File No. 70-8505
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No.2
APPLICATION OR DECLARATION on FORM U-1
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY
64 Perimeter Center East
Atlanta, Georgia 30346
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent of
each applicant or declarant)
Tommy Chisholm, Secretary Thomas G. Boren, President
The Southern Company Southern Electric International,
64 Perimeter Center East Inc.
Atlanta, Georgia 30346 900 Ashwood Parkway, Suite 500
Atlanta, Georgia 30338
(Names and addresses of agents for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to:
W.L. Westbrook John F. Young
Financial Vice-President Vice President
The Southern Company Southern Company Services, Inc.
64 Perimeter Center East One Wall Street, 42nd Floor
Atlanta, Georgia 30346 New York, New York 10005
Thomas G. Boren John D. McLanahan, Esq.
President Troutman Sanders
Southern Electric 600 Peachtree Street, N.E.
International, Inc. Suite 5200
900 Ashwood Parkway Atlanta, Georgia 30308-2216
Suite 500
Atlanta, Georgia 30338
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The Application or Declaration filed in this proceeding, as
previously amended by Amendment No.1, is now amended and restated
in its entirety to read as follows:
Item 1. Description of Proposed Transactions.
1.1 Background. The Southern Company ("Southern") is a
registered holding company under the Public Utility Holding
Company Act of 1935 (the "Act"). Southern owns all of the common
stock of five operating electric utility subsidiaries (Alabama
Power Company ("Alabama Power"), Georgia Power Company, Gulf
Power Company, Mississippi Power Company, and Savannah Electric
and Power Company). Southern also owns all of the common stock
of Southern Electric International, Inc. ("SEI"), a non-utility
subsidiary that is authorized to engage in preliminary
development activities relating to certain categories of
independent power projects and in rendering operations,
construction, management and other similar services to such
projects. (See order dated October 20, 1987 (HCAR No. 24476);
and File No. 70-7932).
Southern, through a new wholly-owned subsidiary, Mobile
Energy Services Company, Inc. ("Mobile Energy"), an Alabama
corporation, proposes to enter into an Asset Purchase Agreement
("Asset Purchase Agreement") with Scott Paper Company ("Scott"),
a Pennsylvania corporation, pursuant to which Mobile Energy would
agree to purchase all right, title and interest of Scott in the
facilities that comprise the energy and recovery complex (the
"Energy Complex") at Scott's integrated pulp and paper mill (the
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"Mill") located in Mobile, Alabama. The Energy Complex is used
to generate substantially all of the steam and electricity
requirements of the Mill. Alabama Power currently provides back-
up and supplemental electric service to the Mill and Energy
Complex over existing interconnecting facilities inside the Mill.
Scott is one of the leading producers of pulp and finished
paper and tissue products in North America. In 1993, as a part
of an ongoing corporate-wide business improvement program, Scott
determined that the continued ownership and operation of the
Energy Complex did not represent the optimal use of the company's
capital and personnel, and therefore initiated efforts to sell
the Energy Complex to a third party. Scott's objective is to
redeploy the substantial capital invested in the Energy Complex
in its primary pulp and paper businesses.
In February 1994, SEI presented a preliminary proposal to
Scott for the purchase and subsequent operation of the Energy
Complex through a new special purpose company that would also
assume certain existing obligations of Scott. Following further
discussions, Scott and SEI executed a letter of intent pursuant
to which Scott agreed that it would negotiate with SEI on an
exclusive basis with respect to the sale and subsequent operation
of the Energy Complex. Scott's selection of SEI's preliminary
proposal was based upon a variety of factors, including SEI's
valuation of the Energy Complex, SEI's proposal of an ownership
and financing structure that would enable Scott to achieve
certain tax and accounting objectives, and SEI's willingness to
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accept certain potential risks associated with a possible change
in ownership of some or all of the components of the Mill.
An additional consideration to Scott in selecting the SEI
proposal was its desire to outsource the operations and
maintenance activities associated with the Energy Complex to
Southern, or a subsidiary of Southern, in order to ensure the
continuing reliability of the Energy Complex through quality
control/assurance programs customarily utilized in the electric
utility industry.
1.2 Description of the Mill and Energy Complex. The Mill
is one of Scott's largest integrated pulp and paper mills in
North America. It is comprised of three separate mills: the Pulp
Mill, which produces paper pulp; the Paper Mill, which produces
coated and uncoated printing papers; and the Tissue Mill, which
produces personal care and cleaning products. The Mill, which
Scott purchased in 1954, is fully integrated with Scott's
Southeast timberlands operations, which consist of more than one
half million acres of forested land in Alabama and Mississippi.
On October 10, 1994, Scott announced that it had entered into an
agreement to sell its wholly-owned subsidiary, S.D. Warren
Company, which owns the Paper Mill, to an investor group led by a
South African paper manufacturer. More recently, Scott has
announced that other components of the Mill are also being
offered for sale to unrelated third parties.1
1 See Wall Street Journal, October 25, 1994 edition,
page A-3.
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The Energy Complex is comprised of two separate power
islands located inside the Mill, which are differentiated by age
and technology. (See Exhibit E-1). The major components of the
north power island were constructed in 1984 and 1985, with an
addition completed in 1994. The south power island components
were constructed between 1960 and 1963. The combined facilities
are designed to produce an average of approximately 105 megawatts
of electricity and 2,000,000 lbs./hr. of steam, representing
approximately ninety-eight percent and one hundred percent of the
Mill's electric and thermal energy needs, respectively. The
principal components of the Energy Complex include three power
boilers, two recovery boilers, three turbine generators, two
evaporator sets, various related waste treatment and fuel and
"liquor" storage facilities, and station control facilities. The
Energy Complex is more fully described in Schedule 1.1(e) to the
Asset Purchase Agreement (Exhibit B-1(a) hereto).
More than eighty percent of the fuel requirements of the
Energy Complex are met by internally generated by-products of the
Mill's pulp manufacturing and woodlands operations. These by-
products include "black liquor," biomass (waste wood), and
sludge. Supplemental fuel needs are provided by coal and natural
gas. "Black liquor" is a by-product of the pulp-making process
that includes significant amounts of lignin, which is the natural
binder of the cellulose fiber in raw wood. After removal of a
portion of the moisture content in the "black liquor" in the
evaporator sets, it is combusted in the recovery boilers.
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Biomass consists of tree bark and tops and limbs left from the
harvesting of trees by Scott. Sludge is solid waste from the
Mill's waste water treatment plant. Its fuel value is derived
from its cellulose content.
Legal title to a substantial part of the equipment and
facilities comprising the Energy Complex is held by the
Industrial Development Board of the City of Mobile, Alabama (the
"Board") pursuant to various agreements that Scott and the Board
entered into between 1973 and 1994 in connection with financing
improvements to the Energy Complex and Mill through the issuance
by the Board of both tax exempt and taxable industrial
development revenue bonds. The payment of principal of and
interest on the outstanding bonds is secured by Scott's
obligations under the terms of facility leases and installment
purchase agreements, pursuant to which Scott is obligated to make
payments in amounts that are equal to the principal of and
interest on the bonds.
The Energy Complex has been certified as a "qualifying
facility" under the Public Utility Regulatory Policies Act of
1978, as amended, pursuant to an order of the Federal Energy
Regulatory Commission dated July 18, 1985. However, since
Southern intends to acquire and hold 100% of the Energy Complex,
it will not preserve "qualifying facility" status for the Energy
Complex.
1.3 Interconnection with Alabama Power Facilities.
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Alabama Power provides and will continue to provide back-up
and supplemental electric service to the Mill and Energy Complex
over three existing 30,000 kVA feeds. The facilities of Alabama
Power and those of the Energy Complex are interconnected at a
single 13.8 kV bus, from which power is distributed to multiple
load centers inside the Mill. (See Exhibit E-2). Internal
controls are designed to assure that the facilities of Alabama
Power and those of the Energy Complex at all times operate
synchronously. Dispatch of the Energy Complex facilities is
coordinated with the Southern System dispatcher.
Generally, the Energy Complex generators are controlled to
match, or balance, electrical generation with electrical energy
consumption inside the Mill and Energy Complex, although there
are actual operating conditions that limit the control system's
ability to maintain a perfect balance between generation and
load. During such conditions, energy produced in the Energy
Complex can and does flow out to the Alabama Power grid. Such
inadvertent flows could occur, for example, following a sudden
loss of electric load inside the Mill, and would continue until
the internal controls correct the imbalance by ramping down power
generation to match the new load condition. Likewise, sudden
variations in the process steam demand requirements of the Mill
can lead to an imbalance between on-site electrical generation
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and demand.2 No charge to Alabama Power will be made by Mobile
Energywith respect to any power flowsinto the Alabama Power grid.
1.4 Summary of Terms of Principal Acquisition Documents.
Under the terms of the Asset Purchase Agreement, Mobile
Energy will agree to pay $350 million for Scott's legal and
equitable interests in the structures, facilities, and equipment
comprising the Energy Complex, and in certain other assets
associated therewith, subject to usual and customary adjustments
for prorated items such as taxes and payments with respect to
obligations to be assumed by Mobile Energy at closing
("Closing"), among other items. In addition, the purchase price
will be reduced by the amount, if any, of past service
liabilities related to pension and other post-retirement benefits
plans maintained by Scott on behalf of certain employees assigned
to the Energy Complex. At Closing, SEI expects to hire the
majority of these employees and assume responsibility for some or
all of the related past service liabilities. (Asset Purchase
Agreement, 2.4 and 2.5).
The obligations of the parties under the Asset Purchase
Agreement are subject to satisfaction of customary and usual
conditions precedent for a transaction of this type, including
2 Two of the three turbine generators in the Energy Complex
are "back pressure" units in which the steam flow through the
turbine, and hence the amount of electricity generated, is
dictated by the demand for process steam inside the Mill. If the
demand for process steam experiences a sudden drop, electrical
generation from these two units and the demand for electricity
inside the Mill would also experience a transitory imbalance,
with the result that energy flows to the Alabama Power grid could
occur.
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expiration of the applicable waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, the receipt of all
necessary regulatory approvals and consents for the transfer of
all other permits necessary for ownership and operation of the
Energy Complex, and execution and delivery of all other operative
documents. (Asset Purchase Agreement, Articles 7 and 8). It is
anticipated that Closing will occur December 13, 1994. (Asset
Purchase Agreement, 3.1).
At Closing, Scott and Mobile Energy will execute and deliver
various instruments pursuant to which Scott will sell, grant,
convey, lease, sublease and assign to Mobile Energy, and Mobile
Energy will purchase, acquire, lease, sublease and assume from
Scott, the legal and equitable interests of Scott in the
structures, facilities, and equipment comprising the Energy
Complex and in certain related supplies, inventories, contractual
rights and permits. (Asset Purchase Agreement, 3.2). These
interests are defined in the Asset Purchase Agreement as the
"Purchased Assets," or generally those assets and interests to be
conveyed by Scott that Scott owns or holds directly, and the
"Leased Assets," or those facilities, structures and equipment to
which the Board holds legal title (collectively, the "Purchased
Assets" and the "Leased Assets" comprise the "Assets" to be
acquired). Scott will also lease the premises on which the
Energy Complex is located, and grant to Mobile Energy easements
and use of common facilities necessary for the operations of the
Energy Complex.
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The Leased Assets include certain solid waste disposal
facilities constructed in 1984 and 1985 that were financed by the
Board through the issuance of $85 million principal amount of tax
exempt industrial development revenue bonds, due 2019 (the "Tax
Exempt Bonds"), the full amount of which remains outstanding. At
Closing, Scott and Mobile Energy will enter into a Lease
Assignment and Assumption Agreement (relating to the 1984 Tax
Exempt Bonds) (Exhibit B-1(b) hereto), pursuant to which Scott
will assign to Mobile Energy, and Mobile Energy will assume, all
of Scott's rights and obligations under a lease (the "Tax Exempt
Bond Lease") and certain other agreements relating to the Tax
Exempt Bonds. The Tax Exempt Bond Lease and related agreements
are more fully described in Item 1.5(b), below.
The Board holds legal title to other facilities and
equipment comprising parts of the Leased Assets to be conveyed to
Mobile Energy pursuant to the terms of other existing financing
agreements under which the Board has issued or committed to issue
both taxable and tax exempt industrial development revenue bonds.
Tax exempt bonds issued by the Board in 1973, 1976 and 1980 to
finance various pollution control facilities used in the Mill and
Energy Complex operations are publicly-held. Taxable bonds
issued in 1984 to finance Scott's No. 6 turbine generator as well
as other equipment used in the Mill operations were acquired and
are held by a wholly-owned subsidiary of Scott.3 Mobile Energy
3 Since Scott indirectly holds the 1984 taxable bonds, the
payments Scott is obligated to make to the Board under the
related facility lease are offset dollar for dollar by the
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will not assume any direct or indirect liability with respect to
any of these bonds. However, since these bonds relate to
structures, facilities and equipment that are included in both
the Energy Complex and the Mill (so-called "mixed-use" assets),
the parties have concluded that it is desirable to leave Scott's
financing arrangements with the Board undisturbed such that the
Board will continue to hold legal title to the financed
properties, and to structure the conveyance of Scott's interest
therein as a lease or sublease, as the case may be, under the
terms of which payment by Mobile Energy of the purchase price for
the Energy Complex would be accepted by Scott as full and
complete payment of all rent payable thereunder for the entire
term thereof.
Scott will also assign to Mobile Energy its interests under
a lease relating to the Board's financing of Scott's new No. 8
recovery boiler, which was placed in service in 1994. The Board
issued approximately $115 million of industrial revenue bonds to
finance this facility. Like the 1984 taxable bonds, these bonds
were also issued to and are held by a wholly-owned subsidiary of
Scott. In this instance, however, Scott will assign the related
bonds to Mobile Energy and Mobile Energy will agree to assume
Scott's obligations to pay rent to the Board.4
payments of principal and interest Scott receives on the bonds.
4 Payments of rent to the Board under the associated
facility lease agreement will equal dollar for dollar payments of
principal and interest on the bonds received by Mobile Energy
from the Board.
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Mobile Energy will have the right to acquire legal title to
all of the Leased Assets for a nominal payment to the Board at
the end of the applicable lease terms.
At Closing, Scott and Mobile Energy will also enter into an
agreement or agreements regarding the use and maintenance of
common facilities between the Mill and the Energy Complex and
pursuant to which Mobile Energy would be granted easements
necessary for the operation on the Energy Complex.
Under the terms of separate Environmental Indemnity
Agreements (Exhibit B-1(c)(i) through (iii) hereto) to be entered
into at Closing with respect to the Energy Complex and each of
the three mills, Mobile Energy and Scott (and its successors)
will agree to defend and indemnify each other against claims
attributable to certain environmental conditions or claims
arising from environmental noncompliance to the extent arising
out of facts or circumstances that occur or come into existence
after the date of Closing. (Environmental Indemnity Agreements,
3.1 and 3.2). Southern, on behalf of Mobile Energy, proposes to
enter into an Environmental Guaranty (Exhibit B-1(d) hereto)
pursuant to which Southern would guaranty payment of liabilities
of Mobile Energy under the Environmental Indemnity Agreements in
an aggregate amount not to exceed $15 million, as escalated for
inflation.
Finally, Mobile Energy and Scott, in its capacity as the
owner of each of the Pulp Mill, the Paper Mill and the Tissue
Mill, will enter into three separate Energy Services Agreements
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(Exhibits B-6(a), (b) and (c) hereto) at Closing pursuant to
which Mobile Energy will provide power and steam processing
services to each of the three mills and "black liquor" processing
services to the Pulp Mill; and a Master Operating Agreement
(Exhibit B-6(d) hereto), which will govern the use of certain
common facilities, and set forth the understanding of the parties
with respect to allocations of processing services to the three
mills, among other matters. The Energy Services Agreements and
Master Operating Agreement are more fully described in Item 1.6,
below.
1.5 Proposed Financing Plan. Southern states that the
aggregate transaction costs for the purchase, related capital
improvements, and financing of the Energy Complex will not exceed
$420 million. The financed costs will include the agreed upon
purchase price ($350 million), costs of capital improvements to
the Energy Complex estimated at $11 million,5 bank structuring,
underwriting and servicing fees estimated at $10 million and
other estimated closing costs of $4 million to be paid at
Closing, and necessary working capital and cash reserves to meet
the requirements of financing parties. Mobile Energy proposes to
finance the aggregate transaction costs from the proceeds of up
to $105 million of equity investments by Southern, through the
assumption of Scott's obligations with respect to the $85 million
5Planned capital improvements include the addition of a
warehouse, administrative building, repair shop, and various
metering equipment.
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principal amount of Tax Exempt Bonds, and from the proceeds of up
to $230 million of fixed-rate notes (the "Notes") to be issued
and sold to one or more financial institutions or underwriters.
Financial closing on the sale of the Notes will not occur
concurrently with Closing under the Asset Purchase Agreement.
Mobile Energy anticipates that such sale will take place in the
first or second quarter of 1995. Accordingly, in order to
provide bridge financing until the Notes are issued, Southern
proposes to make an interim loan to Mobile Energy in an amount
not to exceed $190 million, which would be repaid from the
proceeds of the sale of the Notes. The interim loan would be
evidenced by Mobile Energy's non-interest bearing promissory note
(the "Interim Note") delivered to Southern in the form of Exhibit
B-2 hereto.
(a) Equity Investments By Southern. Southern requests
authority to invest up to $105 million in Mobile Energy in the
form of purchases of Mobile Energy's common stock and cash
capital contributions. Southern's equity investment in Mobile
Energy will provide approximately 25% of Mobile Energy's total
capitalization. Mobile Energy is authorized under the terms of
its Articles of Incorporation (Exhibit A-1 hereto) to issue up to
1000 shares of common stock, par value $1.00 per share, all of
which will be issued to Southern on or before Closing. Mobile
Energy has no other authorized class of capital stock.
Southern proposes to finance its investment in Mobile Energy
(including any interim loan to Mobile Energy) with the proceeds
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of the sale of Southern's common stock, as authorized in Holding
Company Act Release Nos. 25979 and 26098, dated January 25 and
August 5, 1994, respectively, from borrowings and/or commercial
paper sales, as authorized in Holding Company Act Release No.
26004, dated March 15, 1994, and from internally generated funds,
chiefly dividends from subsidiaries.
(b) Tax Exempt Bonds. As indicated, at Closing, Mobile
Energy will assume Scott's obligations under the Tax Exempt Bond
Lease (Exhibit B-3(a) hereto) between Scott and the Board,
pursuant to which Scott leases certain solid waste disposal
facilities constructed in 1984 and 1985 in conjunction with
Scott's addition of a new power boiler. These facilities were
financed by the Board through the issuance of $85 million
principal amount of Variable Rate Demand Solid Waste Revenue
Refunding Bonds, Series 1984 A, B, C, D and E (the "Tax Exempt
Bonds"), which remain outstanding.
The Tax Exempt Bonds mature on December 1, 2019 and do not
have any mandatory amortization prior to maturity. The Tax
Exempt Bonds were issued pursuant to a Trust Indenture dated as
of December 1, 1984 (the "Trust Indenture") (Exhibit B-3(b)
hereto) between the Board and Chemical Bank, as Trustee (the
"Trustee"). The Tax Exempt Bond Lease obligates Scott to make
payments to the Board in amounts equal to the payments of
principal of and interest on the Tax Exempt Bonds. The Board's
rights under the Tax Exempt Bond Lease are assigned to the
Trustee as security for the Tax Exempt Bonds. Under the terms of
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the Tax Exempt Bond Lease, Scott has the ability to accelerate
payment and direct the redemption of the Tax Exempt Bonds at any
time. The Tax Exempt Bond Lease provides that Scott may purchase
the tax exempt facilities for $10 when the Tax Exempt Bonds have
been paid in full.
Under the terms of the Trust Indenture, Scott may cause the
interest rate on the Tax Exempt Bonds to be fixed for various
periods of time ranging from one day up to the entire term of the
bonds. (Trust Indenture, Article IV). Currently, the Tax Exempt
Bonds bear interest at a rate which is reset weekly by the
Remarketing Agent (Goldman, Sachs & Co.), pursuant to a
Remarketing Agreement, dated as of October 30, 1987 (the
"Remarketing Agreement"), among the Board, Scott and Goldman,
Sachs & Co. The interest rate so established is a rate that,
considering relevant market conditions, is calculated to cause
the Tax Exempt Bonds to sell at par. Each bondholder has the
right to tender its Tax Exempt Bonds for purchase upon seven
days' notice. If Tax Exempt Bonds are tendered, the Remarketing
Agent attempts to remarket such bonds to another purchaser. The
Remarketing Agent is entitled to a fee from Scott equal to 1/8th
of 1% per annum of the outstanding principal amount of the Tax
Exempt Bonds. At Closing, Mobile Energy will assume Scott's
obligations under the Remarketing Agreement.
To secure the obligation to make payments under the Tax
Exempt Bond Lease with respect to the principal of or interest on
the Tax Exempt Bonds, and to assure the liquidity needed in the
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event that the Tax Exempt Bonds cannot be remarketed following
their tender, Scott delivered and is obligated to maintain one or
more irrevocable, direct-pay, bank letters of credit in an amount
equal to the unpaid principal amount of the bonds plus a portion
of the interest thereon, payable on demand by the Trustee. The
existing letters of credit (the "Existing LOCs") are issued by
Morgan Guaranty Trust Company of New York, as to the Series A, B
and C Tax Exempt Bonds, and Swiss Bank Corporation, as to Series
D and E Tax Exempt Bonds. (Exhibit B-3(c) hereto). The face
amounts of the Existing LOCs are approximately as follows:
Series A Series B Series C Series D Series E
$10,715,753 $13,777,397 $14,797,945 $21,941,825 $25,513,750
Scott's obligation to reimburse the issuing banks under the
Existing LOCs is set forth in two separate Reimbursement
Agreements, each dated as of December 1, 1984, as they have each
been amended from time to time (the "Existing Reimbursement
Agreements"). (Exhibit B-3(d) hereto). A fee, in the form of a
commission currently equal to .625% per annum of the face amount
of each of the Existing LOCs, is payable to each of the issuing
banks. (Existing Reimbursement Agreements, 2.4). Any
unreimbursed amount drawn under the Existing LOCs is treated as a
"domestic" loan to Scott which bears interest at the "Borrowing
Rate," which is currently the greater of (i) the issuing bank's
prime rate, and (ii) the Federal Funds Rate plus 1/2 of 1%.
