be caused by the negligence or misconduct of any indemnitee or its
respective agents or employees.
(b) Notwithstanding any provision to the contrary set forth in this
Agreement (other than the liquidated damages provided for in Section 2.05), in
no event shall any Party's liability for any and all Losses exceed $2,500,000
(as adjusted during the Term for inflation based on the consumer price index),
regardless of the form of action or legal theory under which liability may be
asserted.
8.02 Duty to Defend.
(a) Indemnitor, at its sole cost and expense, shall defend with
counsel reasonably satisfactory to indemnitee, any claim, demand, suit, cause of
action or proceeding covered by the indemnities set forth in Section 8.01.
Indemnitor shall have the right to control the defense of any claim, demand,
suit, cause of action or proceeding, provided that the indemnitor shall first
confirm in writing to indemnitee that such claim is within the scope of the
indemnities contained herein and that indemnitor shall pay all amounts required
to be paid in respect of such claim, demand, suit, cause of action or
proceeding. The indemnitee shall have the right, but not the obligation, at its
sole cost and expense, to participate in the defense of any such claim, demand,
suit, cause of action or proceeding. Indemnitee shall have the right at any
time, by notice to indemnitor, to assume exclusive control of the defense of any
claim, demand, suit, cause of action or proceeding at the sole cost and expense
of indemnitor, if (a) indemnitor fails to diligently defend such claim, demand,
suit cause of action or proceeding, (b) there is a conflict in the interests of
indemnitor and indemnitee with respect to such claim, demand, suit, cause of
action or proceeding or (c) at any time during the pendency of such claim,
demand, suit, cause of action or proceeding, indemnitor shall disaffirm its
responsibility for the claim involved. If the indemnitee assumes exclusive
control of the defense of any claim, demand, suit, cause of action, or
proceeding as set forth in the preceding sentence, the indemnitor shall pay all
costs that may be incurred by the indemnitee in such defense. In addition, the
indemnitor shall pay all costs that the indemnitee may incur in enforcing this
indemnity, including without limitation reasonable attorneys' fees, within ten
(10) days after the request therefor.
(b) Indemnitor shall have the right to settle any claim, demand, suit,
cause of action, or proceeding which results only in the payment of money,
Indemnitor shall have no right, without the prior written consent of indemnitee,
to settle any claim, demand, suit, cause of action, or proceeding or settlement
thereof, involves non-monetary obligations of indemnitee.
8.03 Survival. The provisions of this Article VIII shall survive the
Term.
ARTICLE IX
MISCELLANEOUS
9.01 No Partnership or Joint Venture. Nothing in this Agreement shall
be construed as creating a partnership or joint venture between the Parties, or
making any Party an agent or employee of the other Party. No employee of Heinz,
ADC or DEN who renders any service hereunder shall be construed or deemed to be
an employee of any other Party as a result thereof. No Party shall have any
authority, or represent that it has any authority, to bind any other party
contractually.
9.02 Severability. If, pursuant to a final, non-appealable judgment by
a court of competent jurisdiction, any provision of this Agreement is found to
be illegal, invalid or otherwise enforceable, such provision shall be construed
to be deleted from this Agreement and the remainder of it shall remain in full
force and effect as though such provision had not been included herein.
9.03 Entire Agreement. This Agreement and all exhibits thereto
constitute the entire and sole understanding of the Parties with respect to the
matters covered hereby or by any transactions contemplated herein, and
supersedes and cancels any and all oral or written prior agreements,
understandings, statements and representations between the Parties with respect
to the subject matter hereof.
9.04 Waivers and Amendments. No waiver, modification or amendment of a
term, condition or provision of this Agreement shall be valid or of any effect
unless made in writing specifying with particularity the manner and extent of
such waiver, modification or amendment, signed by the Party to be bound or its
duly authorized representative. Any waiver by any Party of any default of the
other shall not affect or impair any right arising from any subsequent default.
9.05 Governing Law. This Agreement and the legal relations between the
Parties shall be governed by and construed in accordance with the internal laws
of the Commonwealth of Pennsylvania, without regard to conflict of law
principles.
9.06 Section Headings. Section headings are inserted herein for
convenience only and are not to be construed as a part of this Agreement or as a
limitation of the scope of the particular sections to which they refer.
9.07 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the respective Parties hereto, their respective successors and
assigns.
9.08 Cooperation. The Parties hereto will cooperate with each other in
every way carrying out the transactions contemplated by this Agreement, in
obtaining any and all required approvals, consents, permits and authorizations,
in filing the notification and reports, if any, which may be required, and in
executing and delivering all documents, instruments and copies thereof as shall
be reasonably agreed upon or as any other Party may reasonably request for the
purpose of carrying out the terms and conditions of this Agreement.
9.09 Attorneys' Fees. In the event of any arbitration or judicial
proceedings relating to this Agreement or the breach thereof, the prevailing
Party or Parties shall be entitled to recover from the losing Party or Parties
its reasonable costs, expenses and attorneys' fees.
9.10 Limitation of Liability. EXCEPT AS SET FORTH IN SECTION 2.05, NO
PARTY SHALL BE LIABLE FOR ANY LOST REVENUE, LOST PROFITS, OR OTHER INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, ARISING OUT OF ANY BREACH OF THIS AGREEMENT OR FAILURE TO PERFORM ITS
OBLIGATIONS HEREUNDER.
9.11 Notices. All notices, forms of approval and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person by telegram, telex or other
standard form of telecommunications and by certified mail, postage prepaid
return receipt requested, addressed as follows:
(a) If to Heinz to: James Vuksic
Pittsburgh Factory Manager
Heinz USA
P. O. Box 57
Pittsburgh, PA 15230-0057
Fax: (412) 237-3590
With copies to: Ken G. Campbell
G. M. Manufacturing Services
Heinz USA
P. O. Box 57
Pittsburgh, PA 15230-0057
Fax: (412) 237-5541
Senior Vice President, General Counsel
H. J. Heinz Company
P.O. Box 57
Pittsburgh, PA 15230
Fax: ( 412) 456-6102
(b) If to ADC to: Alexis Tsaggaris, President
DQE Energy Services
One NorthShore Center
Pittsburgh, PA 15212
Phone: (412) 322-6090
Fax: (412) 322-6085
With a copy to: Linda S. Ackerman, Esquire
DQE, Inc.
411 Seventh Avenue
Pittsburgh, PA 15219
Phone: (412) 393-6041
Fax: (412) 393-6605
(c) If to DEN to: Richard LiConti, President
Duquesne Energy, Inc.
411 Seventh Avenue
Pittsburgh, PA 15230-1930
Phone: (412) 393-6281
Fax: (412) 393-6021
With a copy to: David High, Esquire
Duquesne Energy, Inc.
411 Seventh Avenue
16-0006
Pittsburgh, PA 15230-1930
Phone: (412) 393-6443
Fax: (412) 393-6645
or to such other address as one Party may have furnished to the others in
writing.
9.12 Assignments. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties hereto and their
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any Party without the
prior written consent of the others, provided, however, that upon receipt of (i)
an appropriate order from the Securities and Exchange Commission under Section
9(a)(2) of the Public Utility Holding Company Act of 1935, as amended, or (ii)
written confirmation reasonably acceptable to Heinz that such an order is not
required, ADC shall assign this Agreement to a special purpose subsidiary of DQE
Energy Services, Inc. that has been formed solely for the purpose of
facilitating this transaction and any subsequent transaction with Heinz and its
affiliates (the "Special Purpose Subsidiary"). After such assignment, all such
references to ADC herein shall be deemed to refer to the Special Purpose
Subsidiary. Nothing contained herein, express or implied, is intended to confer
on any person other than the Parties hereto and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement. Notwithstanding the foregoing, Heinz may assign this
Agreement to any subsidiary, parent company, or corporate affiliate of Heinz, or
to any person or entity that (i) acquires the Manufacturing Facility; (ii) is
reasonably acceptable to ADC, Energy Services or the Special Purpose Subsidiary,
as the case may be; and (iii) agrees to assume all of Heinz's rights and
obligations under this Agreement.
9.13 Executive Review. Each Party shall have the right at any time
after good faith efforts have failed to resolve a dispute under this Agreement
related to a material matter effecting the Parties rights and obligations
hereunder, to request review of such matter by the Executive Vice President of
HNA Operations of Heinz, the President of DEN and the Chief Executive Officer of
ADC. Each Party shall exercise its right to request executive review by
providing a written notice to the other Parties. The executives of each Party
shall meet within 30 days of date of such notice is delivered to the other
Parties, and shall engage in good faith efforts to resolve the deadlock. Within
30 days of such meeting, the executives shall provide notice to the Parties
stating whether they have been able to resolve the deadlock and the nature of
their decision if they have resolved the deadlock. Any such decision shall be
binding on the Parties.
9.14 Mediation. If a disagreement exists between the Parties
concerning this Agreement, or a breach thereof, executive review under Section
9.13 is unsuccessful, and the continued failure to settle such disagreement is
likely to have material adverse effect on any Party's rights and obligations
under this Agreement, any Party may elect to submit the matter to mediation
under the Commercial Mediation Rules of the American Arbitration Association. If
any Party so elects, the other Party or Parties shall submit to mediation. The
mediator shall not have the authority to impose a settlement on the Parties.
9.15 Audit Rights. Heinz shall have the right upon reasonable notice
and during normal business hours to examine the books and records maintained by
ADC relating to the purchase and sale of electric and steam energy hereunder.
9.16 Assignment and Assumption of Third Party Supply Contracts. In the
event that ADC proposes to enter into a third party supply arrangement to
facilitate procurement of fuel under Section 5.01(c), ADC shall deliver a copy
of the definitive agreement to Heinz for its review and comment. Provided that
the terms and conditions of the supply agreement are reasonably acceptable to
Heinz, the parties shall enter into an agreement stating that upon any
termination of this Agreement (other than any termination caused by Force
Majeure or an Act of Default by ADC) prior to the end of the Term, ADC shall
assign and Heinz shall assume all of ADC's rights and obligations under the
supply agreement. In connection therewith, Heinz shall indemnify, hold harmless
and defend ADC from any and all claims, liens or charges of any nature
whatsoever that arise out of a breach or nonfulfillment by Heinz of any of its
representations, covenants, agreements or obligations under the supply
agreement, and ADC shall indemnify, hold harmless and defend Heinz from any and
all claims, liens or charges of any nature whatsoever that arise out of a breach
or nonfulfillment by ADC prior to such assignment of any of its representations,
covenants, agreements or obligations under the supply agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATTEST: HEINZ USA
By: ___________________________ By: ___________________________
Title: __________________________
Title: __________________________
ATTEST: ALLEGHENY DEVELOPMENT
CORPORATION
By: ___________________________ By: ___________________________
Title: __________________________
Title: __________________________
ATTEST: DUQUESNE ENERGY, INC.
By: ___________________________ By: ___________________________
Title: __________________________
Title: __________________________
EXHIBIT A
CONSOLIDATING STATEMENT
ENERGY CHARGES
A. Payable to DE:
Steam:
aaa mlbs @ x per mlb $__________
[x to be calculated in accordance with 3.01(b)(i)]
B.
Payable to ADC:
Demand Charge
$----------
Steam:
aaa mlbs @ [UECCS - x]
$----------
Additional charge for natural gas (per Exhibit C)
Cmlbs @ [A-B]
$----------
Electricity
bbb kwhs @ UECCE $__________
Total to ADC$__________
EXHIBIT B
STIPULATED BUY-OUT PRICE
Schedule A
Schedule B
Schedule C
EXHIBIT C
ADDITIONAL CHARGE FOR GAS FIRED STEAM
Steam Conditions: 115 psig (130psia)
480 (degree)F
1266 Btu/lb Sat. Vapor
Condensate Conditions: 78 (degree)F
46 Btu/lb Sat. Liquid
Energy to make steam 1220 Btu/lb added
Boiler Efficiency: 80.00% Natural gas
82.00% Coal
Natural Gas (HHV) 1,030,000 Btu/MCF
1000 Lbs=1Mlb
Calculation for the additional energy cost of
natural gas vs. coal- fired steam to HUSA in $.
A=Energy Cost of Natural Gas fired Steam ($/Mlb)
A=1220 x 1000 x Current Natural Gas Price per MCF
1,030,000 x .80
B=Energy Cost of Coal fired Steam ($/Mlb)
B=1220 x 1000 x Actual Coal Price per Ton
Coal Heating Value (Btu's/Ton) x .82
C=Steam Produced with Natural Gas (Mlbs) =Totalized Steam Production
Above Current Capacity
HUSA Additional Charge for Natural Gas fired Steam in $
HUSA Price = (A - B) x C
Sample Calculation
Assumptions:Coal Price = $37/Ton
Natural Gas Price = $3.70/MCF
Coal Heating Value = 25,000,000 Btu/Ton
Steam Produced With Natural Gas = 3,377 mlbs.
A=1220 x 1000 x $3.70= $5.48 /Mlb
1,030,000 x .80
B=1220 x 1000 x $37= $2.20 /Mlb
25,000,000 x .82
C=3,377Mlbs
HUSA Additional Charge = ($5.48-$2.20) x 3,377
HUSA Additional Charge = $3.28/Mlb x 3,377
HUSA Additional Charge = $11,077
EXHIBIT D
SERVICE INTERRUPTION THRESHOLDS (Per Calendar Year)
Compressed Air
limit of 3 incidents < 100 psig @ the factory < 15 minutes in
duration, or
Steam
limit of 1 incident < 115 psig @ the factory < 30 minutes in duration,
or
Electric Energy
limit of 1 incident of < 30 minutes in duration
FIRST AMENDMENT
TO
ENERGY SUPPLY AGREEMENT
This First Amendment ("First Amendment") to the Energy Supply
Agreement dated January 22, 1997 (the "Supply Agreement") by and among Heinz
USA, a Division of H.J. Heinz Company ("Heinz"), Allegheny Development
Corporation ("ADC") and Duquesne Energy, Inc. ("DEN") is entered into as of
March 11, 1997.
W I T N E S S E T H :
WHEREAS, Heinz, ADC and DEN, as parties thereto, desire to amend the
Supply Agreement in certain respects as more fully set forth below:
NOW, THEREFORE, in consideration of the foregoing premise and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
1. New Section 2.09. A new Section 2.09 is hereby inserted to read in
its entirety as follows:
"2.09 Primary Electric Supplier. Section 2.01 hereof
references Heinz's primary electric supply contract in effect on the
Effective Date (the "Primary Electric Supply Contract"). In
consideration of the energy supply arrangement set forth herein, Heinz
hereby agrees that ADC's affiliate, Duquesne Light Company, shall be
the preferred vendor under any successor supply arrangement. If upon
termination of the Primary Electric Supply Contract, or any successor
thereto, Heinz receives a bona fide third party offer to contract for
the supply of electric energy to the Manufacturing Facility under
financial terms more favorable to Heinz than those offered by Duquesne
Light Company, Heinz shall award the new primary electric supply
arrangement to Duquesne Light Company, provided that Duquesne Light
Company matches the financial terms of the third party offer. It is
acknowledged for the purposes of this Section 2.09 that any third party
offer must be in compliance with all applicable regulatory
requirements. Nothing in this Section 2.09 is intended to restrict
Heinz from (i) soliciting or obtaining fair market rates under its
electric supply arrangements or (ii) exploring alternate energy
sources.."
2. New Section 3.01A. A new Section 3.01A is hereby inserted directly
following Section 3.01 to read in its entirety as follows:
"3.01A Incentive Credit. As an incentive to encourage Heinz to
enter into this Supply Agreement and continue to purchase energy
hereunder throughout the Term, Heinz shall receive a credit (the
"Incentive Credit") to be reflected against amounts otherwise payable
to ADC under this Article 3. The Incentive Credit shall be reflected on
the Consolidating Statement during each calendar month in which this
Agreement is in effect and shall equal (i) $20,874.11 per month during
the first sixty (60) calendar months during the Term and (ii)
$29,207.44 per month during all remaining calendar months during the
Term.
3. Amendment to Section 6.01. The phrase "net of the Incentive Credit"
is hereby inserted directly following the reference to "Demand Energy Charge" in
the parenthetical "(including, without limitation, the Demand Energy Charge)".
4. New Exhibit A. Exhibit A (Form of Consolidating Statement) to the
Supply Agreement is hereby deleted in its entirety and the new Exhibit A
attached hereto is substituted therefor.
5. New Exhibit B. Exhibit B (Stipulated Buy-Out Price) to the Supply
Agreement is hereby deleted in its entirety and the new Exhibit B attached
hereto is substituted therefor.
6. Amendment to Section 7.03 Section 7.03 is hereby amended by
deleting the reference to $250,000 as it appears in clause (ii) thereof and
substituting $500,000 therefor.
7. Effective Date of Amendment. This First Amendment shall be
effective immediately upon the execution hereof.
8. Confirmation of Agreement. Except as explicitly set forth above,
all of the provisions of the Supply Agreement are hereby ratified and confirmed.
9. Governing Law. This First Amendment shall be construed and enforced
in accordance with the laws of the Commonwealth of Pennsylvania.
10. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same document.
IN WITNESS WHEREOF, Heinz, ADC and DEN have caused this First Amendment
to be executed by their duly authorized officers, as of the date first above
written.
ATTEST: HEINZ USA
- - ------------------------------ ------------------------------
ALLEGHENY DEVELOPMENT
CORPORATION
- - ------------------------------ ------------------------------
DUQUESNE ENERGY, INC.
- - ------------------------------ ------------------------------
EXHIBIT A
CONSOLIDATING STATEMENT
ENERGY CHARGES
A. Payable to DEN:
Steam:
aaa mlbs @ x per mlb $__________
[x to be calculated in accordance with 3.01(b)(i)]
B.
Payable to ADC:
Demand Charge
$----------
Steam:
aaa mlbs @ [UECCS - x]
$----------
Additional charge for natural gas (per Exhibit C)
Cmlbs @ [A-B]
$----------
Electricity
bbb kwhs @ UECCE $__________
Incentive Credit ($__________)
Total to ADC $__________
FORM OF
OPERATION AND MAINTENANCE SERVICES AGREEMENT
This Operation and Maintenance Services Agreement (O&M Services
Agreement) is made and entered into this ___ day of ________________, 1997, by
and between Allegheny Development Corporation, a corporation organized, existing
and doing business under and by virtue of the laws of the Commonwealth of
Pennsylvania, with offices at Cherrington Corporate Center, 500 Cherrington
Parkway, Suite 110, Coraopolis, Pennsylvania (Owner) and, Newco, a corporation
organized, existing and doing business under and by virtue of the laws of
Pennsylvania with offices at One NorthShore Center, 12 Federal Street,
Pittsburgh, Pennsylvania (Contractor).
WITNESSETH
WHEREAS, Owner is engaged in the development and operation of energy
facilities; and
WHEREAS, Owner and Contractor desire to enter into this O&M Services
Agreement regarding the operation and maintenance of Owner's Energy Facility at
the Pittsburgh International Airport Midfield Terminal, for the mutual benefit
of both Owner and Contractor.
NOW, THEREFORE, in consideration of the mutual covenants, terms,
conditions, privileges and obligations set forth herein, and intending to be
legally bound hereby, the Owner and the Contractor agree as follows:
1 . DEFINITIONS
The definitions contained in the "Specifications for the Scope of
Responsibilities for the Provision of Operation and Maintenance Services
for the Allegheny Development Corporation Energy Facility at the Pittsburgh
International Airport," dated January 1997, attached hereto and made a part
hereof, shall have the same meaning when used in this O&M Services
Agreement.