(Existing Reimbursement Agreements, 2.1(f)). Subject to certain
conditions, under the Swiss Bank Reimbursement Agreement, Scott
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may convert any "domestic" loan to a one, two, three or six month
Eurodollar loan that bears interest at 1/2 of 1% over the
applicable London Interbank Offered Rate (LIBOR). Any loan made
to Scott with respect to an unreimbursed advance is evidenced by
Scott's promissory note (Annex 3 to each of the Existing
Reimbursement Agreements).
Mobile Energy proposes either to seek amendments to the Tax
Exempt Bond Documents that would permit the Board to remarket the
Series A through E Tax Exempt Bonds as long-term fixed interest
rate bonds, or enter into agreements with the Board pursuant to
which new fixed-rate Tax Exempt Bonds in an aggregate principal
amount of up to $85 million would be sold and the proceeds
thereof applied to redeem the existing Tax Exempt Bonds in full.
In either case, the remarketed Tax Exempt Bonds or new Tax Exempt
Bonds would have final maturities in years 2015 through 2019.
Subject to the foregoing, it is proposed that Mobile Energy may
take steps to cause the existing Tax Exempt Bonds to be
remarketed or new Tax Exempt Bonds to be issued at any time prior
to December 31, 1996, or such later date as the Commission by
subsequent order in this proceeding may authorize, provided that
the fixed rate on the remarketed or new Tax Exempt Bonds will in
no event exceed 8-1/2%.
As indicated, at Closing, Scott will assign its entire
interest in the Tax Exempt Bond Lease to Mobile Energy, and
Mobile Energy will assume Scott's obligations thereunder and
under the Existing Reimbursement Agreements. (Lease Assignment
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and Assumption Agreement, 2.1 and 2.2). Notwithstanding the
foregoing, Scott will remain primarily liable to the Board under
the Tax Exempt Bond Lease and directly liable to the issuing
banks under the Existing Reimbursement Agreements. The Lease
Assignment and Assumption Agreement provides, however, that, not
later than September 15, 1995, Mobile Energy shall either cause
the Board to redeem or refund the Tax Exempt Bonds, or cause the
Tax Exempt Bonds to be remarketed in a manner whereby Scott is
fully released and discharged from all liabilities under the Tax
Exempt Bond documents. If Mobile Energy should for any reason
fail to accomplish the matters specified in the preceding
sentence by September 15, 1995, it is obligated to pay to Scott
an amount equal to the principal amount of the Tax Exempt Bonds
plus interest to the earliest practicable redemption date.
(Lease Assignment and Assumption Agreement, 4).
Southern proposes to unconditionally guaranty payment of all
amounts required to be paid by Mobile Energy under the Lease
Assignment and Assumption Agreement. The Guaranty Agreement is
included herewith as Exhibit B-3(e). Southern would remain
liable under the Guaranty Agreement until the earlier of such
time as the Tax Exempt Bonds are (i) refunded or redeemed or
otherwise paid and discharged, or (ii) remarketed in a manner
whereby Scott is fully released and discharged from all liability
with respect thereto. (Guaranty Agreement, 2.1).
(c) Notes. Mobile Energy proposes to issue and sell up to
$230 million of its Notes to one or more financial institutions
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in a private placement, or to one or more underwriters for resale
to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933. Mobile Energy proposes to issue the
Notes at any time through June 30, 1995, or such later date as
the Commission may hereafter authorize. The Notes will be
secured by a first priority lien on Mobile Energy's interest in
the Energy Complex and in the site and the easements, and by an
assignment of Mobile Energy's rights under the Energy Services
Agreements, the Master Operating Agreement, and, to the extent
assignable, in all permits and licenses necessary for the
ownership and operation of the Energy Complex. As additional
security for payment of the Notes, Southern may also be obligated
to execute and deliver a stock pledge agreement pledging all of
the common stock of Mobile Energy. The form of the loan and
security documents (the "Note Instruments") are included herewith
as Exhibit B-4.
The Notes will be issued in series having maturities of from
16 to 22 years from financial closing, will have a weighted
average life of 13 to 15 years from the date of issuance, and
bear interest at a rate to be fixed on or before financial
closing that will not exceed the sum of the yield to maturity for
an actively-traded U.S. Treasury bond with a maturity date equal
to such average life, plus 3-3/4%. Based on an assumed rate for
a 14-year Treasury bond having a yield to maturity of 7.90% as of
October 24, 1994, and a spread of 3-3/4%, the fixed rate on the
Notes would be no greater than 11.65%.
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Under the terms of the Note Instruments, the Notes may be
subject in certain instances to mandatory prepayment in the case
of casualty events, and optional prepayment with payment of a
premium. Principal and interest on the Notes will be payable
quarterly.
As additional security for the payment of the Notes, Mobile
Energy may be obligated to fund various cash reserve accounts,
including but not limited to reserves for debt service and
working capital. All or a portion of the funds needed for such
cash reserves, estimated at not more than $40 million, would be
provided from the proceeds of the Notes. Southern requests
authority to provide a guaranty in an amount of up to $40 million
in lieu of some or all of these cash funded reserve amounts.
Southern states that it is desirable to have the flexibility to
provide a guaranty in lieu of cash funded reserve balances since
it would enable Mobile Energy to reduce the principal amount of
Notes to be sold, thereby reducing interest expense and improving
the project's economics.
It is currently contemplated that the Notes and Tax Exempt
Bonds would be secured pari passu under the terms of an
Intercreditor Agreement (Exhibit B-5 hereto) between the Board
and the holders of the Notes (or trustee on behalf of such
holders).
(d) Interest Rate Swap Agreements. At Closing, Mobile
Energy will enter into separate interest rate swap agreements in
order to hedge against adverse movements in long-term interest
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rates between Closing and the date on which the Notes are sold,
and between Closing and the date (not earlier than six months
after Closing) on which the Tax Exempt Bonds are either
remarketed as fixed rate bonds or redeemed with the proceeds of
new Tax Exempt Bonds issued by the Board. (Exhibits B-7(a) and
(b) hereto). In each case, the counterparty to the swap
instrument would be a financial institution rated above "A" by
Standard & Poor's Corporation and above "A2" by Moody's Investors
Services, Inc. Southern proposes to enter into a Swap Guaranty
Agreement (Exhibit B-7(c) hereto) under which Southern would
unconditionally guaranty Mobile Energy's obligations under the
interest rate swap agreements.
The interest rate swap with respect to the Notes will be a
"forward" swap under which Mobile Energy would in effect lock in
the fixed rate at the time of Closing, although the exchange in
interest rates would not be scheduled to occur until the
anticipated financial closing date, which would be not later than
June 30, 1995. Since Southern anticipates that Mobile Energy
will reverse this interest rate swap when the Notes are sold,
however, it is unlikely that there would ever be an actual
exchange of coupons. The notional principal amount of the swap
would be not more than $230 million, and the term of the swap and
amortization schedule would match the anticipated maturities and
amortization schedule of the Notes, as described above.
The interest rate swap with respect to the $85 million
principal amount of Tax Exempt Bonds would hedge against adverse
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interest rate movements pending remarketing of the bonds or
issuance of new bonds at a fixed rate. The exchange of coupons
would be scheduled to commence six months after Closing.
However, since Southern contemplates that Mobile Energy will
reverse the swap at the time the Board remarkets or sells fixed-
rate Tax Exempt Bonds, it is unlikely that there would ever be an
actual exchange of coupons. The term of the swap and
amortization schedule would match the anticipated maturity and
amortization of the converted or new Tax Exempt Bonds, as
described above.
1.6 Terms of Energy Complex Agreements. Mobile Energy and
Scott (or, as applicable, S.D. Warren Company) further propose to
enter into three separate Energy Services Agreements (Exhibits B-
6(a), (b) and (c) hereto), in each instance with Scott in its
capacity as owner of the Pulp Mill, the Paper Mill and the Tissue
Mill.6 The term of each of the Energy Services Agreements shall
commence at Closing and terminate twenty-five (25) years
thereafter, subject to the exercise of Mobile Energy's
unqualified option to extend the term thereof by a period of five
(5) years upon not less than five (5) years advance notice.
(Energy Services Agreement, Article 2).
6 As indicated, Scott has announced its agreement to sell
the Paper Mill as a part of its sale of S.D. Warren Company, and
will have the right to seek a purchaser for the Tissue Mill and
Pulp Mill, as well, should it choose to do so. Accordingly, the
purpose for having three separate Energy Services Agreements is
to anticipate the possibility that unrelated companies may at
some future point own the separate mills.
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Under the Energy Services Agreements, Mobile Energy will
provide power and steam processing services to the Tissue Mill,
the Paper Mill and the Pulp Mill. In addition, Mobile Energy
will provide black liquor processing services to the Pulp Mill.
(Energy Services Agreement, Article 4).7 During the term of the
Energy Services Agreement, the Mill owners will commit to
purchase the foregoing processing services from Mobile Energy on
an exclusive basis (to the extent Mobile Energy can meet the Mill
owners' as-needed requirements) in the amounts necessary to
operate the Mill from time to time, but not to exceed the Energy
Complex's current full operating capacity or the Mill's current
capacity requirements. (Energy Services Agreement, 4.4 and 4.5).
Mobile Energy will also produce and the Mill owners will accept
certain other by-products and waste streams resulting from the
foregoing products and services, including soap, process
condensates, and miscellaneous effluent streams in volumes,
quantities and qualities to be negotiated and meeting
environmental pre-treatment conditions to be negotiated. (Energy
Services Agreement, 5.3 and 5.4).
Mobile Energy, Scott, as owner of the Tissue Mill and Pulp
Mill, and S.D. Warren Company, as owner of the Paper Mill, will
also enter into a Master Operating Agreement (Exhibit B-6(d)
7 As described in Item 1.2, above, after removing a portion
of the moisture content and certain other waste streams, the
black liquor produced in Seller's pulping process is combusted in
the recovery boilers. This removes most of the lignin content in
the black liquor, producing what is referred to as "green
liquor," which is returned to Seller for reuse in the pulping
process.
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hereto), which, among other things, provides for the creation of
a site operating committee comprised of the Mill owners and
Mobile Energy for the purpose of ensuring through cooperative
efforts continued integrated operation of the Mill and Energy
Complex. In addition, the Master Operating Agreement will govern
nominations of processing services and allocation of demand
charges to the three mills and provides for the installation,
testing and reading of metering devices.
Revenues under the Energy Services Agreements will be based
on separate demand and usage charges for power, steam, and black
liquor processing services. (Energy Services Agreement, Article
7; Master Operating Agreement, Exhibit C). The level of the
demand charges, which are designed to cover debt service, return
of capital and fixed operating costs (such as taxes, insurance,
and on-site labor) of the Energy Complex, are based on peak
levels of demand determined for each of the Pulp Mill, the Paper
Mill, and the Tissue Mill. The demand charges for steam and
electricity apply to each of the three mills. The liquor
processing demand charge applies only to the Pulp Mill. The
steam and electric demand charge levels are first determined on
an aggregate basis, then allocated between the three mills based
on the relative demand peaks of each of the mills. (Master
Operating Agreement, 3.6).
A more detailed explanation of the demand and usage charge
structure is contained in Exhibit B-6(e) hereto.
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Based on projections of the revenues and expenses of the
Energy Complex, Southern estimates that, over the life of the
project, Mobile Energy's net operating cash flow will at all
times be greater than 1.3x fixed debt service, and on average
will be 1.5x fixed debt service.
1.7 Operations and Maintenance Services. In accordance
with its existing authorization, SEI will provide operating and
maintenance services to Mobile Energy at cost, as determined in
accordance with Rules 90 and 91. At Closing, SEI will hire a
majority of the approximately 130 employees of Scott who are
currently assigned to the operations of the Energy Complex.
(Asset Purchase Agreement, Exhibit N). These employees will
remain dedicated to the Energy Complex. Any additional personnel
or other resources that may be required in connection with
operating and maintaining the Energy Complex will be provided by
SEI using its own work force, independent third party suppliers,
or, subject to availability, personnel and other resources that
may be provided by Southern Company Services, Inc. or the
Operating Companies pursuant to the existing service agreements
between SEI and such associate companies. The Operating
Companies will not provide any services directly to Mobile
Energy.
In addition to usual and customary plant operations and
maintenance services, SEI will also prepare and maintain the
books and records and financial and regulatory reports of Mobile
Energy, provide capital improvements services, administer all
26
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project and financing contracts to which Mobile Energy is a
party, and provide fuel and materials procurement, waste
handling, and used part disposition services, among other
services that Mobile Energy may request.
1.8 Other Matters. The consolidated federal income tax
liability of the Southern System is apportioned among the members
of the consolidated group in accordance with the provisions of
subparagraph (a)(1) of Section 1552 of the Internal Revenue Code
of 1986, as amended, and the applicable requirements of Rule
45(c), as modified by certain orders of the Commission. Mobile
Energy will become a member of the Southern System consolidated
group and will be apportioned a share of the consolidated federal
income tax liability of the group in accordance with such
requirements.
In accordance with its existing authorization, Southern
Company Services, Inc., a subsidiary service company of Southern,
will provide tax, auditing, engineering support and other
services to Mobile Energy pursuant to a service agreement that
will be substantially identical to the standard form of Southern
System service agreement now in use. The agreement will be filed
as an exhibit to Southern's Annual Report on Form U-5S.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses incurred or to be
incurred in connection with the transactions proposed herein
(other than in connection with the sale of the Notes, which will
27
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not occur until the first or second quarter of 1995) have been
paid or will be paid by SEI as project development expenses from
funds provided by Southern to SEI in accordance with the
authorization heretofore granted in File 70-7209 (HCAR No. 24476,
October 20, 1987). SEI will be reimbursed for all such amounts
on or after Closing from the proceeds of investments by Southern
in Mobile Energy, as authorized herein. It is estimated that,
through Closing, such fees, commissions and expenses will be
approximately as follows:
Commission filing fee $ 2,000
Hart-Scott-Rodino Act filing fee $ 45,000
Legal Fees and Expenses:*
Troutman Sanders $ 571,200
Latham & Watkins $1,250,000
Balch & Bingham $ 124,000
Engineering and Other Consultants*
Southern Company Services, Inc. $ 524,250
Jaakko Poyry $ 275,000
Rust Engineering $ 750,000
Stone and Webster $ 33,000
Dames and Moore $ 115,000
Miscellaneous* $ 34,700
Total* $3,724,150
*Estimated through Closing
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Southern requests the Commission to retain jurisdiction over
fees, commission and expenses to be paid in connection with the
issuance of the Notes.
Item 3. Applicable Statutory Provisions.
3.1 General Discussion. The issuance of common shares and
of the Interim Note by Mobile Energy to Southern are subject to
Sections 6(a) and 7 of the Act, and the acquisition thereof by
Southern is subject to Sections 9(a), 10, 12(b) and 12(f) and
Rules 43 and 45 thereunder. The repayment of the Interim Note
with the proceeds of the Notes is subject to Rule 42. The
issuance and sale of Notes by Mobile Energy, and the entering
into of an interest rate swap agreement with respect thereto, are
also subject to Sections 6(a) and 7 of the Act. The making of
cash capital contributions and/or open account advances by
Southern to Mobile Energy is subject to Section 12(b) of the Act
and Rule 45 thereunder.
The assumption by Mobile Energy of Scott's obligations under
the Tax Exempt Bond documents, the entering into of agreements
with the Board to cause the Tax Exempt Bonds to be remarketed at
a fixed rate or redeemed with the proceeds of new fixed rate Tax
Exempt Bonds to be issued by the Board, and the entering into of
an interest rate swap agreement with respect to the conversion of
the Tax Exempt Bonds to a fixed rate, are also subject to
Sections 6(a) and 7 of the Act and Rule 42 thereunder.
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Upon its acquisition of the Energy Complex, Mobile Energy
will be an "electric utility company" within the meaning of
Section 2(a)(3) of the Act. Mobile Energy's acquisition of the
Energy Complex is subject to Sections 9(a) and 10. The
acquisition of certain components of the Energy Complex
associated with the processing of black liquor and steam may be
regarded as an acquisition of an interest in an "other business"
for purposes of Section 9(a)(1).
The proposed guaranties by Southern of (i) Mobile Energy's
obligations under the Environmental Indemnity Agreements, (ii)
Mobile Energy's payment obligations under the Lease Assignment
and Assumption Agreement with respect to the Tax Exempt Bonds,
(iii) debt service, working capital, and other reserve
requirements under the terms of the Note Instruments, and (iv)
Mobile Energy's obligations under the Interest Rate Swap
Agreements are subject, in each case, to Sections 6(a), 7, and
12(b) and Rule 45.
The proposed transactions will be carried out in accordance
with the procedures specified in Rule 24 of the Act and pursuant
to an order of the Commission with respect thereto, except that
Southern and Mobile Energy request authorization (i) to issue and
sell the Notes (and repay the Interim Note with the proceeds
thereof) at any time prior to June 30, 1995, and (ii) to cause
the Tax Exempt Bonds to be remarketed at a fixed rate or redeemed
with the proceeds of new fixed-rate Tax Exempt Bonds to be issued
by the Board at any time prior to December 31, 1996.
30
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SEI and Southern Company Services, Inc. will provide
services to Mobile Energy at cost in accordance with Section 13
and Rules 87, 90 and 91 thereunder and with the terms of
authorizations heretofore granted.
All of the transactions proposed herein are subject to Rule
54.
3.2 Analysis of Section 10 Issues. As set forth more fully
below, the transactions described in this Application or
Declaration will satisfy all of the applicable provisions of
Section 10 of the Act and should be approved by the Commission.
Section 10(b) of the Act provides that, if the requirements
of Section 10(f) are satisfied, the Commission shall approve an
acquisition under Section 9(a) unless the Commission finds that:
(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;
(2) in case of the acquisition of securities or utility
assets, the consideration, including all fees, commissions,
and other remuneration, to whomsoever paid, to be given
directly or indirectly, in connection with such acquisition
is not reasonable or does not bear a fair relation to the
sums invested in or the earning capacity of the utility
assets to be acquired or the utility assets underlying the
securities to be acquired; or
(3) such acquisition will unduly complicate the capital
structure of the holding company system of the applicant or
will be detrimental to the public interest or the interest
of investors or consumers or the proper functioning of such
holding company system.
There is no basis for the Commission to make any adverse
findings under Section 10(b).
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Interlocking Relationships. Mobile Energy will be a wholly-
owned subsidiary of Southern and its board of directors will
consist of members of the Southern system's current management.8
The Commission has held in numerous cases that having common
directors among companies in the same holding company system is
not inappropriate; that, in fact, an integrated holding company
system presupposes, in the interest of efficiency and economy,
the existence of interlocking officers and directors.9
Concentration of Control. As the Commission has stated,
Section 10(b)(1) was intended to prevent utility acquisitions
that would result in "huge, complex and irrational holding
company systems at which the Act was primarily aimed." American
Electric Power Co.,Inc., 46 SEC 1299, 1307 (1978). The
acquisition of Mobile Energy, in contrast, will have a negligible
impact on the size of the Southern system. On a pro forma basis,
the net book value of Southern's consolidated utility plant in
service (electric and steam heat plant) will increase by less
than 2% as a result of Mobile Energy's investment in the Energy
Complex and certain planned improvements.10 Furthermore,
Southern's anticipated equity investment, which will not exceed
$105 million, will amount to only 1.3% of Southern's common
shareholder equity, 0.6% of total capitalization, and 3.5% of
8 Initially, the sole director of Mobile Energy will be a
vice president of SEI.
9 See, e.g., Entergy Corporation, et al., HCAR No. 25136
(August 27, 1990); American Natural Gas Co., HCAR No. 12992
(September 20, 1955).
10 At June 30, 1994, consolidated net utility plant in
service was $20,102,814,000.
<PAGE>
consolidated retained earnings.11 Finally, the acquisition will
not expand or extend the service area of the Southern system into
geographic areas not already served.
Competitive Effects. There is no basis in the record for
the Commission to conclude that the acquisition of the Energy
Complex by Mobile Energy will have any anti-competitive effects.
Scott and Southern have each filed notifications pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act with the Department
of Justice and the Federal Trade Commission describing the
effects of the transaction on competition in the relevant market.
By letter dated November 15, 1994, the Federal Trade Commission
has granted the request of the parties for early termination of
the 30-day statutory waiting period.
Fairness of Consideration. In order to disapprove an
acquisition, Section 10(b)(2) requires that the Commission find
that the consideration, including all fees, commissions and other
remuneration, to be given directly or indirectly in connection
with the transaction is not reasonable or does not bear a fair
relation to the investment in and earning capacity of the utility
assets underlying the securities being acquired. In this case,
because Mobile Energy will be a single purpose project
subsidiary, it is appropriate to analyze the reasonableness of
Southern's investment in Mobile Energy in terms of Mobile
11 At June 30, 1994, Southern's common shareholder equity,
total capitalization, and consolidated retained earnings were
$7,822 million, $16,702 million, and $2,984 million,
respectively.
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Energy's investment in the Energy Complex and its projected
earnings under the terms of the Energy Services Agreements.
In the course of its due diligence effort, SEI and its
outside consultants were given access to Scott's books and
records, including confidential and proprietary production data.
Using this information, as well as manufacturer quotes on the
costs of replacement equipment, SEI was able to verify that the
purchase price negotiated with Scott bears a fair relation to
Scott's depreciated cost and estimated replacement cost.
Following the issuance of the Notes and repayment of the
Interim Note with the proceeds thereof, and the release of
Southern's guaranty of Mobile Energy's obligations under the
Lease Assignment and Assumption Agreement, Southern's expected
equity investment in Mobile Energy will be no greater than $105
million. Southern is providing herewith financial projections
(see Item 6(b)(iv))12 that demonstrate that the anticipated
revenues of Mobile Energy will support the servicing of Mobile
Energy's debt and lease obligations and provide a return on
equity that is substantially in excess of Southern's authorized
return on its investment in its regulated operating utility
subsidiaries, which currently ranges from about 11% to 14.5%.