2. WORK
Work under this O&M Services Agreement will consist of the operation and
maintenance by the Contractor of the Energy Facility as defined in the
Agreement Documents identified in Article 8 of this O&M Services Agreement,
capable of fully meeting the operation and maintenance requirements
included in the Agreement Documents.
3. AGREEMENT OF TERM
The term of this O&M Services Agreement begins on June 15, 1997, and
continues unabated through June 14, 2002, unless terminated sooner by the
Owner or extended by the Owner.
The Contractor's service term shall be divided into the following five (5)
service periods:
a. Operations year 6 - from June 15, 1997 through June 14, 1998.
b. Operations year 7 - from June 15, 1998 through June 14, 1999.
c. Operations year 8 - from June 15, 1999 through June 14, 2000.
d. Operations year 9 - from June 15, 2000 through June 14, 2001.
e. Operations year 10 - from June 15, 2001 through June 14, 2002.
4. AGREEMENT PRICE AND TERMS OF PAYMENT
a. Owner shall pay Contractor for services provided hereunder the
following amounts during the following operations years:
Operations year 6 $849,500
Operations year 7 $874,500
Operations year 8 $899,500
Operations year 9 $926,500
Operations year 10 $954,500
b. The above amounts shall be paid in equal monthly installments.
Invoice periods shall be from the first day of the month to the last
day of the month and shall also indicate the period during which
operations and maintenance services were rendered. Contractor shall
invoice Owner on a calendar month basis and shall render an invoice
for services rendered equal to one twelfth (1/12) of the current
operating year contract amount as set forth in paragraph 4(a) above,
or such lesser portion of such month during which services were
rendered, plus any Owner authorized reimbursable expenses, if any,
which occurred during the invoice period. Owner shall make payment
within thirty (30) days of receipt and approval of the invoice.
5. PAYMENT PROCEDURES
Payment shall be made by Owner following monthly invoices submitted by
Contractor.
6. DEFAULT
Each of the following events shall constitute an event of default (herein
individually called an "Event of Default" and collectively called "Events
of Default") under this O&M Services Agreement:
a. The Facility for any reason ceases to operate or significantly
interrupts Energy production and delivery.
b. The Contractor shall fail to: make any payment; perform any
service; or perform or observe any other covenant, condition or
agreement, required of Contractor herein.
c. The Contractor shall suspend or terminate the operation and
maintenance services of the Facility for any reason or shall
negligently operate and/or maintain the Facility.
d. The Contractor shall become insolvent or bankrupt or make an
assignment for the benefit of creditors or a trustee or receiver is
appointed.
e. Bankruptcy, reorganization or insolvency proceedings shall be
instituted by or against Contractor.
In the event that Contractor's error, omission or act of negligence causes
any damage to the Facility, Contractor agrees to immediately repair the
damage at no cost to, and as directed by, the Owner. In addition, upon the
occurrence of any Event of Default, and at any time thereafter, Owner may,
at its option, declare this O&M Services Agreement to be in default, and at
any time thereafter, Owner, in addition to all other rights and remedies
Owner may have, shall also have the following rights and remedies:
a. To take immediate possession of the Facility, bring any action
necessary to enforce any rights of Owner growing out of the operation
and maintenance of the Facility, and operate and maintain the
Facility.
b. Apply to any court for specific performance of this O&M Services
Agreement; for any injunction against any violation by Contractor of
this O&M Services Agreement; for the appointment of a receiver to take
over and operate the Facility in accordance with the terms of this O&M
Services Agreement; or for such other relief as may reasonably be
appropriate.
c. To terminate this O&M Services Agreement.
No right or remedy referred to in this or any other Article is intended to
be exclusive, but each shall be cumulative and in addition to any other
right or remedy referred to in this O&M Services Agreement or otherwise
available to Owner at law or in equity. Any cost incurred by Owner due to
actions taken under this, or any other article will be reimbursed to Owner
by Contractor.
7. LIQUIDATED DAMAGES AND PERFORMANCE GUARANTEES
The Contractor assures that services provided in accordance with this
O&M Services Agreement shall meet all O&M Services Agreement requirements
and shall not cause the Owner to be found in default of any of its
Operations Phase Energy Services Agreement requirements.
If the Facility is not able to produce Energy during the term of the O&M
Services Agreement, the Contractor agrees to pay the Owner $10,000 per day,
for a maximum of 90 days, not as a penalty but as liquidated damages. This
amount is fixed and agreed upon by the Owner and the Contractor because of
the impracticability and extreme difficulty of fixing and ascertaining the
actual damages that the Owner will sustain in such an event.
8. AGREEMENT DOCUMENTS
The Agreement Documents (as the same may be amended, modified or
supplemented from time to time), copies of which are already in the possession
of the Owner and the Contractor are made a part hereof and consist of the
following:
a. "Specification for the Scope of Responsibilities for the Provision
of Operation and Maintenance Services for the Allegheny Development
Corporation Energy Facility at the Pittsburgh International Airport,"
dated January 1997 (the "Specification").
b. Owner's Service Award Notification Letter.
c. "DQE Energy Services Proposal for the Provision of Operation and
Maintenance Services at the Allegheny Development Corporation Energy
Facility at the Pittsburgh International Airport," dated March 13,
1997, including all attachments thereto.
There are no Agreement Documents other than those listed above in this
Article 8. The Agreement Documents may only be amended, modified or
supplemented with the written approval of the Owner.
To the extent there is any contradiction or nonconformity between any
Agreement Document and this O&M Services Agreement, the terms of this
O&M Services Agreement shall govern.
9. CONTRACTOR'S REPRESENTATIONS
As of the date of execution of this O&M Services Agreement, Contractor
makes the following representations:
Contractor has familiarized itself with the nature and extent of the
Agreement Documents, Work, site, locality, all local conditions, and all
laws and regulations that in any manner may affect cost, progress,
performance, regulatory compliance or furnishing of the Work.
Contractor has obtained and carefully studied, or assumes responsibility
for obtaining and carefully studying, all examinations, investigations,
explorations, tests, reports and studies which pertain to the existing
Facility or physical conditions at or contiguous to the Facility, or
otherwise which may affect the cost, progress, performance, regulatory
compliance, or furnishing of the Work, as Contractor considers necessary
for regulatory compliance, the performance or furnishing of the Work, at
the O&M Services Agreement Price, within the O&M Services Agreement Term,
and in accordance with the other terms and conditions of the Agreement
Documents in Article 8.
Contractor has correlated the results of all such observations,
examinations, investigations, explorations, tests, reports and studies with
the terms and conditions of the Agreement Documents in Article 8.
Contractor has given the Owner written notice of any and all conflicts,
errors or discrepancies that Contractor has discovered in the Agreement
Documents and the Owner has provided acceptable written resolution thereof
to the Contractor.
10. SERVICE TERMINATION
The Owner reserves the right to terminate the Contractor's services without
further recourse or claim from the Contractor if the Facility is purchased
by the County during the term of this O&M Services Agreement. The Owner
agrees to provide the Contractor up to forty-five (45) days notice of this
event. If the Facility is purchased by the County, the County will have no
obligation to continue the Contractor's services.
The Owner further reserves the right to terminate the Contractor's
services, with or without cause, during the term of this O&M Services
Agreement, or without cause at the end of the service term, and the
Contractor will have no recourse or claim against the Owner.
In the event Contractor's services are terminated under this Article 10,
Owner shall pay for all services rendered through the date of termination.
11. INSURANCE
Obligations of the Contractor with respect to insurance are set forth in
the Specification.
12. INDEMNIFICATION
The Contractor shall indemnify, defend and hold harmless the Owner, the
County, its Commissioners, its officers, the County's Architect/Engineer,
the County's Construction Manager, Consultants of the County's
Architect/Engineer and Construction Manager, USAir, other airport tenants,
and any of their officers, directors, agents and employees for all claims
and losses arising out of the performance or nonperformance of any Work
done under the terms of this O&M Services Agreement in any way attributable
to such Work under this O&M Services Agreement for any act or omission of
the Contractor, any subcontractor, anyone directly or indirectly employed
by the Contractor or any subcontractor, or anyone for whom they may be
liable, including, without limitation, claims for personal injury, death,
property damage, destruction or loss of use of property, claims arising
from the failure to obtain permits and licenses, claims for patent
infringement, worker's compensation, loss of profits, direct damages,
indirect damages, special damages, consequential damages, punitive damages,
and claims for attorney's fees and defense expenses. The Owner may withhold
from payments due the Contractor under this O&M Services Agreement a
sufficient amount to cover any outstanding claims or potential liabilities
arising out of the Work. Notwithstanding the foregoing, Contractor shall
have no liability whatsoever for any claims or losses resulting from any
Emergency Condition or Upset Condition caused in whole or in part by the
County's Department of Aviation.
13. CONFIDENTIAL INFORMATION
The Owner has classified as confidential all information pertaining to this
O&M Services Agreement and the Agreement Documents. Such information has or
will be made available by the Owner to the Contractor, and subsequently may
be made available by the Contractor to others, on a strict need-to-know
basis. Any organization or party receiving such information is not to
divulge any portion thereof without the prior and express written consent
of the Owner. Any organization or party no longer needing Confidential
information pertaining to this O&M Services Agreement shall return such
information to the Owner. Notwithstanding the foregoing, Owner acknowledges
that any disclosure by Contractor of this O&M Services Agreement or the
Agreement Documents, or of any information related hereto or thereto
(including without limitation, filing copies of the same with the
Securities and Exchange Commission) required by any statute, court of
competent jurisdiction, federal, state or local government or agency or
instrumentality thereof shall not be a violation of such confidentiality or
of this O&M Services Agreement or any Agreement Document. Contractor shall
immediately notify Owner of any and all such disclosures.