The higher return is commensurate with the greater risks involved
in this investment, which are discussed below.
12 The financial projections are being filed separately,
pursuant to Rule 104, as a part of Item 6(b) - Financial
Statements.
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As described in Item 1.6, Mobile Energy's revenues will be
derived under three separate 25-year Energy Services Agreements
that Mobile Energy and each of the Mill owners will enter into at
Closing. These revenues will consist of both demand and usage
charges for steam and electricity processing services and, in the
case of the Pulp Mill, black liquor processing services as well.
Projected expenses are based on confidential and proprietary
production cost data provided by Scott. The demand charges are
based upon specified peak levels of demand for steam, electricity
and liquor processing. The projections assume that, during the
term of the Energy Services Agreements, the Mill will reach these
levels of demand. SEI has confirmed through its inspection of
operating data provided by Scott that the specified peak levels
are consistent with those typically reached in the current
operations of the three mills. The financial projections
demonstrate that Southern will recover its equity investment, and
earn an acceptable return thereon, through the demand charges
that the Mill owners will be contractually bound to pay. The
demand and usage charge structure under the Energy Services
Agreements is described in greater detail in Exhibit B-6(e),
which has been filed separately pursuant to Rule 104.
The principal risk associated with Southern's investment in
the Energy Complex is the risk of a Mill closure or sustained
curtailments in production (the "Mill Risk"). Such events could
occur, for example, if either the U.S. pulp and paper industry as
a whole or Scott's Mobile operations in particular experienced a
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decline in competitiveness, due to plant obsolescence, shrinking
markets, interruptions in the supply of necessary raw materials,
environmental constraints, or otherwise. However, since
Southern's projections indicate that it will recover its
investment in Mobile Energy over a period of years that is
substantially shorter than the 25-year term of the Energy
Services Agreements, the Mill Risk becomes less critical in the
later years. Further, the contractual demand charge structure
will tend to insulate Mobile Energy from the effects of
production cutbacks during the early years.
SEI's analysis of the Mill Risk has focused on the financial
health of the paper and pulp industry as a whole, Scott's
competitive position in the industry, and the competitiveness of
the Mobile facility in particular. To assist in its due
diligence, SEI engaged Jaakko Poyry Consulting, Inc. ("Jaakko
Poyry"), an internationally recognized pulp and paper industry
consulting firm, to prepare a study of the Mill Risk.13 Scott
agreed to provide Jaakko Poyry with highly confidential
production and raw material cost data, current plans for capital
improvements to the Mill, and product marketing strategies, among
other information.
Jaakko Poyry has prepared a preliminary draft of a
confidential report which addresses the Mill Risk on various
levels, including viability of wood supply, the competitiveness
13 SEI also engaged Rust Engineering Company and Southern
Company Services, Inc. to conduct a technical review of the
Energy Complex.
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of the Pulp Mill, and the integrity of current and planned
environmental systems. The draft report also assesses the
competitive position of both Scott and S.D. Warren relative to
other tissue and paper product suppliers worldwide.
In its draft report, Jaakko Poyry has concluded that the
Mill's access to wood fiber compares favorably with the industry
in the area, due primarily to Scott's large captive timberlands
operations in the Southeast, from which it supplies substantially
all of the pine fiber requirements of the Mill, and Scott's cost
effective marine-based transportation network. Further, Jaakko
Poyry concluded that, although the market for hardwood pulpwood
is expected to become tighter in the southern U.S., Scott again
enjoys certain competitive advantages, including the location of
its pulping operations and the existence of certain exclusive
contracts between Scott and independent producers for hardwood
chips which could possibly provide an additional source of
hardwood fiber to the Mill in the future.
Jaakko Poyry also found that the Pulp Mill is a competitive
supplier of fiber to Scott's worldwide operations, and should
remain so if planned investments in the fiber lines are made.
Specifically, Jaakko Poyry concluded that the investment options
identified by Scott to meet tighter environmental regulations
that will go into effect are realistic and will assure the
technical and economic viability of the Pulp Mill. Jaakko Poyry
found that Scott's record on waste treatment and environmental
compliance compared favorably with the industry. Specifically,
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environmental testing disclosed toxicity levels lower than
allowable limits. Further, Jaakko Poyry confirmed that Scott's
current available landfill space is adequate and that test
results for particulate emissions into the air have been
favorable.
Jaakko Poyry also concluded that Scott has a leading
position worldwide in tissue production, and that, due to its
scale, proximity to the growing Southeastern market, and secure
source of wood fiber, the Mobile Tissue Mill will tend over time
to become even more closely integrated into Scott's worldwide
tissue operations. Tissue Mill technology was considered
competitive. The Paper Mill is also regarded as a leading U.S.
producer in certain categories (free-sheet papers), although the
paper operations of the Mill are dependent upon the success of
S.D. Warren's marketing strategy.
Overall, Jaakko Poyry concluded that the risk of significant
production curtailments at the Mill are relatively small.
Reasonableness of Fees. The fees, commissions and expenses
incurred and to be incurred in connection with the acquisition of
Mobile Energy's common shares and the transactions contemplated
under the Asset Purchase Agreement are expected not to exceed $4
million, or roughly 1% of the negotiated purchase price for the
Energy Complex.14 Southern believes that this amount is
14 It should be noted that the expenses paid to third
parties for legal and financial advisory services, and to other
consultants in connection with SEI's due diligence review, were
incurred by SEI as project development expenses in accordance
with its authorization under HCAR No. 24476 (October 20, 1987).
38
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reasonable and fair in light of the size and complexity of the
transaction relative to other similar transactions.
Capital Structure. To disapprove an acquisition, Section
10(b)(3) requires the Commission to find that the transaction
will unduly complicate the capital structure of the holding
company system or will be detrimental to the public interest, the
interest of investors or consumers or the proper functioning of
the holding company system. Southern's consolidated capital
structure will not be unduly complicated by Mobile Energy's
issuance and sale of common stock and Interim Note to Southern at
Closing or by its assumption or issuance of long-term secured
obligations. There will be no other class of stock of Mobile
Energy outstanding, and its funded senior debt will be ranked
equally.
The pro forma 75% debt - 25% equity capitalization ratio of
Mobile Energy will be comparable to the more leveraged
capitalization ratios that the Commission has approved in other
cases involving single purpose independent power producers,15
and will have a negligible effect on the pro forma consolidated
capital structure of Southern. Assuming that the transaction had
closed June 30, 1994, an investment in Mobile Energy's common
equity of $105 million, and long-term debt of $315 million, the
pro forma effect of the transactions would reduce Southern's
15 See Sierra Pacific Resources, HCAR No. 24566 (January 28,
1988), aff'd sub nom. Environmental Action, Inc. v. Securities
and Exchange Commission, 895 F.2d 1255 (9th Cir. 1990).
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consolidated common equity as a percentage of total
capitalization from 46.8% to 46.3% and increase long-term debt
from 45.2% to 45.9%. These pro forma capitalization ratios are
well within acceptable industry standards.
Section 10(c) of the Act provides that, notwithstanding the
provisions of Section 10(b), the Commission shall not approve:
(1) an acquisition of securities or utility assets, or of
any other interest, which is unlawful under the provisions
of Section 8 or is detrimental to the carrying out of the
provisions of Section 11; or
(2) the acquisition of securities or utility assets of a
public utility or holding company unless the Commission
finds that such acquisition will serve the public interest
by tending towards the economical and the efficient
development of an integrated public utility system . . ..
Provisions of Section 11. Section 11(b)(1) generally
requires a registered holding company system to limit its
operations "to a single integrated public utility system, and to
such other businesses as are reasonably incidental, or
economically necessary or appropriate to the operations of such
integrated public utility system." Section 11(b)(2) directs the
Commission "to ensure that the corporate structure or continued
existence of any company in the holding company system does not
unduly or unnecessarily complicate the structure, or unfairly or
inequitably distribute voting power among security holders, of
such holding company system."
40
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The Southern System is an integrated public utility
system16 and will not cease to be such as a consequence of the
transactions proposed herein. The Energy Complex is located
inside the retail electric service territory of Alabama Power,
and the generating units comprising the Energy Complex are
already physically interconnected with the facilities of Alabama
Power and will remain so. Over these interconnections, Alabama
Power will continue to provide back-up and supplemental electric
service to the Energy Complex and Mill at rates set by the
Alabama Public Service Commission.
Components of the Energy Complex used to produce and deliver
steam and to process black liquor, which is one of the primary
sources of fuel for the Energy Complex, may be regarded as
interests in "other businesses" within the meaning of Section 11.
Under cases interpreting Section 11(b)(1), an interest in an
"other business" is retainable, and hence may be acquired under
the standards of Section 10(c)(1), if there is an operating or
"functional relationship" between the utility system and such
other business interests.17 The Commission has approved
numerous applications involving acquisitions of interests in fuel
16 See The Commonwealth & Southern Corporation, et al.,
HCAR No. 7615 (August 2, 1947).
17 See CSW Credit, Inc. et al., HCAR No. 25995 (March 2,
1994).
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related assets,18 and the steam business has historically been
recognizedas anappropriateadjunct oftheelectric utilitybusiness.19
As to Section 11(b)(2), the Commission has consistently
recognized that the creation of a direct subsidiary of a
registered holding company does not per se unduly or
unnecessarily complicate a system's capital structure.20
Further, the Commission has previously approved of acquisitions
of special purpose subsidiaries organized to produce and sell
power to a single customer.21 In this case, the organization of
Mobile Energy serves a useful purpose in that it insulates
Southern's other operating utility subsidiaries from the unique
project related risks associated with the Energy Complex.
Efficiencies and Economies. The transactions will produce
economies and efficiencies more than sufficient to satisfy the
standards of Section 10(c)(2) of the Act. In this regard, it is
reasonable to anticipate that Scott (and its successors), will
achieve savings and other benefits over the long run from the
applied efficiencies and economies brought to it by integration
18 See e.g., Public Service Company of Oklahoma, HCAR No.
19090 (July 17, 1975), and cases cited therein.
19 In many cases, the Commission permitted holding
companies to retain an interest in the steam business upon a
showing of a close operating relationship between the steam and
electric departments of a utility subsidiary. See e.g., North
American Co., 11 S.E.C. 194 (1942); Engineers Public Service
Company, et al., 12 S.E.C. 41 (1942).
20 See Entergy Corporation et al., HCAR No. 25136 (August
27, 1990); Sierra Pacific Resources, supra, note 15.
21 See Electric Energy, Inc., 38 SEC 658 (1958);
Mississippi Valley Generating Company, 36 SEC 159 (1955).
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of the Energy Complex into the much larger Southern system,
especially in the areas of operations and maintenance and access
to personnel and resources.22 Presumably, Scott will also
achieve significant capital savings by being able to redeploy its
capital investment in the Energy Complex to its core industrial
operations. Finally, Scott will achieve savings in labor costs
through the transfer of approximately 130 current employees to
SEI.
Section 10(c)(2) does not call for a precise dollar forecast
of anticipated savings and efficiencies in a case such as
this.23 Scott is not a utility. Its decision to sell the
Energy Complex is not subject to review for fairness or adequacy
of consideration by any regulatory authority, nor are the rates
that Scott (and its successors) will pay for the processing
services. We presume that Scott carefully evaluated the economic
trade-offs involved in continued ownership of the Energy Complex,
on the one hand, with a sale of the facility to a third party
22 In cases involving combinations of very small utility
systems with much larger utility systems, the Commission has
tended to focus on the potential for these kinds of savings to
the customers of the acquired system, recognizing that the
potential for savings to the acquiring company may be
inconsequential or difficult to quantify. See e.g., New England
Electric System, et al., HCAR No. 22699 (November 8, 1982); Ohio
Edison Company, HCAR No. 17842 (January 5, 1973).
23 As the Commission has stated in other cases in respect
of Section 10(c)(2), "specific dollar forecasts of future savings
are not necessarily required; a demonstrated potential for
economies will suffice even when these are not precisely
quantifiable." Centerior Energy Corporation, HCAR No. 24073
(April 29, 1986).
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coupled with a long-term obligation to purchase the Mill's
requirements for electricity, steam and liquor processing.
Integrated Public Utility System. As applied to electric
utility companies, the term "integrated public utility system" is
defined in Section 2(a)(29)(A) of the Act 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 interconnected and coordinated system
confined in its operation to 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.
The Commission has held that the definition of an integrated
electric system in Section 2(a)(29)(A) is a four-part test, each
part of which must be satisfied.24 First, the utility assets of
the system must be physically interconnected or capable of
physical interconnection. Second, the utility assets, under
normal conditions, may be economically operated as a single
interconnected and coordinated system. Third, the system must be
confined in its operations to a single area or region. And
fourth, the system must not be so large as to impair (considering
the state of the art and the area or region affected) the
24 See Environmental Action, Inc. v. Securities and
Exchange Commission, 895 F.2d 1255, 1263 (9th Cir. 1990) (citing
Electric Energy, Inc., 38 SEC 658, 668 (1958)).
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advantages of localized management, efficient operation, and the
effectiveness of regulation.
The transaction proposed herein satisfies all four of these
requirements:
First, as previously shown, the facilities of Alabama Power
and the Energy Complex are already physically interconnected and
are operated synchronously in parallel, and Alabama Power
provides and will continue to provide back-up and supplemental
electric service to the Mill and Energy Complex.
Second, the facilities of Mobile Energy will be economically
operated with those of Southern's other operating subsidiaries as
a single interconnected and coordinated system. This is not to
suggest that Energy Complex will be dispatched from a central
dispatch point with all other generating plants in the Southern
system. The Energy Complex was designed and constructed by Scott
to satisfy its own needs, and with rare exceptions, Scott's
requirements for electricity exceed the electrical generating
capacity of the Energy Complex.
As a customer of Mobile Energy, Scott's requirements for
steam, electricity and liquor processing services will continue
to control the dispatch of the Energy Complex. However, this is
not incompatible with the requirements of Section 2(a)(29)(A).
On the contrary, there is no requirement in the Act that approval
under Section 10 must be conditioned on a showing that a
generating unit that is to be added to a system must be available
to supply the needs of any existing customers. As the Commission
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has stated: "when a generating plant is added to existing plants
in a traditional integrated electric system, the electricity
produced by the new plant need not be dedicated in full or even
in part for distribution to existing retail or wholesale
customers." Sierra Pacific Resources, supra, note 15.
Further, although central economic dispatch of all of the
generating units of utility systems may be dispositive of
operational integration, it is not per se a requirement of
Section 2(a)(29(A). In this case, the Energy Complex is
integrated into Scott's industrial operation, and the amount of
electric energy produced is a function of Scott's demand for
process steam, liquor processing, and other related products.
Further, the economics of the plant are heavily dependent upon a
supply of by-products from its pulp and paper manufacturing
process, which, in turn, consume the electricity and steam
produced. It would not be economical to dispatch the Energy
Complex generators for any sustained period using conventional
fuels rather than the waste streams made available from the Mill
and without a customer for the steam produced.
This Commission has recognized that dedicated, on-site (or
"inside the fence") cogeneration operations are an appropriate
component of an integrated system. In fact, the Energy Complex
will not be the first stand-alone cogenerating facility dedicated
to a single customer in the Southern system. Mississippi Power
Company, an operating utility subsidiary of Southern, has owned
and operated such dedicated facilities at Chevron Oil Company's
46
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Pascagoula refinery since 1967. (See Mississippi Power Company,
HCAR No. 16791 (July 19, 1970), approving acquisition and leasing
of certain assets.)25 Like the Energy Complex, steam and
electrical production at that facility is dictated by Chevron's
requirements for steam and electricity.
Third, the acquisition of the Energy Complex will not
enlarge the area or region served by Southern's operating
subsidiaries. The Energy Complex is located in Alabama, inside
the retail electric service territory served by Alabama Power. In
fact, until the early 1960s, Alabama Power supplied all of the
Mill's electrical needs.
Fourth, the system is not so large as to impair the
advantages of localized management, efficient operations, and the
effectiveness of regulation. The Energy Complex is now a
"qualifying facility" under PURPA that is exempt from state laws
respecting the rates and service of public utilities and from
most provisions of the Federal Power Act. Following its
acquisition, Mobile Energy will not be a public utility under the
Federal Power Act, because it will not be engaged in making sales
of power for resale, and will not be a public utility under
25 The Pascagoula plant was recently expanded with the
addition by Mississippi Power of a new 78 MW cogeneration unit at
the refinery, which increased Mississippi Power's total
generation inside the refinery to 150 MW and steam production to
952,000 lbs./hour. As in the case of the Energy Complex,
Mississippi Power receives the fuel supply (process gas) needed
to operate these facilities from the refinery. On-site controls
are designed to balance, or match, the output of the facility
with Chevron's demand for electricity and steam.
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Alabama law. Thus, the transactions described herein will have
no impact at all on the effectiveness of regulation.
3.3 Rule 54 Analysis. Under Rule 54, in determining
whether to approve the issue or sale of a security by a
registered holding company for purposes other than the
acquisition of an "exempt wholesale generator" or "foreign
utility company", or other transactions by such registered
holding company or its subsidiaries other than with respect to
"exempt wholesale generators" or "foreign utility companies", the
Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an "exempt wholesale
generator" or a "foreign utility company" upon the registered
holding company system if Rules 53(a), (b) and (c) are satisfied.
In that regard, assuming consummation of transactions described
in this Application or Declaration, all of the conditions set
forth in Rule 53(a) are and will be satisfied and none of the
conditions set forth in Rule 53(b) exists or, as a result
thereof, will exist.
Rule 53(a)(1): Assuming full utilization of $500 million of
proceeds of the sale of common stock (as authorized in HCAR Nos.
25980 and 26098) and/or the use of up to $500 million of the
proceeds of short-term borrowings and/or commercial paper sales
(as authorized in HCAR No. 26004), to make investments in "exempt
wholesale generators" and "foreign utility companies," and/or the
guaranty by Southern of up to $500 million of securities of any
"exempt wholesale generators" or "foreign utility companies" (as
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<PAGE>
authorized by HCAR No. 25980), the combination of which may not
exceed $500 million in the aggregate, Southern's "aggregate
investment" in such entities would be approximately 26.9% of
"consolidated retained earnings," as defined in Rule
53(a)(1)(ii), of Southern, determined as follows: At September
30, 1994, Southern had invested, directly or indirectly, an
aggregate of $409.5 million in "exempt wholesale generators" and
"foreign utility companies," 26 and had utilized for this
purpose approximately $97.7 million of the authorized proceeds of
common stock, debt and/or guarantees. The average of the
consolidated retained earnings of Southern reported on Form 10-K
or Form 10-Q, as applicable, for the four consecutive quarters
ended September 30, 1994, is $3.019 billion. Southern's
"aggregate investment," on a pro forma basis, expressed as a
percentage of "consolidated retained earnings," is approximately
26.9% ($409.5 million + $402.3 million divided by $3.019
billion).
Rule 53(a)(2): Southern maintains books and records
enabling it to identify investments in and earnings from each
"exempt wholesale generator" and "foreign utility company" in
which it directly or indirectly holds an interest. In addition,
each domestic "exempt wholesale generator" in which Southern
holds an interest maintains its books and records and prepares
26 These investments were in companies or partnerships that
are "exempt wholesale generators," as defined in Section 32,
operating or constructing facilities in Hawaii and Virginia, and
in "foreign utility companies," as defined in Section 33,
operating in The Grand Bahamas, Chile and Argentina.
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its financial statements in conformity with U.S. generally
accepted accounting principles ("GAAP"). The books and records
and financial statements of each "foreign utility company" in
which Southern holds an interest (including those that are
"majority-owned subsidiaries" and those that are not) are
maintained and prepared in conformity with GAAP. All of such
books and records and financial statements will be made available
to the Commission, in English, upon request.
Rule 53(a)(3): No more than 2% of the employees of
Southern's operating utility subsidiaries will, at any one time,
directly or indirectly, render services to "exempt wholesale
generators" and "foreign utility companies." Based on current
staffing levels of Southern's domestic operating utility
subsidiaries (such companies currently employ, in the aggregate,
approximately 27,000 salaried and hourly employees), no more than
540 employees of these companies, in the aggregate, determined on
a full-time-equivalent basis, will be utilized at any one time in
rendering services directly or indirectly to "exempt wholesale
generators" and "foreign utility companies." In a separate
proceeding (File No. 70-7932) certain of Southern's subsidiaries
are requesting authority to render services to "exempt wholesale
generators" and "foreign utility companies," as required by Rule
53(a).
Rule 53(a)(4): Southern is simultaneously submitting a copy
of this Application or Declaration, and will submit copies of any
Rule 24 certificates required hereunder, as well as a copy of
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Southern's Form U5S, to the Federal Energy Regulatory Commission
and to the appropriate public service commission(s) having
jurisdiction over the retail rates of Southern's operating
utility subsidiaries.
In addition, Southern states that the provisions of Rule
53(a) are not made inapplicable to the authorization herein
requested by reason of the provisions of Rule 53(b).
Rule 53(b)(1): Neither Southern nor any subsidiary of
Southernis thesubjectof anypendingbankruptcy orsimilarproceeding.
Rule 53(b)(2): Southern's average consolidated retained
earnings for the four most recent quarterly periods ($3.019
billion) represented an increase of approximately $44 million in
the average consolidated retained earnings for the previous four
quarterly periods ($2.975 billion).
Rule 53(b)(3): In the previous fiscal year, Southern did
not report any operating losses attributable to its direct or
indirect investments in "exempt wholesale generators" and
"foreign utility companies.
Item 4. Regulatory Approval.
The proposed transactions are not subject to the
jurisdiction of any state commission or, except as noted below,
of any federal commission other than the Commission. Mobile
Energy will not be a "public utility" under the Federal Power Act
or the Alabama public utilities code. The transactions are
subject to review by the Department of Justice and Federal Trade
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Commission pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. Southern has received a letter, dated
November 15, 1994, granting early termination of the 30-day
statutory waiting period.
Item 5. Procedure.
Southern requests that the Commission's order be issued as
soon as the rules allow, and that there be no thirty-day waiting
period between the issuance of the Commission's order and the
date on which it is to become effective. Southern hereby waives
a recommended decision by a hearing officer or other responsible
officer of the Commission and hereby consent that the Division of
Investment Management may assist in the preparation of the
Commission's decision and/or order in the matter unless such
Division opposes the matters covered hereby.