14. MECHANIC'S LIEN
The Contractor shall execute and file in the Office of the Prothonotary of
the Court of Common Pleas of Allegheny County, a waiver of the right to
file a mechanic's lien which shall be effective against claims by the
Contractor and all subcontractors, materialmen, and workers arising out of
any Work provided under the terms of this O&M Services Agreement. The
Contractor shall indemnify, hold harmless and defend the Owner and the
County from any and all claims, liens, or charges of any nature whatsoever
arising out of any Work provided in accordance with this O&M Services
Agreement.
15. FORCE MAJEURE
Neither the Owner nor the Contractor shall be liable to the other for any
failure, delay, or interruption in performing its obligations hereunder
caused by uncontrollable forces. For purposes of this article, the term
"uncontrollable forces" shall mean any cause beyond the control of the
Owner or Contractor, including flood, earthquake, storm, fire, lightning,
epidemic, war, riot, civil disturbance, restraint by Court order or public
authority. Nothing herein shall be construed so as to require Contractor to
settle any strike or labor dispute in which it may be involved; provided
however, that Contractor will take whatever action is necessary and
available to assure the continued operation of the Facility during the
period of any labor dispute.
16. ASSIGNMENTS
Contractor responsibilities described in this O&M Services Agreement may
not be assigned by the Contractor without the prior written consent of the
Owner.
17. TITLE
Title to the Energy Facility shall remain with the Owner and any item or
service supplied by Contractor in accordance with this O&M Services
Agreement and the Specification, attached hereto and made a part hereof,
shall immediately become the property of the Owner.
18. MISCELLANEOUS
Agreement Changes. Any changes in this O&M Services Agreement shall be in
writing and signed by both parties according to a procedure to be
determined at a later date.
Headings. The headings contained in this O&M Services Agreement or included
in any of the Agreement Documents in Article 8 are included for convenience
or reference only. They shall in no way affect the construction or
interpretation of any of the terms or provisions of this O&M Services
Agreement or the Agreement Documents.
Governing Law. This O&M Services Agreement shall be governed by the laws of
the Commonwealth of Pennsylvania.
Time of Essence. It is agreed that time is of the essence for each and
every portion of this O&M Services Agreement and its attachments.
No Agency. Nothing contained in this O&M Services Agreement shall be
construed to designate Contractor, its agents or employees, as the agents
of the Owner, in any manner, and Contractor, its agents and employees,
shall not hold themselves out to others as the agents of the Owner.
Nonwaiver. Failure by the Owner to insist on any occasion upon strict
performance of any provision of this O&M Services Agreement or to take
advantage of any rights hereunder shall not be construed as a waiver
thereof or the relinquishment of any such right or any other right under
this O&M Services Agreement, which shall remain in full force and effect.
Severability. Should any provision of this O&M Services Agreement be held
invalid or unenforceable, such holding shall not result in invalidation of
the entire O&M Services Agreement, but all remaining terms shall remain in
full force and effect.
County Matters. Contractor shall be bound by all the provisions of the
Operations Phase Energy Services Agreement (entered into by Owner and the
County) on the part of Owner to be performed with respect to the Energy
Facility, and this O&M Services Agreement shall not in anyway have the
effect of diminishing the County's rights or Owner's obligations under the
Operations Phase Energy Services Agreement. This O&M Services Agreement
shall not be binding on the County in the event of a breach by Owner or in
the event that the County purchases the Energy Facility.
IN WITNESS WHEREOF, this O&M Services Agreement is duly executed on the
day and year first above written, by the parties hereto, intending to be legally
bound hereby.
ATTEST: OWNER
ALLEGHENY DEVELOPMENT
CORPORATION
By: _______________________________
ATTEST: CONTRACTOR
By: _______________________________
EXHIBIT A
Allegheny Development Corporation
SPECIFICATION FOR THE
SCOPE OF RESPONSIBILITIES FOR THE PROVISION OF
OPERATION AND MAINTENANCE SERVICES
FOR THE ALLEGHENY DEVELOPMENT CORPORATION
ENERGY FACILITY AT THE
PITTSBURGH INTERNATIONAL AIRPORT
January 1997
TABLE OF CONTENTS
PAGE
1.00 Definitions 1
2.00 Facility Location, Description and Requirements 5
3.00 Service Term 6
4.00 Contractor Operations Phase Service Requirements 7
5.00 Staffing and Subcontracting 13
6.00 Programs and Procedures 14
7.00 Contractor Invoices and Other Submittals 18
8.00 Liquidated Damages and Performance Guarantees 20
9.00 Facility Spare Parts, O&M Equipment and Furnishings 21
10.00 Service Termination 23
11.00 Insurance 24
12.00 Other Items 25
13.00 Performance Evaluation 28
1.0 Definitions
The term definitions below listed apply each time the term is used, whether
or not the term is capitalized at its point of use in this Specification or
its attachments, enclosures, appendices or revisions.
1.01 Allegheny Development Corporation Agreement or Energy Services Agreement or
Agreement.
An Agreement dated June 27, 1989, with attachments and exhibits, between
Allegheny Development Corporation (ADC) and the County of Allegheny
(County) whereby ADC will, among other things, operate and maintain an
Energy Facility at the Greater Pittsburgh International Airport Midfield
Terminal Complex.
1.02 ADC - Allegheny Development Corporation
1.03 Boiler
Wherever used in this Specification, the term Boiler shall mean high
temperature water generator (HTWG).
1.04 Building Management System (BMS)
That County designed, owned and operated system which provides, among its
various functions, the environmental control for the Midfield Terminal's
heating, ventilating, air conditioning, electric power and lighting.
1.05 Contractor
The contractor providing operations and maintenance service as indicated in
this Specification to ADC.
1.06 Cooling or Chilled Water System
The Facility components needed to provide chilled water in the quantities,
temperatures and pressures required by the Agreement. Chilled water systems
include, but are not limited to, chillers, pumps, valves, condenser water
filtration system, ancillary systems and components, e.g., water treating
components, energy management systems, switch-gear, etc. that are needed to
support, monitor and control the chilled water systems.
1.07 County, County of Allegheny and County Commissioners
Includes such public officials and public bodies as may, by operation of
Pennsylvania law, succeed to any or all of the rights, powers or duties
lawfully residing in the Board of County Commissioners of Allegheny County.
1.08 Emergency (Facility) Operating Condition
A condition including but not limited to any of the following: a
Significant Equipment Failure, a loss of pressure in County supply or
return piping, the continuous receipt of off-scale high or low load signals
from the County or the declaration of an emergency situation or a situation
requiring a Facility evacuation by the appropriate County, Owner, or
Contractor authority. A series of Upset Conditions could also result in an
Emergency Condition.
1.09 Energy
The electrical and thermal requirements of the Midfield Terminal including,
but not limited to, electricity, hot water and chilled water in such
quantity as required under the Agreement.
1.10 Facility or Energy Facility
The total ADC installation constructed and maintained under the terms of
the Agreement including, but not limited to, ADC's energy plant within the
Central Services Building, the cooling towers, and any utility connections
thereto or therefrom, and including ADC's interface with County's Building
Management System.
1.11 Furnish
Unless specifically limited in context, furnish shall mean to supply all
necessary materials and supply all necessary labor, equipment,
transportation, personnel, services or other items to provide the item or
perform the work item indicated.
1.12 Heating or Hot Water System
The Facility components needed to provide hot water in the quantities,
temperatures and pressures required by the Agreement. Heating systems
include, but are not limited to, boilers, pumps, valves, heat exchangers,
ancillary systems and components; e.g., water treating components, energy
management systems, switchgear, etc., that are needed to support, monitor
and control the heating systems.
1.13 Major Equipment
Major Equipment includes the HTWGs and related equipment supplied by
Cleaver Brooks, the Chillers and related equipment supplied by Trane, the 4
KV/480 V Switchgear and related equipment supplied by Westinghouse, the bus
duct supplied by Golden Gate Switchgear and the Cooling Tower designed and
material supplied by Ceramic Cooling Tower, Inc.
1.14 Normal (Facility) Operating Condition
A condition exemplified when necessary Facility equipment is fully
available to serve a County load or an expected load change, when County
load changes are within expected ranges and when Facility and County
parameter trends are within expected limits.
1.15 O&M Services Agreement
An agreement between the Owner and the Contractor that provides the manner
in which the Owner and the Contractor will meet the requirements and
conditions of this Specification regarding furnishing of operation and
maintenance services to the Allegheny Development Corporation Energy
Facility at the Pittsburgh International Airport Midfield Terminal. The O&M
Services Agreement may amend the requirements of this Specification.
1.16 Operation or Operating Phase
That phase of the Facility beginning on June 15, 1992, and continuing
through June 14, 2007.
1.17 Owner
ADC
1.18 Provide
Provide shall be used synonymously with Furnish
1.19 Scope of Responsibilities or Scope
Scope of Responsibilities or Scope shall be used synonymously with
Specification.
1.20 Significant Equipment Failure
A failure that involves the loss or disablement of Facility equipment that
was not otherwise scheduled to be out of service for operations or
maintenance reasons.
1.21 Specification
Specification shall mean the "Specification for the Scope of
Responsibilities for the Provision of Operation and Maintenance Services
for the Allegheny Development Corporation Energy Facility at the Pittsburgh
International Airport"; i.e., this document.
1.22 Supply
Unless specifically expanded in context, Supply shall mean to purchase,
procure or obtain and make available for use. Supply may be used in terms
of material, labor, personnel, equipment, goods or services.
1.23 Upset (Facility) Operating Condition
A condition exemplified when a Facility component must be unexpectedly
manually operated, removed or connected to provide service due to an
unexpected Facility or County situation. Such situations include, but are
not limited to, the unexpected trip (loss) of a chiller or a HTWG in the
Facility or the sudden loss of a County interfacing system.
2.0 Facility Location, Description and Requirements
2.01 Location
ADC's Facility at Pittsburgh International Airport, Midfield Terminal.
2.02 Description
A technical description of the Facility and the Energy to be provided by
the Owner is included in Specification Attachment A.
2.03 Technical Reference Documents
A list of included Drawings and other relevant Facility technical
information that form a part of this Specification is provided in
Specification Attachment B.
3.0 Service Term
3.01 The term of the O&M Services Agreement begins on June 15, 1997 and
continues unabated through June 14, 2002, unless terminated sooner by the
Owner or extended by the Owner.
3.02 The Contractor's service term shall be divided into the following five
(5) service periods:
a. Operations year 6 - from June 15, 1997 through June 14, 1998.
b. Operations year 7 - from June 15, 1998 through June 14, 1999.
c. Operations year 8 - from June 15, 1999 through June 14, 2000.
d. Operations year 9 - from June 15, 2000 through June 14, 2001.
e. Operations year 10 - from June 15, 2001 through June 14, 2002.
4.0 Contractor Operations Phase Service Requirements
4.01 Operation and Maintenance Services Objectives - Contractor shall
operate and maintain the Facility in a manner that meets the following:
a. The Heating System shall be available 100% of the time. At all
times sufficient heating system components shall be available to
supply the maximum County demand, up to the maximum heating system
contract capacity as per Attachment A of this document.
b. The Cooling System shall be available 100% of the time. At all
times sufficient cooling system components shall be available to
supply the maximum County demand, up to the maximum cooling system
contract capacity as per Attachment A of this document.
c. During the heating season, from September 1 of the current calendar
year to June 15 of the of the next calendar year, individual Heating
System components shall be available 98% of the time. Outside of the
heating season, individual heating components shall be available 85%
of the time. At no time during the heating season shall more than one
(1) HTWG be out of service. At all times sufficient Heating System
components shall be available to supply the maximum County demand. For
purposes of this section, individual Heating System components shall
mean any of the following: a HTWG, a primary high temperature water
pump, a secondary high temperature water pump, a heat exchanger, an
expansion tank, an air separator, and any piping, valving, monitors,
sensors or other equipment or devices associated with a Heating System
component.
d. During the cooling season, from April 1 of the current calendar
year to October 30 of the current calendar year, individual Cooling
System components shall be available 98% of the time. At no time
during the cooling season shall more than one (1) chiller be out of
service. Outside of the cooling season, individual cooling components
shall be available 85% of the time. At all times sufficient Cooling
System components shall be available to supply the maximum County
demand. For purposes of this section, individual Cooling Systems
components shall mean any of the following: a chiller, a primary
chilled water pump, a secondary chilled water pump, an expansion tank,
an air separator, a vertical turbine pump, a cooling tower cell with
fan, a chiller starter and any piping, valving, monitors, sensors or
other equipment or devices associated with a cooling system component.
e. The electrical system shall be available 100% of the time.
Individual electrical systems shall be available 99.5% of the time at
all times. For purposes of this section, individual Electrical System
components shall mean any of the following: a bus duct, a primary line
capacitor, an (internal ADC) stepdown transformer, a 4160 Volt
switchgear device, a 480 V switchgear device, a motor control center
or components thereof.
f. For purposes of Section 4.01 of this Specification, "available"
shall mean ready for and capable of use in providing full service
requirements up to the design capacity of the equipment.
4.02 Operation and Maintenance Reports
The Contractor shall produce operating, maintenance and other reports on a
daily, weekly, monthly, quarterly and annual basis. The form and content of
such reports will be specified by the Owner. Such reports will be required
from the date of the O&M Services Agreement award through the entire
contract period. Each report shall contain historical data from the
reporting period and prospective or predictive information for the next
reporting period. The reports shall contain the information required by and
be in a format approved by the Owner and may be revised as reasonably
required. The Owner will specify the person or persons who will receive
each of the reports. The Owner will require the following reports:
a. Daily reports on Facility operation and maintenance activities
shall be provided by the Contractor to the Owner. Daily reports will
cover the twenty-four (24) hour period from 12:00 a.m. to 11:59 p.m.
of the current day and will be available to the Owner by 8:00 a.m. of
the following day.
b. Weekly reports on Facility operation and maintenance activities
shall be provided by the Contractor to the Owner. Weekly reports will
cover the period from 12:00 a.m. Monday to 11:59 p.m. of the following
Sunday and will be available to the Owner within twenty-four (24)
hours of the end of the reporting period.
c. Monthly reports on Facility operation and maintenance activities
shall be provided by the Contractor to the Owner. Monthly reports will
cover the period from 12:00 a.m. of the first day of the month to
11:59 p.m. of the last day of the month and will be available to the
Owner within one (1) week of the end of the reporting period.
d. Annual reports on Facility operation and maintenance activities
shall be provided by the Contractor to the Owner. Annual reports will
cover the period from 12:00 a.m. of the first day of the calendar year
to 11:59 p.m. of the last day of the calendar year and will be
available to the Owner within two (2) weeks of the end of the
reporting period.
e. Annual capacity reports and annual efficiency reports on each HTWG
and on each Chiller. Capacity reports will require that each HTWG and
each chiller be operated at full rated output capacity at least once
during the year for a minimum duration of four (4) hours. Annual
efficiency reports will require each HTWG and each chiller efficiency
be measured at lease once during the year at outputs of 25%, 50%, 75%
and 100% of rated capacity. The Contractor shall recommend and the
Owner will approve the methods and procedures to be used to conduct
the efficiency tests. Certified correct copies of the reports from
both capacity and efficiency tests shall be provided to the Owner
within one month of their completion. All capacity and efficiency
tests may be run during the course of normal operations.
f. Quarterly maintenance reports which shall detail the actual
maintenance performed on each piece of equipment and machinery in the
Facility during the preceding quarter. Such reports will follow the
calendar year quarters and will be available to the Owner within one
week of the end of the quarter.
g. Monthly reports on situations encountered during the current month
and the corrective action taken, if required. Such reports will be
available to the Owner, if required, one week after the end of the
month.
4.03 Routine and Periodic Operating Services
The Contractor shall provide round-the-clock operating services
consistent with equipment manufacturers recommendation and good work
practices for the Facility. Operating Services shall include, but are
not limited to, such activities as:
a. Development of 24-hour operating shift manning schedules.
b. Formulating and completion of shift logs.
c. Routine operating and inspection tour schedules.
d. Trend reporting and trend analysis.
e. Periodic, but no less frequently than once every three months,
firing and loading of each HTWG on oil.
f. Walk down inspections of Facility and County systems.
In addition, the Contractor will regularly coordinate with County
operations personnel in the BMS control room to ensure
compatibility between the Contractor's Facility operating plans
and the County's BMS operating plans.
All equipment, instruments, sensors and other devices used for
the operation and maintenance of the energy facility shall be
tested for proper performance or calibrated, as necessary, to
meet contractual requirements or as required by the Owner.
4.04 Routine and Periodic Maintenance Services
The Contractor shall keep the Facility in clean, neat and good condition
and repair, as would be taken by a prudent owner who desires to keep and
maintain said Facility for the duration of the O&M Services Agreement term.
The Contractor shall perform all necessary maintenance within the Facility
including, but not limited to, preventive maintenance, corrective
maintenance, remedial maintenance and predictive maintenance, and make all
necessary repairs thereto, interior and exterior, structural and
nonstructural, ordinary and extraordinary and foreseen and unforeseen. Such
maintenance includes, but is not limited to, replacement or repair of
equipment and parts, components and subassemblies thereof, whether due to
failure, wearout, unsuitability, expiration of useful life or other
reasons. The Contractor shall submit a vibration analysis based predictive
maintenance program for all rotating and reciprocating equipment. All
Contractor repairs to the Facility will be at least equal in quality and
class to the original work and will include the replacement of any
components in need of replacement, so as to ensure that at all times the
Facility will continuously meet all of the Midfield Terminal's Energy
requirements. If possible, the Contractor shall schedule maintenance during
off-peak airport periods.
4.05 Housekeeping
The Contractor is responsible for Facility housekeeping. The Facility shall
be maintained in a condition suitable for executive inspection/observations
at all times.
4.06 Instrument Calibration and Testing
The Contractor shall test and calibrate equipment and systems that are used
for billing purposes employing instruments with calibration records
traceable to the National Institute of Standards and Technology. Such
equipment shall include all "BTU" meters, all temperature and all flow
sensors and all electric consumption (kilowatt hours) meters. Calibration
of instruments required for billing purposes shall be performed at least
twice annually or more frequently if directed by the Owner. Heating System
temperature sensors and flow sensors shall be calibrated during September
and January of each year. Cooling System temperature sensors and flow
sensors shall be calibrated in April and July of each year. Kilowatt hour
meters shall be calibrated at least twice annually at approximately 6-month
intervals.
4.07 Records
a. The Contractor shall maintain the on-site record of the as-built
Facility condition.
b. The Contractor shall maintain both on and off site record files of
the calibration and traceability for Facility operating and metering
equipment. These record files shall be maintained for the duration of
the O&M Services Agreement term. Certified correct copies shall be
turned over to the Owner within ten (10) days of such a request and
upon O&M Services Agreement expiration or termination.
c. The Contractor shall maintain other records as may be required by
Federal, State or Local requirements or required by the Owner.
d. Records maintained on-site by the Contractor shall be housed in
three (3) hour fire Rated cabinets or lockers. Records maintained
off-site by the Contractor shall be maintained at locations and in the
manner specifically approved by the Owner in writing.
e. All records are the property of the Owner.
f. The Contractor shall provide the Owner with a true and accurate
copy of all records within five (5) working days of such a request and
all Contractor records upon termination or expiration of the O&M
Services Agreement.
4.08 Permits and Licenses
a. The Owner has obtained a Waste Water Discharge Permit and an Air
Pollution Control Discharge Permit for the Facility from Local
authorities. All other permits and licenses that may be required for
the Contractor to perform in accordance with the requirements of the
Specification at the time of O&M Services Agreement award shall be
obtained and paid for by the Contractor. Annual or periodic charges
for renewal of either of the above permits are the responsibility of
the Contractor.
b. If, during the term of the O&M Services Agreement, additional
Facility permits or licenses are required due to the enactment of new
or amended existing Federal, State or Local laws, regulations or
statutes, the Owner and the Contractor shall work together in
obtaining such permits or licenses.