Southern requests that the Commission reserve jurisdiction
with respect to the proposals described in Item 1.5(c) pending
completion of the record.
Item 6. Exhibits and Financial Statements.
a. Exhibits.
A-1 - Articles of Incorporation of Mobile
Energy. (Previously filed).
A-2 - Form of share of Common Stock of Mobile
Energy.
A-3 - Bylaws of Mobile Energy.
B-1 - Acquisition Documents
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(a) Asset Purchase Agreement between Mobile
Energy and Scott.
(b) Lease Assignment and Assumption
Agreement (relating to the 1984 Tax
Exempt Bonds) between Mobile Energy and
Scott.
(c)(i) Environmental Indemnity Agreement
between Mobile Energy and Scott, in
its capacity as owner of the Pulp
Mill.
(ii) Environmental Indemnity Agreement
between Mobile Energy and S.D.
Warren Company, in its capacity as
owner of the Paper Mill.
(iii) Environmental Indemnity Agreement
between Mobile Energy and Scott, in
its capacity as owner of the Tissue
Mill.
(d) Environmental Guaranty between Southern
and Scott, in its capacity as owner of
the Pulp Mill and Tissue Mill, and S.D.
Warren Company, in its capacity as owner
of the Paper Mill.
(e) Exhibit A - Definitions (Exhibit A to
various documents).
B-2 - Form of Interim Note evidencing interim
loan by Southern to Mobile Energy.
(Previously filed).
B-3 - Tax Exempt Bond Documents
(a) Lease and Agreement between the
Industrial Development Board of the City
of Mobile, Alabama and Scott,
dated as of December 1, 1984.
(Previously filed). ("P")
(b) Trust Indenture between the Industrial
Development Board and Chemical Bank, as
Trustee, dated as of December 1, 1984,
and First Supplement thereto, dated as
of January 1, 1985. (Previously filed).
("P")
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(c) Letters of Credit issued by Morgan
Guaranty Trust Company of New York and
Swiss Bank Corporation in favor of
Chemical Bank, as Trustee under the
Trust Indenture, including amendments
thereto. (Previously filed). ("P")
(d) Reimbursement Agreements between Scott
Paper Company and each of Morgan
Guaranty Trust Company of New York and
Swiss Bank Corporation, as issuing banks
under the Letters of Credit, including
amendments thereto. (Previously filed).
("P")
(e) Guaranty between Southern and Scott
relating to Mobile Energy's obligations
under Lease Assignment and Assumption
Agreement (relating to the 1984 Tax
Exempt Bonds).
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B-4 - Note Instruments
(a) Note Purchase/Underwriting Agreement.
(To be filed by amendment).
(b) Form of Note. (To be filed by
amendment).
(c) Instruments securing holders of the
Notes. (To be filed by amendment).
(d) Stock Pledge Agreement between The
Southern Company, as pledgor, and
[_____________], as pledgee. (To be
filed by amendment).
B-5 - Intercreditor Agreement. (To be filed
by amendment).
B-6 - Operating Contracts.
(a) Pulp Mill Energy Services Agreement
between Mobile Energy and Scott.
(Revised). (Filed separately pursuant
to Rule 104).
(b) Paper Mill Energy Services Agreement
between Mobile Energy and Scott. (Filed
separately pursuant to Rule 104).
(c) Tissue Mill Energy Services Agreement
between Mobile Energy and Scott. (Filed
separately pursuant to Rule 104).
(d) Master Operating Agreement between
Mobile Energy and Scott in its capacity
as the Pulp Mill owner, the Paper Mill
owner, and the Tissue Mill owner
(Revised), together with Exhibit C
thereto. (Filed separately pursuant to
Rule 104).
(e) Explanation of demand and usage charge
structure under Energy Services
Agreements. (Previously filed
separately pursuant to Rule 104).
B-7 - Interest Rate Swap Documents.
(a) International Swap Dealers Association
("ISDA") Master Agreement.
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(b) Schedule to ISDA Master Agreement.
(c) Guaranty between Southern Company and
[________] Bank.
C - None.
D - None.
E-1 - Map of Mill and Energy Complex. ("P")
E-2 - Schematic diagram depicting bus bar
interconnections between Alabama Power
and Energy Complex and Mill facilities.
(Previously filed). ("P")
F - Opinion of Troutman Sanders.
G - Form of Federal Register Notice.
(Previously filed).
b. Financial Statements. (Previously filed).
(i) Balance sheets of The Southern Company and
subsidiary companies at June 30, 1994.
(Designated in The Southern Company's Form
10-Q for the quarter ended June 30, 1994,
File No. 1-3526).
(ii) Journal entry reflecting pro forma effect of
proposed transactions on The Southern Company
and subsidiaries consolidated at June 30,
1994.
(iii) Statement of initial sources and uses of
funds.
(iv) Mobile Energy Services Company, Inc. -
Financial Projections. (Filed separately
pursuant to Rule 104). ("P")
Item 7. Information as to Environmental Effects.
In view of the nature of the proposed transactions as
described in Item 1 hereof, the Commission's action in this
matter will not constitute any major federal action significantly
affecting the quality of the human environment.
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No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed
transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
Dated: December 9, 1994 THE SOUTHERN COMPANY
By:_______________________________
Tommy Chisholm
Secretary
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Exhibit A-2
Number Shares
1 1,000
Incorporated Under the Laws of the State of Alabama
MOBILE ENERGY
SERVICES COMPANY, INC.
The Corporation is authorized to issue 1,000 Common Shares -- Par
Value $1.00 each
THIS CERTIFIES THAT The Southern Company is the owner of One
thousand (1,000) fully paid and non-assessable Shares of the
above Corporation transferable only on the books of the
Corporation by the holder hereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and to
be sealed with the Seal of the Corporation.
Dated _______________________________
__________________________ _________________________________
Secretary President
<PAGE>
Exhibit A-3
MOBILE ENERGY SERVICES COMPANY, INC.
* * * * *
B Y L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The corporation's principal office shall be in
Atlanta, DeKalb County, Georgia.
Section 2. The corporation may also have offices at such
other places both within and without the State of Alabama as the
board of directors may from time to time determine or the
business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of stockholders for the election of
directors shall be held at such place as may be fixed from time
to time by the board of directors, or at such other place, within
or without the State of Alabama, as shall be designated from time
to time by the board of directors and stated in the notice of the
meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of
Alabama, as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at
such date and time as shall be designated from time to time by
the board of directors and stated in the notice of the meeting,
at which they shall elect by a plurality vote a board of
directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by
the articles of incorporation, may be called by the president or
<PAGE>
by a majority of the board of directors and shall be called by
the president or secretary within 21 days of the receipt of a
written demand of the holders of at least ten percent (10%) of
all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting. Such demand shall be
signed by the stockholders demanding the meeting and shall state
the purpose or purposes of the proposed meeting.
Section 4. Written notice stating the place, date and hour
of all meetings shall, unless waived, be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting, and in the
case of special meetings, the purpose thereof shall be stated.
Section 5. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the
notice.
Section 6. Shares entitled to vote may take action on a
matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the shares entitled to
vote on the matter, represented in person or by proxy, shall
constitute a quorum for action on that matter. Once a share is
represented for any purpose at a meeting, it is, unless
established to the contrary, presumed present for quorum purposes
for the remainder of the meeting. If, however, a quorum shall
not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been
transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 7. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any
question brought before such meeting, unless the question is one
upon which by express provision of the Constitution of Alabama,
the statutes or the articles of incorporation a different vote is
required in which case such express provision shall govern and
control the decision of such question.
Section 8. Unless otherwise provided in the articles of
incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth
<PAGE>
the action so taken, shall be signed by all stockholders entitled
to vote on the action, and such consent shall be delivered to the
corporation for inclusion in the minutes or filing with the
corporate records. The record date for determining the
stockholders entitled to take action without a meeting is the
date the first stockholder signs the consent.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute
the whole board shall be not less than one (1) nor more than
fifteen (15). The initial board shall consist of one (1)
director. Thereafter, the number of directors may be fixed or
changed from time to time by the stockholders, or, if the
articles of incorporation so provide, by the board of directors.
The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until his successor
is elected and qualified. Directors need not be stockholders.
Section 2. If a vacancy occurs on the board of directors,
the stockholders or the board of directors may fill the vacancy,
whether resulting from an increase in the number of directors or
otherwise. A vacancy that will occur at a specific later date
may be filled before the vacancy occurs but the new director may
not take office until the vacancy occurs.
Section 3. The business of the corporation shall be managed
by or under the direction of its board of directors which may
exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the articles
of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
Section 4. The board of directors may elect a chairman and
one or more vice-chairmen. The chairman and vice-chairmen shall
perform such duties and have such powers as the board of
directors may from time to time prescribe.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The board of directors of the corporation may
hold meetings, both regular and special, either within or without
the State of Alabama.
Section 6. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed
by the vote of the stockholders at the annual meeting and no
notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a
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<PAGE>
quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of
the newly elected board of directors, or in the event such
meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 7. Regular meetings of the board of directors may
be held without notice at such time and at such place as shall
from time to time be determined by the board.
Section 8. Special meetings of the board may be called by
the president on two (2) days' notice to each director, either
personally or by mail or by telegram; special meetings shall be
called by the president or secretary in like manner and on like
notice on the written request of two directors unless the board
consists of only one director, in which case special meetings
shall be called by the president or secretary in like manner and
on like notice on the written request of the sole director.
Attendance at or participation by a director at a special meeting
(i) waives objection to lack of any required notice or defective
notice of the meeting, unless the director at the beginning of
the meeting (or promptly upon arrival) objects to holding the
meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting; and
(ii) waives objection to consideration of a particular matter at
the meeting that is not within the purpose described in the
meeting notice, unless the director objects to considering the
matter before action is taken on the matter.
Section 9. At all meetings of the board, a majority of the
directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the
board of directors, except as may be otherwise specifically
provided by statute or by the articles of incorporation. If a
quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. A director is, unless
established to the contrary, presumed present for quorum purposes
for the remainder of the meeting at which he has been present for
any purpose. A director who is present at a meeting of the board
or any committee of the board when corporate action is taken is
deemed to assent to the action taken place unless (i) he objects
at the beginning of the meeting (or promptly upon arrival) to
holding it or transacting business at the meeting or, as to a
matter required under the articles of incorporation or these
bylaws to be included in the notice of the purpose of the
meeting, he objects before action is taken on the matter; (ii)
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<PAGE>
his dissent or abstention from action taken is entered in the
minutes of the meeting; or (iii) he delivers written notice of
his dissent or abstention to the presiding officer of the meeting
before its adjournment or to the corporation immediately after
adjournment of the meeting. The right of dissent or abstention
is not available to a director who votes in favor of the action
taken.
Section 10. Unless otherwise restricted by the articles of
incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the board of directors or of any
committee thereof may be taken without a meeting, if all members
of the board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes
of proceedings of the board or committee. Action taken is
effective when the last director signs the consent, unless the
consent specifies a different effective date. Such consent shall
have the same effect as a unanimous vote.
Section 11. Unless otherwise restricted by the articles of
incorporation or these bylaws, members of the board of directors,
or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any
committee, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at
the meeting.
COMMITTEES OF DIRECTORS
Section 12. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the
directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee.
Any such committee, to the extent provided in the resolution
of the board of directors, shall have and may exercise all the
powers and authority of the board of directors in the management
of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or
authority in reference to (1) authorizing distributions, (2)
approving or proposing to stockholders any action requiring
approval of the stockholders, (3) filling vacancies on the board
of directors or on any of its committees, (4) amending articles
of incorporation, (5) adopting, amending or repealing these
bylaws, (6) approving a plan of merger not requiring stockholder
approval, (7) authorizing or approving reacquisition of shares,
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<PAGE>
except according to a formula or method prescribed by the board
of directors, or (8) authorizing or approving the issuance or
sale or contract for sale of shares, or determining the
designation and relative rights, preferences and limitations of a
class or series of shares, except that the board of directors may
authorize a committee (or a senior executive officer of the
corporation) to do so within limits specifically prescribed by
the board of directors. Such committee or committees shall have
such name or names as may be determined from time to time by
resolution adopted by the board of directors.
Section 13. Each committee shall keep regular minutes of
its meetings and report the same to the board of directors when
required.
COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the articles of
incorporation or these bylaws, the board of directors shall have
the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors and may be paid a fixed
sum for attendance at each meeting of the board of directors or a
stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 15. Unless otherwise restricted by the articles of
incorporation or by law, any director of the entire board of
directors may be removed, with or without cause, by the holders
of a majority of shares entitled to vote at an election of
directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes,
the articles of incorporation or these bylaws, notice is required
to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given
in writing, by mail, telephone, telegraph, teletype, telecopier,
facsimile transmission, or other form of wire or wireless
communication; or by mail or private carrier. Written notice by
the corporation to its stockholders, if in a comprehensible form,
is effective when mailed, if mailed postpaid and correctly
addressed to the stockholder's address shown in the corporation's
current record of stockholders.
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<PAGE>
Section 2. Whenever any notice is required to be given
under the provisions of the statutes, the articles of
incorporation or these bylaws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto and shall be delivered to the corporation for
inclusion in the minutes or filing with the corporate records. A
person's attendance at a meeting: (i) waives objection to lack of
notice or defective notice of the meeting, unless the person at
the beginning of the meeting objects to holding the meeting or
transacting business at the meeting; and (2) waives objection to
consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice,
unless the person objects to considering the matter before action
is taken on the matter.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen
by the board of directors and shall be at a minimum a president,
secretary and controller. The board of directors may also choose
one or more vice-presidents, assistant secretaries and assistant
controllers. Any number of offices may be held by the same
person, unless the articles of incorporation or these bylaws
otherwise provide.
Section 2. The board of directors at its first meeting
after each annual meeting of stockholders shall choose a
president, one or more vice-presidents, a secretary and a
controller.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by
the board.
Section 4. The salary of the president shall be fixed by
the board of directors.
Section 5. The officers of the corporation shall hold
office until their successors are chosen and qualified. Any
officer elected or appointed by the board of directors may be
removed at any time by the affirmative vote of a majority of the
board of directors. An officer may resign at any time by giving
notice to the corporation. A resignation is effective when the
notice is given unless the notice specifies a later effective
date. If a resignation is made effective at a later date and the
corporation accepts the future effective date, the board of
directors may fill the pending vacancy before the effective date
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<PAGE>
if the board of directors provides that the successor does not
take office until the effective date.
THE PRESIDENT
Section 6. The president, subject to the board of
directors, shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders
and the board of directors, shall have general and active
management of the business of the corporation and shall see that
all orders and resolutions of the board of directors are carried
into effect.
Section 7. The president shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event
of his inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents
in the order designated by the directors, or in the absence of
any designation, then in the order of their election) shall
perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions
upon the president. The vice-presidents shall perform such other
duties and have such other powers as the board of directors may
from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and
of the board of directors in a book to be kept for that purpose
and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be
prescribed by the board of directors or president, under whose
supervision he shall be. He shall have custody of the corporate
seal of the corporation and he, or an assistant secretary, shall
have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by
the signature of such assistant secretary. The board of
directors may give general authority to any other officer to
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<PAGE>
affix the seal of the corporation and to attest the affixing by
his signature.
Section 10. In the absence of the secretary or in the event
of his inability or refusal to act, the assistant secretary (or
in the event there be more than one assistant secretary, the
assistant secretaries in the order designated by the board of
directors or in the absence of any designation, then in the order
of their election) shall perform the duties of the secretary, and
when so acting, shall have all the powers of and be subject to
all the restrictions upon the secretary. The assistant secretary
shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
THE CONTROLLER AND ASSISTANT CONTROLLERS
Section 11. The controller shall have the custody of the
corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors.
Section 12. The controller shall disburse the funds of the
corporation as may be ordered by the board of directors, taking
proper vouchers for such disbursements, and shall render to the
president and the board of directors, at its regular meetings, or
when the board of directors so requires, an account of all his
transactions as controller and of the financial condition of the
corporation.
Section 13. In the absence of the controller or in the
event of his inability or refusal to act, the assistant
controller (or in the event there shall be more than one
assistant controller, the assistant controllers in the order
determined by the board of directors or in the absence of any
determination, then in the order of their election) shall perform
the duties of the controller, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the
controller. The assistant controller shall perform such other
duties and have such other powers as the board of directors may
from time to time prescribe.
Section 14. Each officer of the corporation shall have the
authority to execute and deliver any and all applications and
filings as are necessary to be filed with federal, state and
local regulatory agencies on behalf of the corporation.
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<PAGE>
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be
represented by a certificate or shall be uncertificated.
Certificates shall be signed by, or in the name of the
corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president and the
controller or an assistant controller, or the secretary or an
assistant secretary of the corporation.
Section 2. Any of or all the signatures on a certificate
may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new
certificate or certificates or uncertificated shares to be issued
in place of any certificate or certificates theretofore issued by
the corporation alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or
certificates or uncertificated shares, the board of directors
may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall
require and/or to give the corporation a bond in such sum as it
may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books.
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<PAGE>
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express
consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the board of directors may
fix, in advance, a record date, which shall not be more than
sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting unless the board of directors fixes a
new record date for the adjourned meeting, which it must do if
the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the original meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and entitled to vote as
such owner, and entitled to hold liable for calls and assessments
a person registered on its books as the owner of shares, and the
corporation shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Alabama.
ARTICLE VII
INDEMNIFICATION
Section 1. Each person who is or was a director of the
corporation or officer or employee of the corporation holding one
or more positions of management through and inclusive of project
manager (such positions being hereinafter referred to as
"Management Positions") and who was or is a party or was or is
threatened to be made a party to any threatened, pending or
completed claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact
that he is or was a director of the corporation or officer or
employee of the corporation holding one or more Management
Positions, or is or was serving at the request of the corporation
as a director, alternate director, officer, employee, agent or
trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, shall be
indemnified by the corporation as a matter of right against any
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<PAGE>
and all expenses (including attorneys' fees) actually and
reasonably incurred by him and against any and all claims,
judgments, fines, penalties, liabilities and amounts paid in
settlement actually incurred by him in defense of such claim,
action, suit or proceeding, including appeals, to the full extent
permitted by applicable law. The indemnification provided by
this section shall inure to the benefit of the heirs, executors
and administrators of such person.
Section 2. Expenses (including attorneys' fees) incurred by
a director of the corporation or officer or employee of the
corporation holding one or more Management Positions with respect
to the defense of any such claim, action, suit or proceeding may
be advanced by the corporation prior to the final disposition of
such claim, action, suit or proceeding, as authorized by the
board of directors in the specific case upon a determination that
the facts then known would not preclude indemnification under the
applicable law, upon receipt of a written affirmation by such
person that he has met the standard of conduct required by the
applicable law and upon receipt of an undertaking by or on behalf
of such person to repay such amount unless it shall ultimately be
determined that such person is entitled to be indemnified by the
corporation under these bylaws or otherwise; provided, however,
that the advancement of such expenses shall not be deemed to be
indemnification unless and until it shall ultimately be
determined that such person is entitled to be indemnified by the
corporation.
Section 3. The corporation may purchase and maintain
insurance, or furnish similar protection, at the expense of the
corporation on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or any person who
is or was serving at the request of the corporation as a director
(or the equivalent), alternate director, officer, employee, agent
or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any
liability or expense (including attorneys' fees) asserted against
him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the
power to indemnify him against such liability or expense under
these bylaws or otherwise.
Section 4. Without limiting the generality of the foregoing
provisions, no present or future director or officer of the
corporation, or his heirs, executors, or administrators, shall be
liable for any act, omission, step, or conduct taken or had in
good faith and in a manner reasonably believed to be in or, in
the case of a director or officer not acting in his official
capacity, not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such conduct was unlawful, which is
required, authorized, or approved by any order or orders issued
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<PAGE>
pursuant to the Public Utility Holding Company Act of 1935, the
Federal Power Act, or any federal or state statute or municipal
ordinance regulating the corporation or its parent by reason of
their being holding or investment companies, public utility
companies, public utility holding companies, or subsidiaries of
public utility holding companies. In any action, suit, or
proceeding based on any act, omission, step, or conduct, as in
this paragraph described, the provisions hereof shall be brought
to the attention of the court. In the event that the foregoing
provisions of this paragraph are found by the court not to
constitute a valid defense on the grounds of not being applicable
to the particular class of plaintiff, each such director and
officer, and his heirs, executors, and administrators, shall be
reimbursed for, or indemnified against, all expenses and
liabilities incurred by him or imposed on him, in connection
with, or arising out of, any such action, suit, or proceeding
based on any act, omission, step, or conduct taken or had in good
faith as further in this paragraph described. Such expenses and
liabilities shall include, but shall not be limited to,
judgments, court costs, and attorneys' fees.
Section 5. The foregoing rights shall not be exclusive of
any other rights to which any such director or officer or
employee may otherwise be entitled and shall be available whether
or not the director or officer or employee continues to be a
director or officer or employee at the time of incurring any such
expenses and liabilities.
Section 6. If any word, clause or provision of the bylaws
or any indemnification made under Article VII hereof shall for
any reason be determined to be invalid, the provisions of the
bylaws shall not otherwise be affected thereby but shall remain
in full force and effect. The masculine pronoun, as used in the
bylaws, means the masculine and feminine wherever applicable.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the articles of
incorporation, if any, may be declared by the board of directors
at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the articles of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends
such sum or sums as the directors from time to time, in their
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absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each
annual meeting, and at any special meeting of the stockholders
when called for by vote of the stockholders, a full and clear
statement of the business and condition of the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time
to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the
words "Corporate Seal, Alabama." The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed
or new bylaws may be adopted by the stockholders or by the board
of directors, when such power is conferred upon the board of
directors by the articles of incorporation at any regular meeting
of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors
if notice of such alteration, amendment, repeal or adoption of
new bylaws be contained in the notice of such special meeting.
If the power to adopt, amend or repeal bylaws is conferred upon
the board of directors by the articles of incorporation it shall
not divest or limit the power of the stockholders to adopt, amend
or repeal bylaws.