4.09 Consumable Supplies and Services
Consumable supplies and services include, but are not limited to, such
items as fuel oil used during the HTWG periodic firing and loading
operation noted in Specification Section 4.03, water, trash
collection, cleaning products and chemical treatment additives,
whether needed for operation, maintenance or general housekeeping
activities. Consumable items shall be furnished by the Contractor.
4.10 During the Operations Phase (on and after June 15, 1992) and for the
duration of the O&M Services Agreement term, the Contractor shall operate
and maintain the Facility on a round-the-clock basis. During
round-the-clock operation, the Contractor shall at a minimum, have one (1)
qualified individual assigned to and in the Facility at all times.
4.11 The Owner has provided office equipment which is expected to last the
duration of the O&M Services Agreement service term. Such equipment is
available for use by the Contractor and shall be maintained by the
Contractor in proper working order throughout the O&M Services Agreement
service term by the Contractor, except the energy management system
computer, which shall be maintained by ADC.
4.12 Maintenance Exclusions
The following items shall not be a requirement of this document and shall
not be the Contractor's responsibility excepting, however, the Owner may
require such services or additional services to be performed as a
Contractor reimbursable expense without markup:
1. Eddy current testing of chiller bundles
2. Complete maintenance rebuild of chillers (complete teardown with
replacement of all bearings and gaskets.)
3. Refrigerant, exclusive of major losses of more than five pounds at
one time, for replenishment due to minor leaks.
4. Repairs to cooling tower basin or structure, or replacement of
ceramic fill.
5. Costs to upgrade equipment, exclusive of engineering and project
management.
6. Annual inspections and all maintenance to the capacitors and
busduct.
4.13 Tools and Equipment
The Owner has provided a full complement of tools and equipment for
use by the Contractor. All tools and equipment are expected to last
the life of the O&M Services Agreement. Therefore, replacement of
tools which are broken, damaged, misplaced, lost or stolen is the
responsibility of the Contractor. New tools or equipment may be
purchased by the Contractor at any time. However, the contractor will
be reimbursed as a reimbursable expense without markup, only if prior
written approval has been received from the Owner. All existing and
all new tools and equipment are the property of the Owner. The
Contractor shall maintain a complete listing of all tools and
equipment, including maintenance records.
5.0 Staffing and Subcontracting
5.01 The Contractor shall have at least one (1) fully qualified
individual in the Facility at all times during the Operation Phase. In
addition, the Contractor shall have sufficient staff or firm
agreements for such staff as needed to meet the objectives in
Specification Section 4.01 under all conditions and at all times.
5.02 Subcontracting is neither encouraged nor discouraged by the
Owner. The Owner retains the right to review and accept or reject,
with or without cause, any subcontractor selected by the Contractor.
The Owner will hold the Contractor responsible to ensure that
subcontractors conform to the same requirements as the Contractor to
the extend that a function has been assigned to a subcontractor by the
Contractor. The Owner may require the contractor to engage selected
subcontractors for the performance of specialized activities.
5.03 All personnel employed by or subcontracted by the Contractor
shall be fully qualified, including holding any current National or
manufacturer's certification and, if necessary, licensed to perform
their function prior to an assignment in the Facility. Such personnel
shall have the proper tools, training, equipment and experience to
perform the work activity subcontracted. Personnel must meet the
minimum qualifications for their job function as may be required by
Federal, State or Local jurisdictional requirements.
5.04 The Contractor shall state the level to which its operating and
maintenance staff, including all subcontractors, are expected to be
union affiliated. The Contractor shall also identify the expected
union affiliation.
5.05 The Contractor shall maintain availability to sufficient
qualified staff to ensure that the Facility can be safely operated and
maintained on a full-time basis in the event of a National, Local or
other work stoppage at the Midfield Terminal Complex.
5.06 The Owner retains the right to require the Contractor to submit
key management personnel for Owner interviews prior to the
Contractor's dedication to the services addressed in this
Specification or the O&M Services Agreement.
5.07 The Owner retains the right to require the Contractor to submit
to utilize Major Equipment service organizations as providers of
maintenance and/or annual inspection services. The Owner shall
negotiate a basic contract for chiller preventive maintenance from
Trane and such contract shall be assigned to the Contractor.
5.08 On any equipment or device covered by a manufacturer's warranty,
only manufacturer authorized ("factory") personnel shall perform
maintenance or repair on the equipment or device if this is a
condition of maintaining the warranty.
6.0 Programs and Procedures
The Contractor shall develop, document and submit for Owner's approval the
following comprehensive programs with accompanying procedures. The Owner's
approval of any program(s) or procedure(s) does not constitute a change in
the requirements of this Specification and does not relieve the Contractor
from the responsibility of meeting the Requirements in this Specification
or the O&M Services Agreement. Program and detailed procedures are required
for the five (5) operating years beginning June 14, 1997.
6.01 An operation program that must include procedures for ensuring
Facility operation under Normal, Upset and Emergency Conditions which
include, but are not limited to, the methods for interfacing with
County personnel, the methods for ensuring twenty-four (24)-hour
personnel availability, criteria for Owner notifications and control
of warranty work. This program, or portions thereof, may require
County review and acceptance.
In all Emergency conditions, except a County declared emergency,
Facility operation following the Emergency shall safeguard personnel
and Facility equipment and be in accordance with Owner approved
operation program procedures. In the case of a County declared
emergency, Facility operation shall be reduced as required in the
Midfield emergency procedures that have been reviewed by the Owner and
the Contractor.
6.02 A preventative maintenance (PM) program that must include a
complete and comprehensive replacement parts program that meets the
objective of Specification Section 4.01. The Program shall specify
with particularity the schedule of maintenance for each major piece of
equipment and machinery during each year, including a schedule of the
number of employees assigned to the program. The Contractor is
responsible for all preventative maintenance.
The PM program should include, but not be limited to, the inspections
and tests recommended by the equipment manufacturers and provide for
accurate record keeping of the information. At a minimum, the program
must address regular inspections of the following:
a. High Temperature Water Generators
b. Chillers and chiller motors, with at least annual cleaning
("punching") of chiller tube bundles.
c. Energy Management System
d. Cooling tower including fans, pumps, heaters and controls
e. 4KV bus duct
f. Hot and chilled water pumping skids and motors
g. 4KV/480V switchgear
h. Motor control centers and variable frequency drive
i. Chilled water pumps and motors
j. Heat exchangers
k. High temperature water pumps and motors
l. Chemical treatment equipment
m. Metering equipment
n. Condenser water filter
6.03 A corrective maintenance (CM) program that meets the
objective of Specification Section 7.01. Contractor is
responsible for all corrective maintenance as well as all
replacement parts for corrective maintenance. Owner plans to
provide Boiler and Machinery insurance to cover losses in excess
of $10,000.00, subject to the limitations and exclusion of the
Owner's insurance policy.
6.04 A predictive maintenance program, based on vibration
analysis, for all rotating and reciprocating equipment.
6.05 A training and annual retraining program for all personnel.
These programs shall be implemented in a manner that ensures
appropriate personnel are kept abreast of Major Equipment O&M
developments as well as other important issues.
6.06 An instrument calibration program and procedures.
Instruments used for billing purposes must be calibrated with
traceability to National Institute of Standards and Technology.
6.07 An equipment and system walk-down to familiarize the
Contractor with the facility.
6.08 A listing of open work orders which are over 60 days aged
from the date of issuance shall be provided to the Owner monthly.
Contractor shall make its best efforts to complete such open work
orders as soon as possible. All open work orders shall be
completed within 90 days of issuance.
6.09 An equipment storage program that includes the requirements
for ensuring that spare parts and any other material held by the
Contractor are stored in a manner that ensures the material can
be used for its intended purpose when withdrawn from storage for
Facility use. Since site storage facilities are extremely
limited, the Contractor may require off-site storage facilities.
If off-site storage is used, this Program shall also establish
the level of Contractor control of such facilities and require
the Contractor to have access to the storage facility on a
round-the-clock basis.
6.10 A safety program that includes the requirements that the
Contractor shall utilize to ensure that all applicable Federal,
State, Local and Midfield personnel safety regulations will be
met.
6.11 An Operations Phase daily log program that shall include the
information required by Federal, State or Local jurisdictions,
the County or the Owner. Log sheets shall be signed by Contractor
personnel with responsibility during the log period. Copies of
the Operations Phase logs shall be available in the Facility at
all times and shall be provided to the Owner when requested.
6.12 The Contractor shall maintain a permanent bulletin board
within the Facility. Bulletin Board postings shall include all
postings required by Federal, State, County and Local regulations
and those required by the Owner and the Contractor.
6.13 A water chemistry program for each hot water, chilled water
or condenser water system, which addresses corrosion, pitting,
scaling, dissolved solids, hardness, pH, conductivity and
dissolved oxygen, and that provides a complete description of the
operation and maintenance procedures that will be developed to
ensure that Facility water meets all appropriate requirements
including the following:
1) Ferrous metal loss, as indicated by a corrosion coupon
analysis method approved by the Owner, shall not exceed 1.5 mils
per year.
2) Copper metal loss, as indicated by a corrosion coupon analysis
method approved by the Owner, shall not exceed 0.01 mils per
year.
3) Both ferrous and copper coupons shall be free of observable
pitting.
4) Corrosion coupons shall be analyzed every 90 days. If either
corrosion limit is exceeded, or if pitting of the coupons is
observed, Contractor agrees to pay Owner $10,000.00, not as a
penalty but as liquidated damages, owing to the difficulty of
assessing actual damages for each such incident.