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I hereby certify that the foregoing bylaws were duly adopted
by the directors of the corporation on December [ ], 1994.
[SEAL]
Secretary
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12-09-94 01:33p Directory C:\WP51\WPDOCS\FILING\*.*
Free:154,316,800
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8223XA2 .ASC 46,944 12-06-94 03:10p | 8223XB .ASC 8,600 12-06-94 03:26p
8223XE .ASC 2,515 12-06-94 03:12p | 8223XG .ASC 4,431 12-06-94 03:13p
8505XA2 .ASC 1,394 12-09-94 11:18a | 8505XA3 .ASC 37,937 12-08-94 01:26p
8505XB1A.ASC 136,145 12-09-94 11:51a | 8505XB1B.ASC 29,172 12-08-94 01:29p
8505XB1D.ASC 25,465 12-08-94 01:34p | 8505XB3E.ASC 19,841 12-08-94 01:40p
8505XB7A.ASC 90,394 12-08-94 03:12p | 8505XB7B.ASC 38,195 12-08-94 03:47p
8505XB7C.ASC 17,555 12-08-94 04:01p | 8505XF .ASC 5,303 12-08-94 04:07p
<PAGE>
Exhibit B-1(b)
LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT
(relating to 1984 tax-exempt bonds)
This Lease Assignment and Assumption Agreement (the
"Agreement") dated as of December _____, 1994 is by and between
Scott Paper Company, a Pennsylvania corporation ("Seller"), and
Mobile Energy Services Company, Inc., an Alabama corporation
("Buyer").
RECITALS
A. Seller and Buyer are parties to an Asset Purchase
Agreement dated the date of this Agreement ("Asset Purchase
Agreement") providing for the sale by Seller and the purchase by
Buyer of certain assets located in the City of Mobile, Alabama
defined therein as the "Energy Complex."
B. Except as expressly provide herein, terms used in
this Agreement shall have the meanings in Exhibit A to the Asset
Purchase Agreement.
C. Certain assets included in the Energy Complex are
owned by The Industrial Development Board of the City of Mobile,
Alabama (the "Board") and leased by the Board to Seller pursuant
to the terms of a Lease and Agreement dated as of December 1,
1984 between the Board and Seller recorded in the office of the
Judge of Probate, Mobile County, Alabama, in Real Property Book
2702, Page 434, as amended by Amendment No. 1 to Lease and
Agreement dated as of November 8, 1994 (collectively, the "Lease
and Agreement").
D. The structures and equipment leased by the Board
to Seller pursuant to the Lease and Agreement are located on a
portion of the premises constituting the Energy Complex that is
(i) leased by Seller to the Board pursuant to the Utilities Land
Sublease dated as of December 1, 1983 recorded in the office of
the Judge of the Probate, Mobile County, Alabama, in Real
Property Book 2557, page 176, as amended by Amendment No. 1 to
Utilities Land Sublease dated as of December 1, 1984 and
Amendment No. 2 to Utilities Land Sublease dated as of November
8, 1994 (the foregoing documents being collectively referred to
herein as the "Land Lease") and (ii) leased back to Seller
pursuant to the Lease and Agreement.
E. The Land Lease and the Lease and Agreement were
entered into in connection with and relate to the Variable Rate
Demand Solid Waste Revenue Refunding Bonds (Scott Paper Company
Project) Series 1984 A, B, C, D and E of the Board presently
outstanding in an aggregate principal amount of $85,000,000 (the
"Bonds") issued under and secured by a Trust Indenture dated as
of December 1, 1984 between the Board and Chemical Bank, as
<PAGE>
Trustee (the "Trustee"), as supplemented by a First Supplemental
Trust Indenture dated as of January 1, 1985 between the Board and
the Trustee (collectively, the "Indenture").
F. The Bonds are secured by irrevocable letters of
credit issued by Morgan Guaranty Trust Company of New York
("Morgan"), as to Series 1984 A, B and C, and Swiss Bank
Corporation, New York Branch ("Swiss"), as to Series 1984 D and E
(collectively, the "Letters of Credit").
G. In connection with the issuance of the Letters of
Credit, Seller entered into separate Reimbursement Agreements
dated as of December 1, 1984 with Morgan and Swiss, respectively,
which have been amended by six subsequent amendments, in the case
of the Reimbursement Agreement with Morgan, and seven subsequent
amendments, in the case of the Reimbursement Agreement with Swiss
(collectively, the "Reimbursement Agreements").
H. Pursuant to a Remarketing Agreement dated as of
October 30, 1987 (the "Remarketing Agreement") among the Board,
Seller and Goldman, Sachs & Co. (the "Remarketing Agent"), the
Remarketing Agent remarkets the Bonds tendered for purchase by
the holders thereof and is entitled to receive a fee from Seller.
I. As permitted by Section 4.13 of the Lease and
Agreement, Seller proposes to assign to Buyer all of Seller's
right, title and interest in and to the Lease and Agreement and
the Project (as defined therein), and Buyer wishes to assume all
of Seller's liabilities and obligations under the Lease and
Agreement arising after the Closing Date (including, without
limitation, its obligation to pay rent under Section 3.5 of the
Lease and Agreement); Seller also wishes to assign to Buyer
Seller's rights under the Remarketing Agreement, and Buyer wishes
to assume Seller's obligations under the Remarketing Agreement;
and Buyer wishes to assume certain payment and other obligations
of Seller under the Reimbursement Agreements.
NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Lease and Agreement. (a) Seller does hereby
grant, bargain, transfer, sell, assign, convey and deliver to
Buyer all right, title and interest of Seller in, to and under
the Lease and Agreement and the Project.
(b) Buyer does hereby accept all the right, title
and interest of Seller in, to and under the Lease and Agreement
and the Project and assumes and agrees to pay, perform and
discharge promptly and fully when due all of the liabilities and
obligations of Seller thereunder arising after the Closing Date,
including, without limitation, the obligation to pay rent under
Section 3.5 thereof and the obligation to pay the Tender Agent
under Section 3.6 thereof.
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<PAGE>
(c) Buyer shall not seek to change the Interest
Rate Mode (as defined in the Indenture) of any of the Bonds
except in or following a remarketing referred to in Section
4(a)(ii) hereof.
2. Reimbursement Agreements. Buyer does hereby
assume and agree to pay and discharge promptly and fully when due
the liabilities and obligations of the Seller under Article II
(Reimbursement Obligations; Other Payments; Letters of Credit
Commission) and Section 6.1 (Indemnification) of each of the
Reimbursement Agreements arising after the Closing Date.
3. Remarketing Agreement. (a) Seller does hereby
grant, bargain, transfer, sell, assign, convey and deliver to
Buyer all right, title and interest of Seller in, to and under
the Remarketing Agreement.
(b) Buyer does hereby accept all the right, title
and interest of Seller in, to and under the Remarketing Agreement
and assumes and agrees to pay, perform and discharge promptly and
fully when due all of the liabilities and obligations of the
Seller thereunder arising after the Closing Date, including,
without limitation, the obligation to pay the fees and expenses
of the Remarketing Agent under Section 2 of the Remarketing
Agreement and the obligation to amend and furnish a disclosure
document (which, until completion of a remarketing referred to in
Section 4(a)(ii) hereof, shall describe Buyer's assumption of the
Lease and Agreement in a manner satisfactory to Seller) and the
obligation to indemnify the Remarketing Agent from any
liabilities arising after the Closing Date.
4. Refunding or Remarketing of Bonds. Not later than
September 15, 1995 (time being of the essence for purposes of
this Section), Buyer shall (a) (i) cause the Board to refund and
redeem the Bonds or otherwise cause the Bonds to be fully paid
and discharged or (ii) cause the Bonds to be remarketed in a
manner whereby Seller is fully released and discharged from all
liability in relation to the Bonds or the Lease and Agreement and
(b) in connection with such discharge or remarketing pay all
amounts payable under Article II of the Reimbursement Agreements
to Morgan and Swiss, respectively. In the event that for any
reason Buyer fails to accomplish the matters specified in the
preceding sentence by September 15, 1995, Buyer shall immediately
pay to Seller an amount equal to the principal amount of the
outstanding Bonds, plus an amount equal to unpaid interest that
will accrue to the earliest practicable redemption date, and
Seller shall cause the Bonds to be redeemed in accordance with
the provisions of the Indenture. In the event that Buyer fails
to pay the amount due to Seller as provided in the preceding
sentence, Seller shall nevertheless have the absolute right to
cause the Bonds to be redeemed and to reimburse Morgan and Swiss
using Seller's own funds, and Buyer shall pay to Seller on demand
an amount equal to the sum advanced by Seller for the foregoing
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<PAGE>
purposes, together with interest thereon from the date of the
advance until the date of payment by Buyer at a rate of interest
per annum equal to the lesser of (y) a variable rate per annum
equal to the prime rate as announced from time to time by The
Chase Manhattan Bank (National Association) at its principal
office in The City of New York plus three percent (3%) or (z) the
highest rate permitted by law. The earlier of September 15, 1995
or the date on which the Bonds are remarketed or redeemed as
provided in this Section is herein called the "Release Date."
5. Security. As security for its obligations to pay
all amounts due under this Agreement, Buyer has furnished to
Seller the unconditional guaranty of its parent, The Southern
Company.
6. Seller Indemnification. Seller hereby agrees to
indemnify, defend and hold harmless the MESC Indemnified Parties
from and against any and all Losses arising directly or
indirectly, in whole or in part, out of (i) any breach by Seller
of any covenant or agreement made by Seller in or pursuant to
this Agreement, (ii) any claim by the Board, the Trustee, any
Person who was a holder of the Bonds prior to the Release Date
(including any claim by any taxing authority against Buyer
seeking collection from Buyer in respect of interest paid to
holders of the Bonds during the period prior to the Release Date
as a result of a claim that such interest was not excludable from
gross income), the Remarketing Agent, Morgan or Swiss arising
under the Lease and Agreement, the Indenture, the Bonds, the
Remarketing Agreement or the Reimbursement Agreement as a result
of any acts or omissions of Seller occurring (A) on or before the
Closing Date or (B) between the Closing Date and the Release Date
(excluding failure to perform obligations assumed by Buyer
hereunder and excluding the obligation of Seller to deliver
Biomass to Buyer pursuant to any of the Operative Documents)
provided that in the case of omissions Seller shall have received
notice that any action was required, such action cannot be
performed by Buyer and Seller shall have the ability to take such
action, or (iii) any claim by any taxing authority for taxes
imposed on the Project, or on Seller with reference to the
Project, for any period on or before the Closing Date. The
foregoing indemnification shall be in addition to and shall not
limit in any way the indemnification obligations of Seller under
any of the Operative Documents.
7. Buyer Indemnification. Buyer hereby agrees to
indemnify, defend and hold harmless the Scott Indemnified Parties
from and against any and all Losses arising directly or
indirectly, in whole or in part, out of (i) any breach by Buyer
of any covenant or agreement made by Buyer in or pursuant to this
Agreement or (ii) any claim by the Board, the Trustee, any holder
of the Bonds, the Remarketing Agent, Morgan or Swiss as a result
of any acts or omissions of Buyer occurring after the Closing
Date. The foregoing indemnification shall be in addition to and
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<PAGE>
shall not limit in any way the indemnification obligations of
Buyer under any of the Operative Documents.
8. Cooperation. If either Seller or Buyer shall
receive notice or have any knowledge of any claim, demand,
action, suit or proceeding that may result in a claim for
indemnification by such party against the other party pursuant to
this Agreement (collectively, "Claim"), such party shall, as
promptly as is reasonably possible, give the other party notice
of such Claim, including (i) a reasonably detailed description of
the facts and circumstances relating to such Claim, (ii) a
reasonably detailed description of the basis for such potential
Claim for indemnification with respect thereto, and (iii) a
complete copy of all notices, pleadings and other papers related
thereto; provided that the failure to give promptly such notice
or to provide such information or documents shall not relieve the
other party of any indemnification obligation it may have under
this Agreement unless such failure shall materially diminish the
ability of such other party to respond to or to defend the party
failing to give such notice against such Claim. Seller and Buyer
shall consult and cooperate with each other regarding response to
and defense of any such Claim, demand, action, suit or proceeding
and the party against whom indemnification is claimed shall, upon
its acknowledgment in writing of its obligation to indemnify the
party seeking the indemnification, be entitled to and shall
assume the defense or to represent the interest of the party
seeking indemnification in respect of such Claim, demand, action,
suit or proceeding, which shall include the right to select and
direct legal counsel and other consultants to appear in
proceedings on behalf of such party and to propose, accept and
reject offers of settlement, all at its sole cost and expense;
provided that no such settlement shall be made without the
express consent of the relevant Indemnified Party, such consent
not to be unreasonably withheld; provided, further, that if any
such settlement is reasonably likely to adversely affect such
Indemnified Party's business operations, then, notwithstanding
the foregoing, such Indemnified Party shall be entitled to
withhold its consent to such settlement and take control of the
defense and investigation of such Claim, to employ and engage
attorneys of its own choice to handle and defend the same and to
compromise or settle such Claim, all at the indemnifying party's
cost, risk and expense up to the amount of the proposed
settlement rejected by the Indemnified Party with any additional
cost, risk or expense for the account of such Indemnified Party.
Nothing herein shall prevent an Indemnified Party from retaining
its own counsel or participating in its own defense at its own
cost and expense. The parties shall cooperate with each other in
any notification to insurers.
9. Notices. All notices, requests, demands and other
communications which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when
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<PAGE>
transmitted if transmitted by telecopy, electronic or digital
transmission method, subject to the sender's facsimile machine
receiving the correct answerback of the addressee and
confirmation of uninterrupted transmission by a transmission
report or the recipient confirming by telephone to Sender that he
has received the facsimile; the day after it is sent, if sent for
next day delivery to a domestic address by recognized overnight
delivery service (e.g., Federal Express); and upon receipt, if
sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If Seller, addressed to:
Scott Paper Company
Scott Plaza
Philadelphia, PA 19113-1586
Attention: Treasurer
Telecopy: (610) 522-5665
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, DC 20005
Attention: Martin Klepper, Esq.
Telecopy: (202) 393-5760
If to Buyer, addressed to:
Mobile Energy Services Company, Inc.
900 Ashwood Parkway
Atlanta, GA 30338-4780
Attention: President
Telecopy: (404) 393-9871
With a copy to:
Troutman Sanders
600 Peachtree Street. N.E.
Suite 200
Atlanta, Georgia 30308-2216
Attention: Hugh M. Davenport, Esquire
Telecopy: (404) 885-3525
and
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, CA 94111
Attention: Tim Flato, Esquire
Telecopy: (415) 395-8095
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<PAGE>
or to such other place and with such other copies as either party
may designate as to itself by written notice to the others
pursuant to this Section 9.
10. Governing Law. This Agreement shall be governed
by, construed, interpreted and the rights of the parties shall be
determined in accordance with the laws of the State of New York
(without reference to the choice of law provisions of New York
law, except Section 5-1401 of the New York General Obligation
Law).
11. Entire Agreement; Amendments. This Agreement and
any agreement, document or instrument attached hereto or referred
to herein integrate all the terms and conditions mentioned herein
or incidental hereto and supersede all oral negotiations and
prior writings in respect to the subject matter hereof. In the
event of any conflict between the terms, conditions and
provisions of this Agreement and any such agreement, document or
instrument, the terms, conditions and provisions of this
Agreement shall prevail as against such other agreement, document
or instrument. This Agreement may only be amended or modified by
an instrument in writing signed by both Seller and Buyer.
12. Counterparts. This Agreement may be signed in
multiple originals
and/or using counterpart signature pages. All such multiple
originals shall constitute but one and the same document.
13. Severability. Any provision of this Agreement
that shall be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. In
the event any such provision of this Agreement is so held
invalid, the parties shall promptly renegotiate in good faith new
provisions to restore this Agreement as near as possible to its
original intent and effect. To the extent permitted by applicable
law, the parties hereto hereby waive any provision of law that
renders any provision hereof prohibited or unenforceable in any
respect.
14. Headings. The headings of the various Sections of
this Agreement are for convenience of reference only and shall
not modify, define or limit any of the terms or provisions
hereof.
15. Service of Process, Consent to Jurisdiction.
(a) Service of Process. Each party hereto
irrevocably consents to the service of any process, pleading,
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<PAGE>
notice or other papers in the manner set forth in the Asset
Purchase Agreement.
(b) Consent to Jurisdiction. Each party hereto
irrevocably and unconditionally (i) agrees that any suit, action
or other legal proceeding arising out of this Agreement may be
brought in the forum specified in the Asset Purchase Agreement;
(ii) consents to the jurisdiction of any such court in any such
suit, action or proceeding; and (iii) waives any objection which
such party may have to the laying of venue of any such suit,
action or proceeding in any such forum.
16. Dispute Resolution. The provisions of Article 16
of the Master Operating Agreement shall govern the resolution of
any disputes which may arise under this Agreement.
17. Attorneys' Fees. Subject to the provisions of
Article 16 of the Master Operating Agreement, if either party to
this Agreement brings a court action to enforce its rights under
this Agreement, the prevailing party shall be entitled to recover
its costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred in connection with such action,
including any appeal of such action.
18. Delay and Waiver. No delay or omission to
exercise any right, power or remedy accruing upon the occurrence
of any breach or default of either Seller or Buyer under this
Agreement shall impair any such right, power or remedy of the
other party, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring, nor shall any
waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on
the part of either Seller or Buyer of any breach or default under
this Agreement, or any waiver on the part of Seller or Buyer of
any provision or condition of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth
in such writing.
19. Third-Party Beneficiaries. This Agreement is
intended to be solely for the benefit of Seller and Buyer and
their successors and permitted assigns and is not intended to and
shall not confer any rights or benefits on any third party not a
signatory hereto.
20. WAIVER OF JURY TRIAL. THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN), OR ACTIONS OF THE PARTIES HERETO. THIS
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<PAGE>
PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO
ENTER INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this
instrument as of the day and year first above written.
SCOTT PAPER COMPANY
By:_________________________
Title:
MOBILE ENERGY SERVICES
COMPANY, INC.
By:_________________________
Title:
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<PAGE>
STATE OF NEW YORK :
: ss
COUNTY OF NEW YORK :
I, the undersigned Notary Public in and for said State and
County, hereby certify that ____________________________, whose
name as __________________, of Scott Paper Company is signed to
the foregoing instrument and who is known to me, acknowledged
before me on this day that, being informed of the contents of the
instrument, he, as such officer and with full authority, executed
the same voluntarily for and as the act of said corporation.
Given under my hand this _______ day of December, 1994.
[SEAL]
_________________________________
Notary Public
My commission expires:
STATE OF NEW YORK :
: ss
COUNTY OF NEW YORK :
I, the undersigned Notary Public in and for said State and
County, hereby certify that ______________________________, whose
name as __________________________, of Mobil Energy Services
Company, Inc. is signed to the foregoing instrument and who is
known to me, acknowledged before me on this day that, being
informed of the contents of the instrument, he, as such officer
and with full authority, executed the same voluntarily for and as
the act of said corporation.
Given under my hand this _____ day of December, 1994.
[SEAL]
__________________________________
Notary Public
My commission expires:
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<PAGE>
Exhibit B-1(c)(i)
L&W Draft No. 6
December 8, 1994
PULP MILL ENVIRONMENTAL INDEMNITY AGREEMENT
between
SCOTT PAPER COMPANY,
a Pennsylvania corporation,
in its capacity as Pulp Mill Owner
and
MOBILE ENERGY SERVICES COMPANY, INC.,
an Alabama corporation
Dated as of , 1994
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS; INTERPRETATION . . . . . . . . . . . 3
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 3
1.2 Rules of Interpretation . . . . . . . . . . . . . . 3
ARTICLE 2 - ENVIRONMENTAL COVENANTS . . . . . . . . . . . . . 3
2.1 Energy Complex . . . . . . . . . . . . . . . . . . 3
2.2 Pulp Mill . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 - ENVIRONMENTAL INDEMNIFICATION
BY PULP MILL OWNER AND MESC . . . . . . . 3
3.1 Pulp Mill Owner Indemnity . . . . . . . . . . . . . 3
3.2 MESC Indemnity . . . . . . . . . . . . . . . . . . 4
3.3 Joint Liability . . . . . . . . . . . . . . . . . . 4
3.4 Cooperation Regarding Claims . . . . . . . . . . . 4
3.5 Limitation of Liability . . . . . . . . . . . . . . 5
3.6 No Release of Insurers . . . . . . . . . . . . . . 6
3.7 Representatives . . . . . . . . . . . . . . . . . . 6
3.8 Survival of Indemnities . . . . . . . . . . . . . . 6
3.9 Water Agreement and Boiler Ash Disposal Agreement . 6
ARTICLE 4 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . 6
4.1 No Third Party Beneficiary; No Dedication . . . . . 6
4.2 Confidential Information . . . . . . . . . . . . . 6
4.3 Notices; Transfer of Funds . . . . . . . . . . . . 7
4.4 Assignment of Agreement . . . . . . . . . . . . . . 7
4.5 Delay and Waiver . . . . . . . . . . . . . . . . . 7
4.6 Cumulative Remedies. . . . . . . . . . . . . . . . 7
4.7 Dispute Resolution. . . . . . . . . . . . . . . . . 8
4.8 Service of Process, Consent to Jurisdiction. . . . 8
4.9 Entire Agreement; Amendments . . . . . . . . . . . 8
4.10 Headings . . . . . . . . . . . . . . . . . . . . . 8
4.11 Governing Law . . . . . . . . . . . . . . . . . . . 8
4.12 Attorneys' Fees. . . . . . . . . . . . . . . . . . 8
4.13 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 8
4.14 Severability . . . . . . . . . . . . . . . . . . . 9
4.15 Counterparts . . . . . . . . . . . . . . . . . . . 9
4.16 Non-Interference; Access . . . . . . . . . . . . . 9
4.17 Decision-Making by Parties. . . . . . . . . . . . . 9
4.18 No Recourse to Affiliates . . . . . . . . . . . . . 9
4.19 Cooperation with Lenders . . . . . . . . . . . . . 9
4.20 Further Assurances . . . . . . . . . . . . . . . . 10
<PAGE>
PULP MILL ENVIRONMENTAL INDEMNITY AGREEMENT dated as of
________, 1994 (the "Agreement"), between Scott Paper Company, a
Pennsylvania corporation ("Scott"), in its capacity as the owner
and operator of its Mobile, Alabama pulp mill (as more
particularly defined in Exhibit A, the "Pulp Mill") (in such
capacity, the "Pulp Mill Owner"), and Mobile Energy Services
Company, Inc., an Alabama corporation ("MESC").
RECITALS
A. Concurrently herewith, Scott and MESC will enter
into an Asset Purchase Agreement (as defined in Exhibit A),
pursuant to which, among other things, Scott will sell to MESC
certain assets constituting a part of the Energy Complex (as
defined in Exhibit A).
B. Concurrently herewith, Scott and MESC will enter
into a Lease Assignment and Assumption Agreement relating to the
1984 Tax-Exempt Bonds (as defined in Exhibit A), (the "1984 Tax-
Exempt Lease Agreement"), a Sublease and Assignment Agreement
relating to facilities financed with 1984-1985 taxable bonds,
(the "1984 Taxable Lease Agreement"), a Lease and Assignment
Agreement relating to facilities financed with 1973-1980 tax-
exempt bonds (the "1973 Tax-Exempt Lease Agreement"), a Lease and
Assignment Agreement relating to facilities financed with 1976
tax-exempt bonds (the "1976 Tax-Exempt Lease Agreement") and a
Lease Assignment Agreement relating to facilities financed with
1994 taxable bonds (the "Lease Assignment Agreement").
C. Concurrently herewith, The Southern Company will
execute a Southern Company Guaranty (as defined in Exhibit A)
pursuant to which The Southern Company will guarantee the payment
and performance of certain obligations of MESC under the 1984
Tax-Exempt Lease Agreement.
D. Concurrently herewith, MESC will enter into an
Energy Services Agreement (as defined in Exhibit A) with each of
the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill
Owner (each as defined in Exhibit A), pursuant to which MESC will
provide Power Processing Services, Steam Processing Services and
Liquor Processing Services (as defined in Exhibit A) to the
Mills (as defined in Exhibit A).
E. Concurrently herewith, MESC, Scott, Paper Mill
Owner, Pulp Mill Owner and Tissue Mill Owner will enter into the
Master Operating Agreement (as defined in Exhibit A), in order
to, among other things, define and allocate certain rights and
obligations among the Energy Complex, the Pulp Mill, the Tissue
Mill, the Paper Mill and Scott.
F. Concurrently herewith, MESC and Scott will enter
into a Lease (as defined in Exhibit A) pursuant to which, among
other things, Scott will lease to MESC the land constituting the
Leased Premises (as defined in Exhibit A).
<PAGE>
G. Concurrently herewith, MESC, Pulp Mill Owner,
Tissue Mill Owner and Paper Mill Owner will enter into the
Easement Deeds (as defined in Exhibit A) pursuant to which the
parties thereto will grant and obtain certain easements in
connection with the operation, maintenance and use of the Energy
Complex and the Mills.
H. Concurrently herewith, Scott, MESC and SEI will
enter into an Employee Transition Agreement (as defined in
Exhibit A), pursuant to which, among other things, such parties
will set forth their respective obligations with respect to the
Energy Complex Employees (as defined in Exhibit A).
I. Concurrently herewith, Scott and MESC will enter
into an Scott Environmental Indemnity Agreement (as defined in
Exhibit A), pursuant to which, among other things, Scott and MESC
will indemnify each other for certain environmental claims
relating to certain environmental conditions, if and when any
such claims arise.
J. Concurrently herewith, (i) MESC and Paper Mill
Owner will enter into a Paper Mill Environmental Indemnity
Agreement (as defined in Exhibit A) and (iii) MESC and Tissue
Mill Owner will enter into a Tissue Mill Environmental Indemnity
Agreement (as defined in Exhibit A), in each case pursuant to
which MESC and the applicable Mill Owner will indemnify each
other for certain specified environmental claims relating to
certain environmental conditions, if and when any such claims
arise.
K. Concurrently herewith, The Southern Company will
execute an Environmental Guaranty (as defined in Exhibit A) in
favor of the Mill Owners, pursuant to which The Southern Company
will guarantee the payment of certain payment obligations of MESC
under the this Agreement, the Paper Mill Environmental Indemnity
Agreement and the Tissue Mill Environmental Indemnity Agreement.
L. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Common
Services Agreement (as defined in Exhibit A), which provides,
among other things, for the sharing of certain services and
facilities described therein among the parties thereto.
M. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Water
Agreement (as defined in Exhibit A), pursuant to which, among
other things, Pulp Mill Owner will provide water and waste
treatment services to the each of the Mills and the Energy
Complex.
N. Concurrently herewith, Pulp Mill Owner and MESC
will enter into a Boiler Ash Disposal Agreement (as defined in
Exhibit A), pursuant to which, among other things, Pulp Mill
Owner will treat and dispose of certain waste products produced
by the Energy Complex.
2
<PAGE>
O. Pulp Mill Owner is entering into this Agreement,
among other reasons, to induce MESC to purchase the Energy
Complex (in order to supply a reliable source of steam processing
services for the Pulp Mill) by providing assurances against
future Environmental Claims and Environmental Expenses (as
defined in Exhibit A) arising from Environmental Claims or
Environmental Noncompliance located at or otherwise relating to
the Pulp Mill or associated facilities occurring after the
Closing Date.
P. MESC is entering into this Agreement, among other
reasons, to induce Pulp Mill Owner to purchase services pursuant
to the Pulp Mill Energy Services Agreement by providing
assurances against future Environmental Claims and Environmental
Expenses arising from Environmental Claims or Environmental
Noncompliance located at or otherwise relating to the Energy
Complex or associated facilities occurring after the Closing
Date.
In consideration of the agreements herein and in the
other Operative Documents (as defined in Exhibit A) and in
reliance upon the representations and warranties herein and
therein, Pulp Mill Owner and MESC agree as follows:
ARTICLE 1 - DEFINITIONS; INTERPRETATION
1.1 Definitions. Except as otherwise expressly
provided herein, capitalized terms used in this Agreement shall
have the meanings given in Exhibit A.
1.2 Rules of Interpretation. Except as otherwise
expressly provided herein, the rules of interpretation set forth
in Exhibit A shall apply to this Agreement.
ARTICLE 2 - ENVIRONMENTAL COVENANTS
2.1 Energy Complex. MESC shall not cause, or suffer
the existence of, any Environmental Conditions or Environmental
Noncompliances at the Energy Complex which could reasonably be
expected to lead to any material Environmental Claim or
Environmental Expense asserted against or incurred by Pulp Mill
Owner or its Affiliates.
2.2 Pulp Mill. Pulp Mill Owner shall not cause, or
suffer the existence of, any Environmental Conditions or
Environmental Noncompliances at the Pulp Mill which could
reasonably be expected to lead to any material Environmental
Claim or Environmental Expense asserted against or incurred by
MESC or its Affiliates.
ARTICLE 3 - ENVIRONMENTAL INDEMNIFICATION
33
<PAGE>
BY PULP MILL OWNER AND MESC
3.1 Pulp Mill Owner Indemnity. Pulp Mill Owner agrees
to indemnify, defend and hold harmless each of the MESC
Indemnified Parties from and against any and all Environmental
Claims brought against such MESC Indemnified Party by any third
party and any and all Environmental Expenses imposed upon or
reasonably incurred by such MESC Indemnified Party, in connection
with (i) breaches of any Pulp Mill Owner representations and
warranties, covenants or other Pulp Mill Owner obligations in the
Pulp Mill Energy Services Agreement or Master Operating
Agreement, or (ii) without limiting the foregoing, any
Environmental Conditions that give rise to, or could give rise
to, Environmental Claims or other liabilities, or Environmental
Noncompliances located at or otherwise relating to the Pulp Mill
or associated facilities, to the extent arising out of facts or
circumstances that occur or come into existence after the date
hereof (including without limitation, any Environmental
Conditions or Environmental Noncompliance associated with the
present or future use of the Underground Storage Tanks). Pulp
Mill Owner's obligations pursuant to this Agreement shall exist
regardless of whether any MESC Indemnified Party is alleged or
held to be strictly or jointly and severally liable under any
action, legal provision, permit, rule, regulation, order or
otherwise. If Pulp Mill Owner sells the Pulp Mill, Pulp Mill
Owner shall retain all obligations and liabilities of Pulp Mill
Owner under this Section 3.1 arising out of any facts or
circumstances existing as of or prior to the date of any such
sale (whether known at the time of any such sale or thereafter
discovered as having existed as of the date thereof), and the
party to whom Pulp Mill Owner sells the Pulp Mill shall assume
all obligations and liabilities of Pulp Mill Owner under this
Section 3.1 arising out of facts or circumstances that occur or
come into existence after the date of any such sale.
3.2 MESC Indemnity. MESC agrees to indemnify, defend
and hold harmless each of the Pulp Mill Owner Indemnified Parties
from and against any and all Environmental Claims brought against
such Indemnified Party by any third party and any and all
Environmental Expenses imposed upon or reasonably incurred by
such Indemnified Party, in connection with (i) breaches of any
MESC representations and warranties, covenants or other MESC
obligations in the Pulp Mill Energy Services Agreement or Master
Operating Agreement, or (ii) without limiting the foregoing, any
Environmental Conditions that give rise to, or could give rise
to, Environmental Claims or other liabilities, or Environmental
Noncompliances located at or otherwise relating to the Energy
Complex, to the extent arising out of facts or circumstances that
occur or come into existence after the date hereof. MESC's
obligations pursuant to this Agreement shall exist regardless of
whether any Pulp Mill Owner Indemnified Party is alleged or held
to be strictly or jointly and severally liable under any action,
legal provision, permit, rule, regulation, order or otherwise.
If Pulp Mill Owner sells the Pulp Mill, Pulp Mill Owner shall
44
<PAGE>
retain all rights of the Pulp Mill Owner Indemnified Parties
under this Section 3.2 arising out of any facts or circumstances
existing as of or prior to the date of any such sale (whether
known at the time of any such sale or thereafter discovered as
having existed as of the date thereof), and the party to whom
Pulp Mill Owner sells the Pulp Mill shall assume all rights of
the Pulp Mill Owner Indemnified Parties under this Section 3.2
arising out of facts or circumstances that occur or come into
existence after the date of any such sale.
3.3 Joint Liability. In the event that any
Environmental Claims or Environmental Expenses arise, directly or
indirectly, in whole or in part, out of the joint or concurrent
negligence of Pulp Mill Owner and MESC, or their respective
Affiliates, officers, directors, agents, attorneys or employees,
each party's liability under this Agreement therefor shall be
limited to such party's proportionate degree of fault.
3.4 Cooperation Regarding Claims. If Pulp Mill Owner
or MESC shall receive notice or have knowledge of any claim,
demand, action, suit or proceeding that may result in a claim for
indemnification by such party against such other party pursuant
to this Section 3.4, such party shall, as promptly as is
reasonably possible, give such other party notice of such claim,
demand, action, suit or proceeding, including (i) a reasonably
detailed description of the facts and circumstances relating to
such claim, demand, action, suit or proceeding, (ii) a reasonably
detailed description of the basis for its potential claim for
indemnification with respect thereto, and (iii) a complete copy
of all notices, pleadings and other papers related thereto;
provided that failure promptly to give such notice or to provide
such information and documents shall not relieve such other party
of any indemnification obligation it may have under this
Section 3.4 unless such failure shall materially diminish the
ability of such other party to respond to or to defend the party
failing to give such notice against such claim, demand, action,
suit or proceeding. Pulp Mill Owner and MESC shall consult and
cooperate with each other regarding the response to and the
defense of any such claim, demand, action, suit or proceeding and
the party against whom indemnification is claimed shall, upon its
acknowledgment in writing of its obligation to indemnify the
party seeking indemnification, be entitled to and shall assume
the defense or represent the interests of the party seeking
indemnification in respect of such claim, demand, action, suit or
proceeding, which shall include the right to select and direct
legal counsel and other consultants to appear in proceedings on
behalf of such party and to propose, accept or reject offers of
settlement, all at its sole cost; provided that no such
settlement shall be made without the written consent of the
relevant Indemnified Party, such consent not to be unreasonably
withheld; provided, further, that if any such settlement is
reasonably likely to have a material adverse effect on the
relevant Indemnified Party's business operations, then,
notwithstanding the foregoing, such Indemnified Party shall be
55
<PAGE>
entitled to withhold its consent to such settlement and take
control of the defense and investigation of such claim, demand,
action, suit or proceeding, to employ and engage attorneys of its
own choice to handle and defend the same and to compromise or
settle such claim, demand, action suit or proceeding, all at the
indemnifying party's cost, risk and expense; and provided further
that if the claim is settled without the indemnifying party's
consent, the Indemnified Party shall be deemed to have waived all
rights hereunder against the indemnifying party for damages
arising out of such claim. Nothing herein shall prevent an
Indemnified Party from retaining its own counsel and
participating in its own defense at its own cost and expense.
The parties shall cooperate with each other in any notifications
to insurers.
3.5 Limitation of Liability.
(a) Limitation of Liability in General.
(i) Notwithstanding any other provision of
this Agreement or any of the other Operative Documents (except
Section 7.3(c) of the Master Operating Agreement) or the failure
of the essential purposes of any remedies set forth in this
Agreement or any of the other Operative Documents, Pulp Mill
Owner and MESC shall only be liable for direct damages as a
result of a breach or default by such party hereunder or
thereunder. In no event shall Pulp Mill Owner or MESC be liable
to the other, whether under contract, tort (including
negligence), strict liability, or any other cause of or form of
action whatsoever, for claims of non-party customers, cost of
money, loss of profits, loss of use of capital or revenue or any
other incidental, special or consequential loss or damage of any
nature arising at any time or from any cause whatsoever, or for
punitive or exemplary damages.
(ii) Neither Pulp Mill Owner nor MESC shall
be liable to the other party under this Section 3.5 for any
Losses until either any individual amount otherwise due the
Indemnified Party exceeds __________ Dollars ($____) or the
aggregate amount otherwise due the Indemnified Party being
indemnified exceeds an accumulated total of __________ Dollars
($____), whereupon, in each such case, the entirety of such
amount shall become due and payable; provided, however, that this
limitation shall not apply with respect to amounts payable
pursuant to Section 7.3(c) of the Master Operating Agreement.
(b) Insurance. In the event any insurer
providing insurance covering any judgment obtained by an
Indemnified Party against an indemnifying party for an
indemnified Loss refuses to pay such judgment, the party against
or through whom the judgment is obtained shall, at the request of
the prevailing party, execute such documents as may be necessary
to effect an assignment of its contractual rights against the
nonpaying insurer and thereby give the prevailing party the
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opportunity to enforce its judgment directly against such
insurer, provided that nothing in this Section 3.5(b) shall
relieve the indemnifying party of its liability hereunder or
under the other Operative Documents.
3.6 No Release of Insurers. The provisions of this
Article 3 shall not be construed so as to relieve any insurer of
its obligation to pay any insurance proceeds in accordance with
the terms and conditions of valid and collectible insurance
policies.
3.7 Representatives. No officer, director, agent,
attorney, employee or other individual representative of either
party shall be personally liable for any Environmental Claim or
Environmental Expense under the provisions contained in this
Article 3. Nothing herein shall relieve either party of any
liability to make any payment expressly required to be made by
such party pursuant to this Agreement, the Pulp Mill Energy
Services Agreement or the Master Operating Agreement.
3.8 Survival of Indemnities. The provisions of this
Article 2 shall survive the expiration of this Agreement, the
Asset Purchase Agreement, the Pulp Mill Energy Services Agreement
and the Master Operating Agreement or any earlier termination
thereof.
3.9 Water Agreement and Boiler Ash Disposal Agreement.
For purposes of this Agreement, the terms "Environmental Claim"
and "Environmental Expense" shall include any Environmental
Claims or Environmental Expenses arising out of the acts or
omissions of either party hereto with respect to their rights or
obligations under (i) the Water Agreement, or (ii) the Boiler Ash
Disposal Agreement.
ARTICLE 4 - MISCELLANEOUS
4.1 No Third Party Beneficiary; No Dedication. This
Agreement is intended to be solely for the benefit of Pulp Mill
Owner and MESC and their respective Indemnified Parties,
successors and permitted assigns and is not intended to and shall
not confer any rights or benefits on any other third party. No
undertaking by any party pursuant hereto shall constitute the
dedication of such party's property or any portion thereof to any
other party or to the public, nor affect the status of such party
as an independent entity.
4.2 Confidential Information. Confidential
communications between MESC and Pulp Mill Owner hereunder shall
be managed in accordance with the provisions of Section 13.9 of
the Pulp Mill Energy Services Agreement.
4.3 Notices; Transfer of Funds. All payments,
notices, requests, demands and other communications which are
required or may be made or given under this Agreement shall be
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managed in accordance with the provisions of Section 13.10 of the
Pulp Mill Energy Services Agreement.
4.4 Assignment of Agreement. Except as otherwise
provided by Article 15 of the Master Operating Agreement, neither
this Agreement nor any of the other Project Documents nor any of
the rights or obligations hereunder or thereunder may be assigned
by any party without the prior written consent of the others,
except that (i) MESC may, without such consent, assign any or all
such rights to any Lender as collateral security and assign all
such rights and obligations to a wholly-owned subsidiary of The
Southern Company (or a partnership controlled by The Southern
Company) or subsidiaries of MESC or to a successor in interest to
MESC which shall assume all obligations and liabilities of MESC
under this Agreement and the other Project Documents, as
applicable and (ii) Pulp Mill Owner may, without such consent,
assign its rights, obligations and liabilities hereunder in
accordance with the last sentence of Sections 3.1 and 3.2 hereof,
respectively. [In connection with any such assignment by MESC,
Scott and the Mill Owners shall execute and deliver such consents
to such assignment as MESC or the applicable assignee shall
reasonably request.] Subject to the foregoing, this Agreement
and the other Project Documents shall be binding upon and inure
to the benefit of the parties hereto and thereto and their
respective successors and permitted assigns, and no other Person
shall have any right, benefit or obligation under this Agreement
or the other Project Documents as a third party beneficiary or
otherwise.
4.5 Delay and Waiver. No delay or omission to
exercise any right, power or remedy accruing upon the occurrence
of any MESC Event of Default or Pulp Mill Owner Event of Default
or any breach or default of Pulp Mill Owner or MESC under this
Agreement or any of the other Project Documents shall impair any
such right, power or remedy of the other party, nor shall it be
construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default
thereafter occurring, nor shall any waiver of any single MESC
Event of Default or Pulp Mill Owner Event of Default or other
breach or default be deemed a waiver of any other MESC Event of
Default or Pulp Mill Owner Event of Default or other breach or
default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of Pulp
Mill Owner or MESC of any MESC Event of Default or Pulp Mill
Owner Event of Default or other breach or default under this
Agreement or any of the other Project Documents, or any waiver on
the part of Pulp Mill Owner or MESC of any provision or condition
of this Agreement or any of the other Project Documents, must be
in writing and shall be effective only to the extent specifically
set forth in such writing.
4.6 Cumulative Remedies. All rights and remedies of
the parties hereto are cumulative of each other and of every
other right or remedy such party may otherwise have at law or in
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equity, and the exercise of one or more rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
4.7 Dispute Resolution. All disputes arising
hereunder shall be resolved in accordance with the provisions set
forth in Article 16 of the Master Operating Agreement.
4.8 Service of Process, Consent to Jurisdiction. The
parties hereby incorporate the provisions of Section 13.15 of the
Pulp Mill Energy Services Agreement herein by this reference with
respect to service of process and consent to jurisdiction.
4.9 Entire Agreement; Amendments. This Agreement and
any agreement, document or instrument attached hereto or referred
to herein integrate all the terms and conditions mentioned herein
or incidental hereto and supersede all oral negotiations and
prior writings in respect to the subject matter hereof. Except
as provided in the immediately following sentence, in the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail as against such other agreement, except that in the event
of any conflict between the terms, conditions, and provisions of
this Agreement and those of the Master Operating Agreement, the
Master Operating Agreement shall prevail. This Agreement may
only be amended or modified by an instrument in writing signed by
Pulp Mill Owner and MESC.
4.10 Headings. The headings of the various Articles
and Sections of this Agreement are for convenience of reference
only and shall not modify, define or limit any of the terms or
provisions hereof.
4.11 Governing Law. This Agreement shall be governed
by, construed, interpreted and the rights of the parties shall be
determined in accordance with the laws of the State of New York
(without reference to the choice of law provisions of New York
law (except Section 5-1401 of the New York General Obligations
Law), except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a
party to or the subject of this Agreement, and as to those
matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
4.12 Attorneys' Fees. Subject to Article 16 of the
Master Operating Agreement, if any party to this Agreement brings
a court action to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and
expenses, including, without limitation, reasonable attorneys'
fees, incurred in connection with such action, including any
appeal of such action.
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4.13 WAIVER OF JURY TRIAL. THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER OPERATIVE DOCUMENTS, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF THE PARTIES HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS
AGREEMENT.
4.14 Severability. Any provision of this Agreement
that shall be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
In the event any such provision of this Agreement is so held
invalid, the parties shall promptly renegotiate in good faith new
provisions to restore this Agreement as near as possible to its
original intent and effect. To the extent permitted by
Applicable Law, the parties hereto hereby waive any provision of
law that renders any provision hereof prohibited or unenforceable
in any respect.
4.15 Counterparts. This Agreement may be signed in
multiple originals and/or using counterpart signature pages. All
such multiple originals shall constitute but one and the same
document.
4.16 Non-Interference; Access. Pulp Mill Owner and
MESC shall not undertake or engage in, or permit any Person under
its control to undertake or engage in, any activities which
unreasonably interfere with the operation of the Energy Complex
or the Pulp Mill. In the event MESC or Pulp Mill Owner is
granted access to the other party's facility, the party granted
access shall, and shall cause its agents, employees, contractors
and subcontractors to, comply with all safety requirements of the
party granting access.