6.14 An environmental compliance program which meets or exceeds
the requirements of all Local, County, State and Federal
environmental rules and regulations applicable to the energy
facility. This program should address, but not be limited to, the
following areas:
1) Air pollution
2) Water pollution
3) Industrial waste water management
4) Hazardous waste
5) Solid waste, including residual waste and municipal waste
6) Management of ozone depleting substances
7) Storage tanks
8) Superfund issues
9) Documentation
10) Record keeping
11) Other current or future applicable areas
The Contractor's environmental program should address, but not be
limited to, the requirements of each of the following:
Clean Air Act (Federal) Clean Air Act Amendments of 1990
(Federal) Allegheny County Health Department Article XXI (County)
Clean Water Act (Federal) Resource Conservation and Recovery Act
(Federal) Solid Waste Management Act (PA) Storage Tank and Spill
Prevention Act of 1989 (PA) Comprehensive Environmental Response,
Compensation & Liability Act (Federal) Superfund Amendments and
Reauthorization Act (Federal) Emergency Planning and Community
Right-To-Know Act (Federal)
Contractor shall maintain and operate all equipment within normal
operating limits as stated by the equipment manufacturer, good
work practices or applicable rule or regulation. Any
environmental violation, exceedance or discharge caused by the
Contractor due to operation outside of the normal operating
limits or Contractor negligence or willful act shall be the
responsibility of the Contractor to remedy, including payment of
all fines or penalties, excepting equipment breakdown or
malfunction.
7.0 Contractor Invoices and Other Submittals
7.01 The Contractor shall provide the Owner with monthly invoices
during each period of the service term. All invoices shall be in
accordance with the pricing, terms and conditions of the O&M Services
Agreement. Monthly invoices for all other services shall include the
costs for the services provided during the invoice period. All invoice
periods shall be from the first day of the calendar month to the last
day of the calendar month. Contractor invoices will be paid by the
Owner within 30 days following their receipt and verification.
7.02 The Contractor shall provide the Owner with monthly certified
correct County energy usage reports bearing the signature of the
Facility Manager. These reports shall be based upon information from
permanent Facility metering systems and equipment and shall be
accurate within the calibration limits of the metering systems and
equipment. This information will be used by the Owner for its own
County energy usage billing purposes.
The Contractor shall be liable and responsible for any Owner costs,
penalties and/or lost revenue that results from omissions or errors in
any Contractor programs including, but not limited to, errors in the
Contractor's calibration programs or procedures for Facility metering
systems and equipment whether or not those programs or procedures were
previously approved by the Owner.
7.03 The Owner will separately invoice and collect fees from the
County.
7.04 The Owner will directly receive and pay for utility services
supplied by Duquesne Light Company and Peoples Natural Gas Company or
any other gas supplier following usage information verification by the
Contractor. The manner of and schedule for verification shall be
agreed upon by the Owner and the Contractor.
7.05 The Contractor will be reimbursed for service costs incurred as
part of the services provided under the terms of this Specification
and the O&M Services Agreement which:
a. were not included in an Owner approved Contractor yearly
budget but which the Owner subsequently directs the Contractor to
incur. This type of reimbursable cost, when authorized by the
Owner in writing, may include an Owner approved markup for the
specific term.
b. were not included in an Owner approved Contractor yearly
budget but which the Contractor subsequently requests in writing
and the Owner accepts as a reimbursable cost. This type of
reimbursable cost, when approved by the Owner in writing, shall
be without any Contractor markup.
7.06 Each reimbursable cost item shall be individually listed in the
Contractor's monthly invoice to the Owner. Such monthly invoice shall
include the following at a minimum for each reimbursable item listed:
a. The Contractor's actual cost, without markup, for the item.
b. The Owner approved markup, if any, for the type of cost
reimbursable item involved.
c. The total cost to the Owner for the reimbursable item.
d. A true and legible copy of the invoice received by the
Contractor for the reimbursable item. Each such invoice shall be
noted by the Contractor to indicate its acceptable receipt date
of the reimbursable item and the Contractor's purchase order or
other Contractor payment obligation for the reimbursable item.
e. The Owner's document that authorized the item as a
reimbursable cost.
7.07 Costs that the Contractor incurs as part of the services
provided under the terms of this Specification and the O&M
Services Agreement which:
a. were not included in an Owner approved Contractor yearly
budget or
b. were not previously approved by the Owner in writing as a
reimbursable cost item
WILL NOT BE REIMBURSED TO THE CONTRACTOR!
7.08 Daily, weekly, monthly, quarterly and annual reports shall
be submitted to the Owner and in a form approved by the Owner.
Reports shall include the Operation Phase. Schedule requirements
for report initiation are included in Section 12.0 of this
Specification. For additional report information, see Section
4.02 of this Specification.
8.0 Liquidated Damages and Performance Guarantees
8.01 The Contractor shall guarantee that services provided in
accordance with this Specification shall meet all Specification
requirements and shall not cause the Owner to be found in default
of any of its Demonstration or its Operations Phase Agreement
requirements.
8.02 If the Facility is not able to operate and deliver energy in
the amounts required by the County, except as provided for in
this Specification, on any day during the service term, the
Contractor shall pay the Owner $10,000 per day, for a maximum of
90 days, not as a penalty but as liquidated damages. This amount
is fixed and agreed upon by the Owner and the Contractor because
of the impracticability and extreme difficulty of fixing and
ascertaining the actual damages that the Owner will sustain in
such an event.
8.03 The Contractor shall further warrant that if its commission
or omission of services provided under the terms of the O&M
Services Agreement and this Specification result in any damage or
degradation to the Facility or to Facility systems and/or
equipment, the Contractor shall, at no additional cost:
a. Immediately notify the Owner of the commission or omission and
of its affect on the Facility.
b. Take the immediate short-term action(s) necessary to ensure
personnel and Facility safety and to ensure that the Facility
will be able to continue to provide the required level of energy
to the County.
c. Replace or repair, as the Owner may direct, affected Facility
equipment and/or systems.
9.0 Facility Spare Parts, O&M Equipment and Furnishings
9.01 The Contractor is responsible for all spare parts for
equipment and furnishings in the energy facility. The Contractor
shall supply the owner with the below comprehensive lists. Each
listed item shall include a complete description, shelf life, and
estimated cost and, when appropriate, a catalog or manufacturer's
part number suitable for direct procurement of the listed item.
a. Spare parts that the Owner should maintain available to
ensure that the Facility can meet the operating objectives
in Specification Section 4.01. This list should be divided
into two parts: PART I for items that must be immediately
available from site storage locations and PART II for items
that must be made available within a specified time frame.
b. O&M equipment, such as hoists, ladders, lifts,
instruments, tools, etc. that should always be available in
the Facility to enable efficient, effective and safe
Facility O&M.
c. Furnishings, such as chairs, files, desks, storage racks,
storage cabinets, etc. not supplied by the Constructor that
should be purchased and installed for efficient, effective
and safe O&M of the Facility.
9.02 The Contractor shall provide the Owner with any additional
information pertaining to the above lists.
9.03 The Owner reserves the right to directly purchase or to
direct the Contractor to furnish any or all of the above items.
All purchased items shall be the property of the Owner after they
have been acceptably received by the Contractor. Items purchased
by the Contractor shall be at the Contractor's expense or
reimbursable as provided for in this Specification and the O&M
Services Agreement.
9.04 The Contractor shall receive and inspect all the above
purchased items, whether purchased by the Contractor or the
Owner, against their appropriate purchase requirements. For Owner
purchased items, the Contractor shall notify the Owner of each
acceptable and rejectable inspection.
9.05 The Contractor shall develop and maintain an inventory
(Inventory) that lists each of the above purchased items, whether
purchased by the Owner or furnished by the Contractor. The
Inventory shall include item costs and other information required
by the Owner. The Contractor shall annually update the Inventory
and provide the Owner with a certified correct copy.
9.06 The Contractor shall immediately and at no cost to the Owner
replace each Inventory item that is withdrawn for Facility use,
lost, worn out, expired or otherwise not available for use or
usable in the Facility.
9.07 The Contractor shall furnish storage facilities for all
spare parts and other material needed to be stored for the
Facility, regardless of the purchaser of the part(s) or material.
The Contractor's Inventory list described in this Specification
Section shall identify the location for all stored items and the
Contractor shall maintain stored material and items in accordance
with the requirement of the Equipment Storage Program described
in this Specification Section 5.0.
9.08 The Contractor shall furnish all on-site and, if necessary,
all off-site storage facilities at no additional cost to the
Owner.
10.0 Service Termination
10.01 The Owner reserves the right to terminate the Contractor's
services without further recourse or claim from the Contractor if
the Facility is purchased by the County during the term of the
O&M Services Agreement. The Owner agrees to provide the
Contractor up to forty-five (45) days notice of this event. If
the Facility is purchased by the County, the County will have no
obligation to continue the Contractor's services.
10.02 The Owner further reserves the right to terminate the
Contractor's services with or without cause during the term of
the O&M Services Agreement or without cause at the end of the
service term, and the Contractor will have no recourse or claim
against the owner.
10.03 The Contractor agrees to support the Owner or the County in
an orderly transition of O&M service responsibility in the event
of termination for any reason, default or expiration of the O&M
Services Agreement, including provision of sufficient interface
to provide a seamless transition.
11.0 Insurance
11.01 The Contractor and any of it's subcontractors shall obtain
and pay all premiums for the following insurance:
a. Workers Compensation to Pennsylvania statutory limits for
all Contractor and subcontractor employees in full
compliance with Workers Compensation and Occupational
Diseases Act of the Commonwealth of Pennsylvania..
b. Comprehensive General Liability to a limit of not less
than $1,00,000 per occurrence and $2,000,000 aggregate, for
all Contractor and subcontractor employees.
c. Automobile liability on Contractor or subcontractor for
all owned, not-owned or hired vehicles with a combined
single limit of not less than $1,000,000 per occurrence.
d. Employer's liability Insurance with a limit of not less
than $500,000.
e. Excess liability insurance with a limit of not less than
$3,000,000.