4.17 Decision-Making by Parties. Except where this
Agreement expressly provides for a different standard, whenever
this Agreement provides for a determination, decision,
permission, consent or approval of a party, the party shall
promptly make such determination, decision, grant or withholding
of permission, consent or approval in a commercially reasonable
manner. Any denial of consent required to be made in a
commercially reasonable manner shall include in reasonable detail
the reason for denial or aspect of the request that was not
acceptable.
4.18 No Recourse to Affiliates. This Agreement is
solely and exclusively between MESC and Pulp Mill Owner, and any
obligations created herein shall be the sole obligations of the
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parties hereto. No party shall have recourse to any parent,
subsidiary, partner, joint venturer, affiliate, director or
officer of the other party for performance of said obligations
unless the obligations are assumed in writing by the Person
against whom recourse is sought.
4.19 Cooperation with Lenders. Pulp Mill Owner shall
reasonably cooperate with MESC and its Lenders from time to time
in connection with MESC's financing and/or refinancing of the
Energy Complex, including, without limitation, by furnishing such
non-privileged information, giving such certificates and
furnishing a Consent in the form of Exhibit C to the Pulp Mill
Energy Services Agreement and such opinions of counsel and other
matters as MESC and its Lenders may reasonably request, provided
that the foregoing undertaking shall not obligate Pulp Mill Owner
to materially change any rights or benefits, or materially
increase any burdens, liabilities or obligations of Pulp Mill
Owner under this Agreement or any other Project Document to which
it is a party. MESC shall reasonably cooperate with Pulp Mill
Owner and its lenders from time to time in connection with the
financing and/or refinancing of the Pulp Mill, including, without
limitation, the furnishing of such information, the giving of
such certificates and the furnishing of such reasonable consents
and reasonable opinions of counsel and other matters as Pulp Mill
Owner and its lenders may reasonably request, provided that the
foregoing undertaking shall not obligate MESC to materially
change any rights or benefits, or materially increase any
burdens, liabilities or obligations under this Agreement or any
other Project Document to which it is a party. Any confidential
information provided by either party pursuant to this Section
4.19 shall be governed in accordance with Section 4.2.
4.20 Further Assurances. Pulp Mill Owner and MESC
agree to cooperate in all reasonable respects necessary to
implement the matters contemplated by this Agreement, and each
will take all reasonable actions within its authority to secure
the cooperation of its Affiliates.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
1111
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IN WITNESS WHEREOF, the parties hereto have by their
respective duly authorized officers caused this Pulp Mill
Environmental Indemnity Agreement to be executed as of the day
and year first above written.
PULP MILL OWNER: SCOTT PAPER COMPANY,
a Pennsylvania corporation,
in its capacity as Pulp Mill Owner
By:
Name:
Title:
MESC: MOBILE ENERGY SERVICES COMPANY, INC.,
an Alabama corporation
By:
Name:
Title:
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<PAGE>
EXHIBIT B-1(c)(ii)
L&W Draft No. 1
December 8, 1994
PAPER MILL ENVIRONMENTAL INDEMNITY AGREEMENT
between
S.D. WARREN COMPANY,
a Pennsylvania corporation,
in its capacity as Paper Mill Owner
and
MOBILE ENERGY SERVICES COMPANY, INC.,
an Alabama corporation
Dated as of , 1994
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS; INTERPRETATION . . . . . . . . . . . 3
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 3
1.2 Rules of Interpretation . . . . . . . . . . . . . . 3
ARTICLE 2 - ENVIRONMENTAL COVENANTS . . . . . . . . . . . . . 3
2.1 Energy Complex . . . . . . . . . . . . . . . . . . 3
2.2 Paper Mill . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 - ENVIRONMENTAL INDEMNIFICATION
BY PAPER MILL OWNER AND MESC . . . . . . . 3
3.1 Paper Mill Owner Indemnity . . . . . . . . . . . . 3
3.2 MESC Indemnity . . . . . . . . . . . . . . . . . . 4
3.3 Joint Liability . . . . . . . . . . . . . . . . . . 4
3.4 Cooperation Regarding Claims . . . . . . . . . . . 4
3.5 Limitation of Liability . . . . . . . . . . . . . . 5
3.6 No Release of Insurers . . . . . . . . . . . . . . 6
3.7 Representatives . . . . . . . . . . . . . . . . . . 6
3.8 Survival of Indemnities . . . . . . . . . . . . . . 6
ARTICLE 4 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . 6
4.1 No Third Party Beneficiary; No Dedication . . . . . 6
4.2 Confidential Information . . . . . . . . . . . . . 6
4.3 Notices; Transfer of Funds . . . . . . . . . . . . 6
4.4 Assignment of Agreement . . . . . . . . . . . . . . 6
4.5 Delay and Waiver . . . . . . . . . . . . . . . . . 7
4.6 Cumulative Remedies. . . . . . . . . . . . . . . . 7
4.7 Dispute Resolution. . . . . . . . . . . . . . . . . 7
4.8 Service of Process, Consent to Jurisdiction. . . . 7
4.9 Entire Agreement; Amendments . . . . . . . . . . . 7
4.10 Headings . . . . . . . . . . . . . . . . . . . . . 8
4.11 Governing Law . . . . . . . . . . . . . . . . . . . 8
4.12 Attorneys' Fees. . . . . . . . . . . . . . . . . . 8
4.13 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 8
4.14 Severability . . . . . . . . . . . . . . . . . . . 8
4.15 Counterparts . . . . . . . . . . . . . . . . . . . 9
4.16 Non-Interference; Access . . . . . . . . . . . . . 9
4.17 Decision-Making by Parties. . . . . . . . . . . . . 9
4.18 No Recourse to Affiliates . . . . . . . . . . . . . 9
4.19 Cooperation with Lenders . . . . . . . . . . . . . 9
4.20 Further Assurances . . . . . . . . . . . . . . . . 10
<PAGE>
PAPER MILL ENVIRONMENTAL INDEMNITY AGREEMENT dated as
of ________, 1994 (the "Agreement"), between Scott Paper Company,
a Pennsylvania corporation ("Scott"), in its capacity as the
owner and operator of its Mobile, Alabama paper mill (as more
particularly defined in Exhibit A, the "Paper Mill") (in such
capacity, the "Paper Mill Owner"), and Mobile Energy Services
Company, Inc., an Alabama corporation ("MESC").
RECITALS
A. Concurrently herewith, Scott and MESC will enter
into an Asset Purchase Agreement (as defined in Exhibit A),
pursuant to which, among other things, Scott will sell to MESC
certain assets constituting a part of the Energy Complex (as
defined in Exhibit A).
B. Concurrently herewith, Scott and MESC will enter
into a Lease Assignment and Assumption Agreement relating to the
1984 tax-exempt bonds (as defined in Exhibit A), (the "1984 Tax-
Exempt Lease Agreement"), a Sublease and Assignment Agreement
relating to facilities financed with 1984-1985 taxable bonds (the
"1984 Taxable Lease Agreement"), a Lease and Assignment Agreement
relating to facilities financed with 1973-1980 tax-exempt bonds
(the "1973 Tax-Exempt Lease Agreement"), a Lease and Assignment
Agreement relating to facilities financed with 1976 tax-exempt
bonds (the "1976 Tax-Exempt Lease Agreement") and a Lease
Assignment Agreement relating to facilities financed with 1994
taxable bonds (the "Lease Assignment Agreement").
C. Concurrently herewith, The Southern Company will
execute a Southern Company Guaranty (as defined in Exhibit A)
pursuant to which The Southern Company will guarantee the payment
and performance of certain obligations to MESC under the 1984
Tax-Exempt Lease Agreement.
D. Concurrently herewith MESC will enter into an
Energy Services Agreement (as defined in Exhibit A) with each of
the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill
Owner (each as defined in Exhibit A), pursuant to which, MESC
will provide Power Processing Services, Steam Processing Services
and Liquor Processing Services to the Mills.
E. Concurrently herewith, MESC, Scott, Paper Mill
Owner, Pulp Mill Owner and Tissue Mill Owner will enter into the
Master Operating Agreement (as defined in Exhibit A), in order
to, among other things, define and allocate certain rights and
obligations among the Energy Complex, the Pulp Mill, the Tissue
Mill and the Paper Mill.
F. Concurrently herewith, MESC and Scott will enter
into a Lease (as defined in Exhibit A) pursuant to which, among
other things, Scott will lease to MESC the land constituting the
Leased Premises (as defined in Exhibit A).
G. Concurrently herewith, MESC, the Pulp Mill Owner,
the Tissue Mill Owner and the Paper Mill Owner will enter into
<PAGE>
the Easement Deeds (as defined in Exhibit A) pursuant to which
the parties thereto will grant and obtain certain easements in
connection with the operation, maintenance and use of the Energy
Complex and the Mills.
H. Concurrently herewith, Scott, MESC and SEI will
enter into an Employee Transition Agreement (as defined in
Exhibit A), pursuant to which, among other things, such parties
will set forth their respective obligations with respect to the
Energy Complex Employees (as defined in Exhibit A).
I. Concurrently herewith, Scott and MESC will enter
into a Scott Environmental Indemnity Agreement (as defined in
Exhibit A), pursuant to which, among other things, Scott and MESC
will indemnify each other for certain specified environmental
claims relating to certain environmental conditions, if and when
any such claims arise.
J. Concurrently herewith, (i) MESC and Pulp Mill
Owner will enter into a Pulp Mill Environmental Indemnity
Agreement (as defined in Exhibit A) and (ii) MESC and Tissue Mill
Owner will enter into a Tissue Mill Environmental Indemnity
Agreement (as defined in Exhibit A), in each case pursuant to
which MESC and the applicable Mill Owner will indemnify each
other for certain specified environmental claims relating to
certain environmental conditions, if and when any such claims
arise.
K. Concurrently herewith, The Southern Company will
execute an Environmental Guaranty (as defined in Exhibit A) in
favor of the Mill Owners, pursuant to which The Southern Company
will guarantee the payment of certain payment obligations of MESC
under this Agreement, the Pulp Mill Environmental Indemnity
Agreement and the Tissue Mill Environmental Indemnity Agreement.
L. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Common
Services Agreement (as defined in Exhibit A), which provides,
among other things, for the sharing of certain services and
facilities described therein among the parties thereto.
M. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Water
Agreement (as defined in Exhibit A), pursuant to which, among
other things, Pulp Mill Owner will provide water and waste
treatment services to the each of the Mills and the Energy
Complex.
N. Concurrently herewith, Pulp Mill Owner and MESC
will enter into a Boiler Ash Disposal Agreement (as defined in
Exhibit A), pursuant to which, among other things, Pulp Mill
Owner will treat and dispose of certain waste products produced
by the Energy Complex.
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O. Paper Mill Owner is entering into this Agreement,
among other reasons, to induce MESC to purchase the Energy
Complex (in order to supply a reliable source of steam processing
services for the Paper Mill) by providing assurances against
future Environmental Claims and Environmental Expenses (as
defined in Exhibit A) arising from Environmental Claims or
Environmental Noncompliance located at or otherwise relating to
the Paper Mill or associated facilities occurring after the
Closing Date.
P. MESC is entering into this Agreement, among other
reasons, to induce Paper Mill Owner to purchase services pursuant
to the Paper Mill Energy Services Agreement by providing
assurances against future Environmental Claims and Environmental
Expenses arising from Environmental Claims or Environmental
Noncompliance located at or otherwise relating to the Energy
Complex or associated facilities occurring after the Closing
Date.
In consideration of the agreements herein and in the
other Operative Documents (as defined in Exhibit A) and in
reliance upon the representations and warranties herein and
therein, Paper Mill Owner and MESC agree as follows:
ARTICLE 1 - DEFINITIONS; INTERPRETATION
1.1 Definitions. Except as otherwise expressly
provided herein, capitalized terms used in this Agreement shall
have the meanings given in Exhibit A.
1.2 Rules of Interpretation. Except as otherwise
expressly provided herein, the rules of interpretation set forth
in Exhibit A shall apply to this Agreement.
ARTICLE 2 - ENVIRONMENTAL COVENANTS
2.1 Energy Complex. MESC shall not cause, or suffer
the existence of, any Environmental Conditions or Environmental
Noncompliances at the Energy Complex which could reasonably be
expected to lead to any material Environmental Claim or
Environmental Expense asserted against or incurred by Paper Mill
Owner or its Affiliates.
2.2 Paper Mill. Paper Mill Owner shall not cause, or
suffer the existence of, any Environmental Conditions or
Environmental Noncompliances at the Paper Mill which could
reasonably be expected to lead to any material Environmental
Claim or Environmental Expense asserted against or incurred by
MESC or its Affiliates.
ARTICLE 3 - ENVIRONMENTAL INDEMNIFICATION
3
<PAGE>
BY PAPER MILL OWNER AND MESC
3.1 Paper Mill Owner Indemnity. Paper Mill Owner
agrees to indemnify, defend and hold harmless each of the MESC
Indemnified Parties from and against any and all Environmental
Claims brought against such MESC Indemnified Party by any third
party and any and all Environmental Expenses imposed upon or
reasonably incurred by such MESC Indemnified Party, in connection
with (i) breaches of any Paper Mill Owner representations and
warranties, covenants or other Paper Mill Owner obligations in
the Paper Mill Energy Services Agreement or Master Operating
Agreement, or (ii) without limiting the foregoing, any
Environmental Conditions that give rise to, or could give rise
to, Environmental Claims or other liabilities, or Environmental
Noncompliances located at or otherwise relating to the Paper Mill
or associated facilities, to the extent arising out of facts or
circumstances that occur or come into existence after the date
hereof. Paper Mill Owner's obligations pursuant to this
Agreement shall exist regardless of whether any MESC Indemnified
Party is alleged or held to be strictly or jointly and severally
liable under any action, legal provision, permit, rule,
regulation, order or otherwise. If Paper Mill Owner sells the
Paper Mill, Paper Mill Owner shall retain all obligations and
liabilities of Paper Mill Owner under this Section 3.1 arising
out of any facts or circumstances existing as of or prior to the
date of any such sale (whether known at the time of any such sale
or thereafter discovered as having existed as of the date
thereof), and the party to whom Paper Mill Owner sells the Paper
Mill shall assume all obligations and liabilities of Paper Mill
Owner under this Section 3.1 arising out of facts or
circumstances that occur or come into existence after the date of
any such sale.
3.2 MESC Indemnity. MESC agrees to indemnify, defend
and hold harmless each of the Paper Mill Owner Indemnified
Parties from and against any and all Environmental Claims brought
against such Indemnified Party by any third party and any and all
Environmental Expenses imposed upon or reasonably incurred by
such Indemnified Party, in connection with (i) breaches of any
MESC representations and warranties, covenants or other MESC
obligations in the Paper Mill Energy Services Agreement or Master
Operating Agreement, or (ii) without limiting the foregoing, any
Environmental Conditions that give rise to, or could give rise
to, Environmental Claims or other liabilities, or Environmental
Noncompliances located at or otherwise relating to the Energy
Complex, to the extent arising out of facts or circumstances that
occur or come into existence after the date hereof. MESC's
obligations pursuant to this Agreement shall exist regardless of
whether any Paper Mill Owner Indemnified Party is alleged or held
to be strictly or jointly and severally liable under any action,
legal provision, permit, rule, regulation, order or otherwise.
If Paper Mill Owner sells the Paper Mill, Paper Mill Owner shall
retain all rights of the Paper Mill Owner Indemnified Parties
under this Section 3.2 arising out of any facts or circumstances
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existing as of or prior to the date of any such sale (whether
known at the time of any such sale or thereafter discovered as
having existed as of the date thereof), and the party to whom
Paper Mill Owner sells the Paper Mill shall assume all rights of
the Paper Mill Owner Indemnified Parties under this Section 3.2
arising out of facts or circumstances that occur or come into
existence after the date of any such sale.
3.3 Joint Liability. In the event that any
Environmental Claims or Environmental Expenses arise, directly or
indirectly, in whole or in part, out of the joint or concurrent
negligence of Paper Mill Owner and MESC, or their respective
Affiliates, officers, directors, agents, attorneys or employees,
each party's liability under this Agreement therefor shall be
limited to such party's proportionate degree of fault.
3.4 Cooperation Regarding Claims. If Paper Mill Owner
or MESC shall receive notice or have knowledge of any claim,
demand, action, suit or proceeding that may result in a claim for
indemnification by such party against such other party pursuant
to this Section 3.4, such party shall, as promptly as is
reasonably possible, give such other party notice of such claim,
demand, action, suit or proceeding, including (i) a reasonably
detailed description of the facts and circumstances relating to
such claim, demand, action, suit or proceeding, (ii) a reasonably
detailed description of the basis for its potential claim for
indemnification with respect thereto, and (iii) a complete copy
of all notices, pleadings and other papers related thereto;
provided that failure promptly to give such notice or to provide
such information and documents shall not relieve such other party
of any indemnification obligation it may have under this
Section 3.4 unless such failure shall materially diminish the
ability of such other party to respond to or to defend the party
failing to give such notice against such claim, demand, action,
suit or proceeding. Paper Mill Owner and MESC shall consult and
cooperate with each other regarding the response to and the
defense of any such claim, demand, action, suit or proceeding and
the party against whom indemnification is claimed shall, upon its
acknowledgment in writing of its obligation to indemnify the
party seeking indemnification, be entitled to and shall assume
the defense or represent the interests of the party seeking
indemnification in respect of such claim, demand, action, suit or
proceeding, which shall include the right to select and direct
legal counsel and other consultants to appear in proceedings on
behalf of such party and to propose, accept or reject offers of
settlement, all at its sole cost; provided that no such
settlement shall be made without the written consent of the
relevant Indemnified Party, such consent not to be unreasonably
withheld; provided, further, that if any such settlement is
reasonably likely to have a material adverse effect on the
relevant Indemnified Party's business operations, then,
notwithstanding the foregoing, such Indemnified Party shall be
entitled to withhold its consent to such settlement and take
control of the defense and investigation of such claim, demand,
5
<PAGE>
action, suit or proceeding, to employ and engage attorneys of its
own choice to handle and defend the same and to compromise or
settle such claim, demand, action suit or proceeding, all at the
indemnifying party's cost, risk and expense; and provided further
that if the claim is settled without the indemnifying party's
consent, the Indemnified Party shall be deemed to have waived all
rights hereunder against the indemnifying party for damages
arising out of such claim. Nothing herein shall prevent an
Indemnified Party from retaining its own counsel and
participating in its own defense at its own cost and expense.
The parties shall cooperate with each other in any notifications
to insurers.
3.5 Limitation of Liability.
(a) Limitation of Liability in General.
(i) Notwithstanding any other provision of
this Agreement or any of the other Operative Documents (except
Section 7.3(c) of the Master Operating Agreement) or the failure
of the essential purposes of any remedies set forth in this
Agreement or any of the other Operative Documents, Paper Mill
Owner and MESC shall only be liable for direct damages as a
result of a breach or default by such party hereunder or
thereunder. In no event shall Paper Mill Owner or MESC be liable
to the other, whether under contract, tort (including
negligence), strict liability, or any other cause of or form of
action whatsoever, for claims of non-party customers, cost of
money, loss of profits, loss of use of capital or revenue or any
other incidental, special or consequential loss or damage of any
nature arising at any time or from any cause whatsoever, or for
punitive or exemplary damages.
(ii) Neither Paper Mill Owner nor MESC shall
be liable to the other party under this Section 3.5 for any
Losses until either any individual amount otherwise due the
Indemnified Party exceeds __________ Dollars ($____) or the
aggregate amount otherwise due the Indemnified Party being
indemnified exceeds an accumulated total of __________ Dollars
($____), whereupon, in each case, the entirety of such amount
shall become due and payable; provided, however, that this
limitation shall not apply with respect to amounts payable
pursuant to Section 7.3(c) of the Master Operating Agreement.
(b) Insurance. In the event any insurer
providing insurance covering any judgment obtained by an
Indemnified Party against an indemnifying party for an
indemnified Loss refuses to pay such judgment, the party against
or through whom the judgment is obtained shall, at the request of
the prevailing party, execute such documents as may be necessary
to effect an assignment of its contractual rights against the
nonpaying insurer and thereby give the prevailing party the
opportunity to enforce its judgment directly against such
insurer, provided that nothing in this Section 3.5(b) shall
6
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relieve the indemnifying party of its liability hereunder or
under the other Operative Documents.
3.6 No Release of Insurers. The provisions of this
Article 3 shall not be construed so as to relieve any insurer of
its obligation to pay any insurance proceeds in accordance with
the terms and conditions of valid and collectible insurance
policies.
3.7 Representatives. No officer, director, agent,
attorney, employee or other individual representative of either
party shall be personally liable for any Environmental Claim or
Environmental Expense under the provisions contained in this
Article 3. Nothing herein shall relieve either party of any
liability to make any payment expressly required to be made by
such party pursuant to this Agreement, the Paper Mill Energy
Services Agreement or the Master Operating Agreement.
3.8 Survival of Indemnities. The provisions of this
Article 2 shall survive the expiration of this Agreement, the
Asset Purchase Agreement, the Paper Mill Energy Services
Agreement and the Master Operating Agreement or any earlier
termination thereof.
ARTICLE 4 - MISCELLANEOUS
4.1 No Third Party Beneficiary; No Dedication. This
Agreement is intended to be solely for the benefit of Paper Mill
Owner and MESC and their respective Indemnified Parties,
successors and permitted assigns and is not intended to and shall
not confer any rights or benefits on any other third party. No
undertaking by any party pursuant hereto shall constitute the
dedication of such party's property or any portion thereof to any
other party or to the public, nor affect the status of such party
as an independent entity.
4.2 Confidential Information. Confidential
communications between MESC and Paper Mill Owner hereunder shall
be managed in accordance with the provisions of Section 13.9 of
the Paper Mill Energy Services Agreement.
4.3 Notices; Transfer of Funds. All payments,
notices, requests, demands and other communications which are
required or may be made or given under this Agreement shall be
managed in accordance with the provisions of Section 13.10 of the
Paper Mill Energy Services Agreement.