11.02 Receipts from Contractor insurance claims shall be used
exclusively for repair or replacement of the Facility, or as
directed by the Owner.
11.03 All Insurance carried by the Contractor shall name the
Owner and the County, its Commissioners, as additional insureds
and shall be placed with companies acceptable to the Owner.
11.04 Each Contractor Insurance policy shall include a provision
that requires the carrier to immediately notify the Owner in the
event of a policy cancellation or of a possible policy
termination or material alteration within 30 days. On an annual
basis, the Contractor shall supply the Owner with documentation,
acceptable to the Owner, that confirms that the insurance
requirements in this Specification Section 11.0 will be met for
at least the next twelve (12) month period. The Contractor
insurance information shall include, but not be limited to, the
following:
a. Name of the insurance company
b. Number of policy
c. Date of insurance policy
d. Expiration date of the insurance policy
e. Limits of liability or amount of coverage provided
f. Nature of coverage, including special hazards, if required
g. Specifications of all deductibles
h. Additional insured interest of the Owner and the County,
except under Workers Compensation policy.
11.05 Contractor agrees to comply promptly with all safety
recommendations made by the Owner, the County or their insurers
11.06 Owner shall be responsible for obtaining and maintaining
all property insurance related to the Energy Facility.
12.0 Other Items
12.01 The Contractor shall develop the following programs that meet
the appropriate Federal, State, Local and Midfield regulations:
a. Drug and Alcohol Abuse Program
b. Affirmative Action Program
c. Civil Rights Program (See Specification Attachment E)
d. Sexual Harassment Program
e. Occupational Safety and Health
f. Other programs as required by Owner or to meet existing or
future rules and regulations applicable to the energy facility.
The Contractor shall comply with and conduct its operations in
compliance with all present and future laws, ordinances, orders,
directives, rules and regulations of the United States of America,
Commonwealth of Pennsylvania, political subdivisions (including the
County), authorities and their respective agencies, departments,
authorities or commissions of the foregoing, applicable to or
affecting directly or indirectly the Owner or its operations and
activities on or in connection with the Facility premises.
12.02 The Contractor shall ensure that services furnished in
accordance with this Specification and the O&M Services Agreement are
in accordance with the applicable requirements of the Federal Aviation
Administration.
12.03 The Owner has classified as confidential all information
pertaining to this Specification and the O&M Services Agreement. Such
information has been or will be made available by the Owner to the
Contractor and subsequently may be made available by the Contractor to
others on a strict need-to-know basis. Any organization or party
receiving such information is not to divulge any portion thereof
without the prior and express written consent of the Owner. Any
organization or party no longer needing confidential information
pertaining to this Specification or the O&M Services Agreement shall
return such information to the Owner.
12.04 The Contractor shall execute and file in the Office of the
Prothonotary of the Court of Common Pleas of Allegheny County, a
waiver of the right to file a mechanic's lien which shall be effective
against claims by the Contractor and all subcontractors, materialmen
and workers arising out of any work or service provided under the
terms of this Specification and the O&M Services Agreement. The
Contractor shall indemnify, hold harmless and defend the Owner and the
County from any and all claims, liens or charges of any nature
whatsoever arising out of any work or service provided in accordance
with this Specification and the O&M Services Agreement.
12.05 Indemnification
An indemnification provision is contained in the O&M Services
Agreement that is included as Attachment G of this Specification.
12.06 Purchasing
The Contractor shall purchase and directly pay for goods, services and
spare parts for the facility operation and maintenance as required by
the O&M Services Agreement and this Specification.
12.07 Engineering
The Contractor shall have engineering responsibility and shall provide
all required engineering for evaluation, analysis or resolution of
operating conditions encountered and any equipment modification,
replacement or addition. Additionally, the Contractor shall make
recommendations to the Owner that are intended to make Facility
operation and maintenance less costly without sacrificing quality,
reliability or availability of energy output.
12.08 Accounting/Bookkeeping/Auditing
The Contractor shall insure that the systems utilized for billing,
collection, payment and record keeping meet generally accepted
accounting and bookkeeping practices. The Owner reserves the right to
specify and approve the systems used by the Contractor.
12.09 Budgeting and Planning
On a yearly basis the Contractor shall provide the Owner with an
annual operating and maintenance plan (Plan) and an annual operating
and maintenance budget (Budget). Each Plan and Budget shall be
submitted to the Owner on or before April 1st for the Operating year
beginning on the following June 15th. The yearly Plan and Budget
submittals shall be in a form approved by the Owner. Each Budget
dollar total shall be the quoted term Budget plus the quoted
escalation for that term.
Each Plan shall, at a minimum, include a description of and schedule
for significant operating and maintenance activities the Contractor
plans to perform during next operating year and a description of the
level of Contractor and subcontractor support that will be necessary
during the next operating year.
Each Budget shall, at a minimum, include the same level of detail that
the Contractor provided with its proposal with emphasis on and an
explanation for line item changes since its proposal submittal. No
increase in the total Budget will be accepted by the Owner. 12.10
Access Control
The Contractor shall grant both Owner and County personnel access to
the Facility at all times. In addition, the Contractor shall grant the
Owner the right to review all information and documentation relating
to the Facility that may be in the Contractor's possession or control
at any time.
12.11 Security
The Contractor will maintain the energy facility as a secure
installation and shall limit access to Owner and County personnel or
workmen performing work activities with the facility.
12.12 Force Majeure
Neither the Owner nor the Contractor shall be liable to the other for
any failure, delay, or interruption in performing its obligations
hereunder caused by uncontrollable forces. For purposes of this
section, the term "uncontrollable forces" shall mean any cause beyond
the control of the Owner or the Contractor, including flood,
earthquake, storm, fire, lightning, epidemic, war, riot, civil
disturbance, restraint by Court Order or public authority. Nothing
herein shall be construed so as to require Contractor to settle any
strike or labor dispute in which it may be involved; provided however,
that Contractor will take whatever action is necessary and available
to assure the continued operation of the Facility during the period of
any labor dispute.
12.13 Assignment
Contractor responsibilities described in this Specification and in the
O&M Services Agreement may not be assigned by the Contractor without
the prior written consent of the Owner.
12.14 Attachments
The Attachments listed in the Table of Contents of this Specification
are included herewith and made a part hereof.
13.0 Performance Evaluation
13.1 At least once annually, and more frequently if deemed necessary
or desired by the Owner, a comprehensive performance evaluation of the
Contractor will be conducted by the Owner. The evaluation will usually
be conducted in July and will generally follow the evaluation document
titled, "Allegheny Development Corporation, Operations and Maintenance
Contractor Annual Comprehensive Review and Evaluation", found in
Attachment G to this Specification.
The purpose of this performance evaluation will include the following:
1. Determination of Contractor's compliance with the
Specification and all other Agreement Documents. Non-compliance
shall be a cause for termination of the Contractor.
2. Evaluation of the Facility Manager. An unsatisfactory O&M
Contractor evaluation may be cause for dismissal of the Facility
Manager.
3. Determination of qualification of the Contractor for cost
savings sharing, should a cost savings sharing program exist.
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EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filing under the Public Utility Holding Company Act of 1935
________, 1997
DQE, Inc.
DQE Energy Services, Inc.
DQE, Inc. ("DQE") and DQE Energy Services, Inc. ("Energy Services")
have filed an application under Sections 9(a)(2) and 10 of the Public Utility
Holding Company Act of 1935, as amended (the "Act") for authorization of (i) the
assignment to DH Energy, Inc. ("DH Energy") by Allegheny Development Corporation
("ADC"), a wholly owned subsidiary of DQE, of all of ADC's rights and
obligations under the Heinz Facility Lease (the "Lease") between ADC and Heinz
USA, a division of H.J. Heinz Company ("Heinz") dated as of January 22, 1997 and
the Energy Supply Agreement (the "Supply Agreement") among ADC, Heinz and
Duquesne Energy, Inc., a Pennsylvania corporation and wholly owned subsidiary of
Energy Services dated as of January 22, 1997 and (ii) the execution of an
Operation and Maintenance Services Agreement (the "O&M Agreement") between ADC
and Newco, an entity to be formed under the laws of the Commonwealth of
Pennsylvania which will be a wholly owned subsidiary of Energy Services
("Newco"), pursuant to which Newco will serve as operator of ADC's energy
facility located at the Midfield Terminal Complex at the Greater Pittsburgh
International Airport.
DQE, a Pennsylvania Corporation, is an energy services company formed
in 1989 to serve as the holding company for Duquesne Light Company ("DLC"), an
electric utility company, and other energy related subsidiaries.
Energy Services was formed on August 2, 1995 and is presently
providing energy services and solutions for customers in international and
domestic markets.
DH Energy was formed January 9, 1997 for the purpose of entering into
the Lease and the Supply Agreement.
The Lease and the Supply Agreement require ADC and, after the
assignment by ADC to DH Energy, DH Energy to (i) operate and maintain an
inside-the-fence Energy Facility ("the Energy Facility") that provides energy in
the form of steam, electricity and compressed air to the Heinz manufacturing
plant in Pittsburgh, Pennsylvania (the "Manufacturing Plant") and (ii) sell to
Heinz electricity and steam produced by the Energy Facility for use by Heinz in
the Manufacturing Plant.
The O&M Agreement will require Newco to provide operating services to
ADC's energy facility located at the Midfield Terminal Complex at the Greater
Pittsburgh International Airport.
Following the transactions, DQE will continue to be a public utility
holding company entitled to an exemption under Section 3(a)(1) of the Act
because DQE and any public utility subsidiary from which it derives a
substantial part of its income will be predominantly intrastate in character and
will continue to operate predominantly in the Commonwealth of Pennsylvania. In
addition, Energy Services will be a holding company within the meaning of the
Act, entitled to an exemption under Section 3(a)(1) of the Act from all the
provisions of the Act, except for Section 9(a)(2) under the same analysis.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