4.4 Assignment of Agreement. Except as otherwise
provided by Article 15 of the Master Operating Agreement, neither
this Agreement nor any of the other Project Documents nor any of
the rights or obligations hereunder or thereunder may be assigned
by any party without the prior written consent of the others,
except that (i) MESC may, without such consent, assign any or all
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<PAGE>
such rights to any Lender as collateral security and assign all
such rights and obligations to a wholly-owned subsidiary of The
Southern Company (or a partnership controlled by The Southern
Company) or subsidiaries of MESC or to a successor in interest to
MESC which shall assume all obligations and liabilities of MESC
under this Agreement and the other Project Documents, as
applicable and (ii) Paper Mill Owner may, without such consent,
assign its rights, obligations and liabilities hereunder in
accordance with the last sentence of Sections 3.1 and 3.2 hereof,
respectively. [In connection with any such assignment by MESC,
Scott and the Mill Owners shall execute and deliver such consents
to such assignment as MESC or the applicable assignee shall
reasonably request.] Subject to the foregoing, this Agreement
and the other Project Documents shall be binding upon and inure
to the benefit of the parties hereto and thereto and their
respective successors and permitted assigns, and no other Person
shall have any right, benefit or obligation under this Agreement
or the other Project Documents as a third party beneficiary or
otherwise.
4.5 Delay and Waiver. No delay or omission to
exercise any right, power or remedy accruing upon the occurrence
of any MESC Event of Default or Paper Mill Owner Event of Default
or any breach or default of Paper Mill Owner or MESC under this
Agreement or any of the other Project Documents shall impair any
such right, power or remedy of the other party, nor shall it be
construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default
thereafter occurring, nor shall any waiver of any single MESC
Event of Default or Paper Mill Owner Event of Default or other
breach or default be deemed a waiver of any other MESC Event of
Default or Paper Mill Owner Event of Default or other breach or
default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of Paper
Mill Owner or MESC of any MESC Event of Default or Paper Mill
Owner Event of Default or other breach or default under this
Agreement or any of the other Project Documents, or any waiver on
the part of Paper Mill Owner or MESC of any provision or
condition of this Agreement or any of the other Project
Documents, must be in writing and shall be effective only to the
extent specifically set forth in such writing.
4.6 Cumulative Remedies. All rights and remedies of
the parties hereto are cumulative of each other and of every
other right or remedy such party may otherwise have at law or in
equity, and the exercise of one or more rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
4.7 Dispute Resolution. All disputes arising
hereunder shall be resolved in accordance with the provisions set
forth in Article 16 of the Master Operating Agreement.
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<PAGE>
4.8 Service of Process, Consent to Jurisdiction. The
parties hereby incorporate the provisions of Section 13.15 of the
Paper Mill Energy Services Agreement herein by this reference
with respect to service of process and consent to jurisdiction.
4.9 Entire Agreement; Amendments. This Agreement and
any agreement, document or instrument attached hereto or referred
to herein integrate all the terms and conditions mentioned herein
or incidental hereto and supersede all oral negotiations and
prior writings in respect to the subject matter hereof. Except
as provided in the immediately following sentence, in the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail as against such other agreement, except that in the event
of any conflict between the terms, conditions, and provisions of
this Agreement and those of the Master Operating Agreement, the
Master Operating Agreement shall prevail. This Agreement may
only be amended or modified by an instrument in writing signed by
Paper Mill Owner and MESC.
4.10 Headings. The headings of the various Articles
and Sections of this Agreement are for convenience of reference
only and shall not modify, define or limit any of the terms or
provisions hereof.
4.11 Governing Law. This Agreement shall be governed
by, construed, interpreted and the rights of the parties shall be
determined in accordance with the laws of the State of New York
(without reference to the choice of law provisions of New York
law (except Section 5-1401 of the New York General Obligations
Law), except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a
party to or the subject of this Agreement, and as to those
matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
4.12 Attorneys' Fees. Subject to Article 16 of the
Master Operating Agreement, if any party to this Agreement brings
a court action to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and
expenses, including, without limitation, reasonable attorneys'
fees, incurred in connection with such action, including any
appeal of such action.
4.13 WAIVER OF JURY TRIAL. THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER OPERATIVE DOCUMENTS, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF THE PARTIES HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS
AGREEMENT.
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4.14 Severability. Any provision of this Agreement
that shall be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
In the event any such provision of this Agreement is so held
invalid, the parties shall promptly renegotiate in good faith new
provisions to restore this Agreement as near as possible to its
original intent and effect. To the extent permitted by
Applicable Law, the parties hereto hereby waive any provision of
law that renders any provision hereof prohibited or unenforceable
in any respect.
4.15 Counterparts. This Agreement may be signed in
multiple originals and/or using counterpart signature pages. All
such multiple originals shall constitute but one and the same
document.
4.16 Non-Interference; Access. Paper Mill Owner and
MESC shall not undertake or engage in, or permit any Person under
its control to undertake or engage in, any activities which
unreasonably interfere with the operation of the Energy Complex
or the Paper Mill. In the event MESC or Paper Mill Owner is
granted access to the other party's facility, the party granted
access shall, and shall cause its agents, employees, contractors
and subcontractors to, comply with all safety requirements of the
party granting access.
4.17 Decision-Making by Parties. Except where this
Agreement expressly provides for a different standard, whenever
this Agreement provides for a determination, decision,
permission, consent or approval of a party, the party shall
promptly make such determination, decision, grant or withholding
of permission, consent or approval in a commercially reasonable
manner. Any denial of consent required to be made in a
commercially reasonable manner shall include in reasonable detail
the reason for denial or aspect of the request that was not
acceptable.
4.18 No Recourse to Affiliates. This Agreement is
solely and exclusively between MESC and Paper Mill Owner, and any
obligations created herein shall be the sole obligations of the
parties hereto. No party shall have recourse to any parent,
subsidiary, partner, joint venturer, affiliate, director or
officer of the other party for performance of said obligations
unless the obligations are assumed in writing by the Person
against whom recourse is sought.
4.19 Cooperation with Lenders. Paper Mill Owner shall
reasonably cooperate with MESC and its Lenders from time to time
in connection with MESC's financing and/or refinancing of the
Energy Complex, including, without limitation, by furnishing such
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<PAGE>
non-privileged information, giving such certificates and
furnishing a Consent in the form of Exhibit C to the Paper Mill
Energy Services Agreement and such opinions of counsel and other
matters as MESC and its Lenders may reasonably request, provided
that the foregoing undertaking shall not obligate Paper Mill
Owner to materially change any rights or benefits, or materially
increase any burdens, liabilities or obligations of Paper Mill
Owner under this Agreement or any other Project Document to which
it is a party. MESC shall reasonably cooperate with Paper Mill
Owner and its lenders from time to time in connection with the
financing and/or refinancing of the Paper Mill, including,
without limitation, the furnishing of such information, the
giving of such certificates and the furnishing of [a Lender
Consent], such reasonable opinions of counsel and other matters
as Paper Mill Owner and its lenders may reasonably request,
provided that the foregoing undertaking shall not obligate MESC
to materially change any rights or benefits, or materially in-
crease any burdens, liabilities or obligations under this
Agreement or any other Project Document to which it is a party.
Any confidential information provided by either party pursuant to
this Section 4.19 shall be governed in accordance with Section
4.2.
4.20 Further Assurances. Paper Mill Owner and MESC
agree to cooperate in all reasonable respects necessary to
implement the matters contemplated by this Agreement, and each
will take all reasonable actions within its authority to secure
the cooperation of its Affiliates.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have by their
respective duly authorized officers caused this Paper Mill
Environmental Indemnity Agreement to be executed as of the day
and year first above written.
PAPER MILL OWNER: S.D. WARREN COMPANY
a Pennsylvania corporation,
in its capacity as Paper Mill Owner
By:
Name:
Title:
MESC: MOBILE ENERGY SERVICES COMPANY, INC.,
an Alabama corporation
By:
Name:
Title:
12
<PAGE>
Exhibit B-1(c)(iii)
L&W Draft No. 1
December 8, 1994
TISSUE MILL ENVIRONMENTAL INDEMNITY AGREEMENT
between
SCOTT PAPER COMPANY,
a Pennsylvania corporation,
in its capacity as Tissue Mill Owner
and
MOBILE ENERGY SERVICES COMPANY, INC.,
an Alabama corporation
Dated as of , 1994
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS; INTERPRETATION . . . . . . . . . . . 3
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 3
1.2 Rules of Interpretation . . . . . . . . . . . . . . 3
ARTICLE 2 - ENVIRONMENTAL COVENANTS . . . . . . . . . . . . . 3
2.1 Energy Complex . . . . . . . . . . . . . . . . . . 3
2.2 Tissue Mill . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 - ENVIRONMENTAL INDEMNIFICATION
BY TISSUE MILL OWNER AND MESC . . . . . . . 3
3.1 Tissue Mill Owner Indemnity . . . . . . . . . . . . 3
3.2 MESC Indemnity . . . . . . . . . . . . . . . . . . 4
3.3 Joint Liability . . . . . . . . . . . . . . . . . . 4
3.4 Cooperation Regarding Claims . . . . . . . . . . . 4
3.5 Limitation of Liability . . . . . . . . . . . . . . 5
3.6 No Release of Insurers . . . . . . . . . . . . . . 6
3.7 Representatives . . . . . . . . . . . . . . . . . . 6
3.8 Survival of Indemnities . . . . . . . . . . . . . . 6
ARTICLE 4 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . 6
4.1 No Third Party Beneficiary; No Dedication . . . . . 6
4.2 Confidential Information . . . . . . . . . . . . . 6
4.3 Notices; Transfer of Funds . . . . . . . . . . . . 6
4.4 Assignment of Agreement . . . . . . . . . . . . . . 6
4.5 Delay and Waiver . . . . . . . . . . . . . . . . . 7
4.6 Cumulative Remedies. . . . . . . . . . . . . . . . 7
4.7 Dispute Resolution. . . . . . . . . . . . . . . . . 7
4.8 Service of Process, Consent to Jurisdiction. . . . 7
4.9 Entire Agreement; Amendments . . . . . . . . . . . 7
4.10 Headings . . . . . . . . . . . . . . . . . . . . . 8
4.11 Governing Law . . . . . . . . . . . . . . . . . . . 8
4.12 Attorneys' Fees. . . . . . . . . . . . . . . . . . 8
4.13 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 8
4.14 Severability . . . . . . . . . . . . . . . . . . . 8
4.15 Counterparts . . . . . . . . . . . . . . . . . . . 9
4.16 Non-Interference; Access . . . . . . . . . . . . . 9
4.17 Decision-Making by Parties. . . . . . . . . . . . . 9
4.18 No Recourse to Affiliates . . . . . . . . . . . . . 9
4.19 Cooperation with Lenders . . . . . . . . . . . . . 9
4.20 Further Assurances . . . . . . . . . . . . . . . . 10
<PAGE>
TISSUE MILL ENVIRONMENTAL INDEMNITY AGREEMENT dated as
of ________, 1994 (the "Agreement"), between Scott Paper Company,
a Pennsylvania corporation ("Scott"), in its capacity as the
owner and operator of its Mobile, Alabama tissue mill (as more
particularly defined in Exhibit A, the "Tissue Mill") (in such
capacity, the "Tissue Mill Owner"), and Mobile Energy Services
Company, Inc., an Alabama corporation ("MESC").
RECITALS
A. Concurrently herewith, Scott and MESC will enter
into an Asset Purchase Agreement (as defined in Exhibit A),
pursuant to which, among other things, Scott will sell to MESC
certain assets constituting a part of the Energy Complex (as
defined in Exhibit A).
B. Concurrently herewith, Scott and MESC will enter
into an Lease Assignment and Assumption Agreement relating to the
1984 Tax-Exempt Bonds (as defined in Exhibit A), (the "1984 Tax-
Exempt Lease Agreement"), a Sublease and Assignment Agreement
relating to facilities financed with 1984-1985 taxable bonds,
(the "1984 Taxable Lease Agreement"), a Lease and Assignment
Agreement relating to facilities financed with 1973-1980 tax-
exempt bonds (the "1973 Tax-Exempt Lease Agreement"), a Lease and
Assignment Agreement relating to facilities financed with 1976
tax-exempt bonds (the "1976 Tax-Exempt Lease Agreement") and a
Lease Assignment Agreement relating to facilities financed with
1994 taxable bonds (the "Lease Assignment Agreement").
C. Concurrently herewith, The Southern Company will
execute a Southern Company Guaranty (as defined in Exhibit A)
pursuant to which The Southern Company will guarantee the payment
and performance of certain obligations of MESC under the 1984
Tax-Exempt Lease Agreement.
D. Concurrently herewith, MESC will enter an Energy
Services Agreement (as defined in Exhibit A) with each of the
Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner
(each as defined in Exhibit A), pursuant to which MESC will
provide Power Processing Services, Steam Processing Services and
Liquor Processing Services to the Mills.
E. Concurrently herewith, MESC, Scott, Paper Mill
Owner, Pulp Mill Owner and Tissue Mill Owner will enter into the
Master Operating Agreement (as defined in Exhibit A), in order
to, among other things, define and allocate certain rights and
obligations among the Energy Complex, the Pulp Mill, the Tissue
Mill, and the Paper Mill.
F. Concurrently herewith, MESC and Scott will enter
into a Lease (as defined in Exhibit A) pursuant to which, among
other things, Scott will lease to MESC the land constituting the
Leased Premises (as defined in Exhibit A).
G. Concurrently herewith, MESC, the Pulp Mill Owner,
the Tissue Mill Owner and the Paper Mill Owner will enter into
<PAGE>
the Easement Deeds (as defined in Exhibit A) pursuant to which
the parties thereto will grant and obtain certain easements in
connection with the operation, maintenance and use of the Energy
Complex and the Mills.
H. Concurrently herewith, Scott, MESC and SEI will
enter into an Employee Transition Agreement (as defined in
Exhibit A), pursuant to which, among other things, such parties
will set forth their respective obligations with respect to the
Energy Complex Employees (as defined in Exhibit A).
I. Concurrently herewith, Scott and MESC will enter
into an Scott Environmental Indemnity Agreement (as defined in
Exhibit A), pursuant to which, among other things, Scott and MESC
will indemnify each other for certain specified environmental
claims relating to certain environmental conditions, if and when
any such claims arise.
J. Concurrently herewith, (i) MESC and Paper Mill
Owner will enter into a Paper Mill Environmental Indemnity
Agreement (as defined in Exhibit A) and (iii) MESC and Pulp Mill
Owner will enter into a Pulp Mill Environmental Indemnity
Agreement (as defined in Exhibit A), in each case pursuant to
which MESC and the applicable Mill Owner will indemnify each
other for certain specified environmental claims relating to
certain environmental conditions, if and when any such claims
arise.
K. Concurrently herewith, The Southern Company will
execute an Environmental Guaranty (as defined in Exhibit A) in
favor of the Mill Owners, pursuant to which The Southern Company
will guarantee the payment of certain payment obligations of MESC
under this Agreement, the Pulp Mill Environmental Indemnity
Agreement, and the Paper Mill Environmental Indemnity Agreement.
L. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Common
Services Agreement (as defined in Exhibit A), which provides,
among other things, for the sharing of certain services and
facilities described therein among the parties thereto.
M. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Water
Agreement (as defined in Exhibit A), pursuant to which, among
other things, Pulp Mill Owner will provide water and waste
treatment services to the each of the Mills and the Energy
Complex.
N. Concurrently herewith, Pulp Mill Owner and MESC
will enter into a Boiler Ash Disposal Agreement (as defined in
Exhibit A), pursuant to which, among other things, Pulp Mill
Owner will treat and dispose of certain waste products produced
by the Energy Complex.
2
<PAGE>
O. Tissue Mill Owner is entering into this Agreement,
among other reasons, to induce MESC to purchase the Energy
Complex (in order to supply a reliable source of steam processing
services for the Tissue Mill) by providing assurances against
future Environmental Claims and Environmental Expenses (as
defined in Exhibit A) arising from Environmental Claims or
Environmental Noncompliance located at or otherwise relating to
the Tissue Mill or associated facilities occurring after the
Closing Date.
P. MESC is entering into this Agreement, among other
reasons, to induce Tissue Mill Owner to purchase services
pursuant to the Tissue Mill Energy Services Agreement by
providing assurances against future Environmental Claims and
Environmental Expenses arising from Environmental Claims or
Environmental Noncompliance located at or otherwise relating to
the Energy Complex or associated facilities occurring after the
Closing Date.
In consideration of the agreements herein and in the
other Operative Documents (as defined in Exhibit A) and in
reliance upon the representations and warranties herein and
therein, Tissue Mill Owner and MESC agree as follows:
ARTICLE 1 - DEFINITIONS; INTERPRETATION
1.1 Definitions. Except as otherwise expressly
provided herein, capitalized terms used in this Agreement shall
have the meanings given in Exhibit A.
1.2 Rules of Interpretation. Except as otherwise
expressly provided herein, the rules of interpretation set forth
in Exhibit A shall apply to this Agreement.
ARTICLE 2 - ENVIRONMENTAL COVENANTS
2.1 Energy Complex. MESC shall not cause, or suffer
the existence of, any Environmental Conditions or Environmental
Noncompliances at the Energy Complex which could reasonably be
expected to lead to any material Environmental Claim or
Environmental Expense asserted against or incurred by Tissue Mill
Owner or its Affiliates.
2.2 Tissue Mill. Tissue Mill Owner shall not cause,
or suffer the existence of, any Environmental Conditions or
Environmental Noncompliances at the Tissue Mill which could
reasonably be expected to lead to any material Environmental
Claim or Environmental Expense asserted against or incurred by
MESC or its Affiliates.
ARTICLE 3 - ENVIRONMENTAL INDEMNIFICATION
3
<PAGE>
BY TISSUE MILL OWNER AND MESC
3.1 Tissue Mill Owner Indemnity. Tissue Mill Owner
agrees to indemnify, defend and hold harmless each of the MESC
Indemnified Parties from and against any and all Environmental
Claims brought against such MESC Indemnified Party by any third
party and any and all Environmental Expenses imposed upon or
reasonably incurred by such MESC Indemnified Party, in connection
with (i) breaches of any Tissue Mill Owner representations and
warranties, covenants or other Tissue Mill Owner obligations in
the Tissue Mill Energy Services Agreement or Master Operating
Agreement, or (ii) without limiting the foregoing, any
Environmental Conditions that give rise to, or could give rise
to, Environmental Claims or other liabilities, or Environmental
Noncompliances located at or otherwise relating to the Tissue
Mill or associated facilities, to the extent arising out of facts
or circumstances that occur or come into existence after the date
hereof. Tissue Mill Owner's obligations pursuant to this
Agreement shall exist regardless of whether any MESC Indemnified
Party is alleged or held to be strictly or jointly and severally
liable under any action, legal provision, permit, rule,
regulation, order or otherwise. If Tissue Mill Owner sells the
Tissue Mill, Tissue Mill Owner shall retain all obligations and
liabilities of Tissue Mill Owner under this Section 3.1 arising
out of any facts or circumstances existing as of or prior to the
date of any such sale (whether known at the time of any such sale
or thereafter discovered as having existed as of the date
thereof), and the party to whom Tissue Mill Owner sells the
Tissue Mill shall assume all obligations and liabilities of
Tissue Mill Owner under this Section 3.1 arising out of facts or
circumstances that occur or come into existence after the date of
any such sale.
3.2 MESC Indemnity. MESC agrees to indemnify, defend
and hold harmless each of the Tissue Mill Owner Indemnified
Parties from and against any and all Environmental Claims brought
against such Indemnified Party by any third party and any and all
Environmental Expenses imposed upon or reasonably incurred by
such Indemnified Party, in connection with (i) breaches of any
MESC representations and warranties, covenants or other MESC
obligations in the Tissue Mill Energy Services Agreement or
Master Operating Agreement, or (ii) without limiting the
foregoing, any Environmental Conditions that give rise to, or
could give rise to, Environmental Claims or other liabilities, or
Environmental Noncompliances located at or otherwise relating to
the Energy Complex, to the extent arising out of facts or
circumstances that occur or come into existence after the date
hereof. MESC's obligations pursuant to this Agreement shall
exist regardless of whether any Tissue Mill Owner Indemnified
Party is alleged or held to be strictly or jointly and severally
liable under any action, legal provision, permit, rule,
regulation, order or otherwise. If Tissue Mill Owner sells the
Tissue Mill, Tissue Mill Owner shall retain all rights of the
Tissue Mill Owner Indemnified Parties under this Section 3.2
4
<PAGE>
arising out of any facts or circumstances existing as of or prior
to the date of any such sale (whether known at the time of any
such sale or thereafter discovered as having existed as of the
date thereof), and the party to whom Tissue Mill Owner sells the
Tissue Mill shall assume all rights of the Tissue Mill Owner
Indemnified Parties under this Section 3.2 arising out of facts
or circumstances that occur or come into existence after the date
of any such sale.
3.3 Joint Liability. In the event that any
Environmental Claims or Environmental Expenses arise, directly or
indirectly, in whole or in part, out of the joint or concurrent
negligence of Tissue Mill Owner and MESC, or their respective
Affiliates, officers, directors, agents, attorneys or employees,
each party's liability under this Agreement therefor shall be
limited to such party's proportionate degree of fault.
3.4 Cooperation Regarding Claims. If Tissue Mill
Owner or MESC shall receive notice or have knowledge of any
claim, demand, action, suit or proceeding that may result in a
claim for indemnification by such party against such other party
pursuant to this Section 3.4, such party shall, as promptly as is
reasonably possible, give such other party notice of such claim,
demand, action, suit or proceeding, including (i) a reasonably
detailed description of the facts and circumstances relating to
such claim, demand, action, suit or proceeding, (ii) a reasonably
detailed description of the basis for its potential claim for
indemnification with respect thereto, and (iii) a complete copy
of all notices, pleadings and other papers related thereto;
provided that failure promptly to give such notice or to provide
such information and documents shall not relieve such other party
of any indemnification obligation it may have under this
Section 3.4 unless such failure shall materially diminish the
ability of such other party to respond to or to defend the party
failing to give such notice against such claim, demand, action,
suit or proceeding. Tissue Mill Owner and MESC shall consult and
cooperate with each other regarding the response to and the
defense of any such claim, demand, action, suit or proceeding and
the party against whom indemnification is claimed shall, upon its
acknowledgment in writing of its obligation to indemnify the
party seeking indemnification, be entitled to and shall assume
the defense or represent the interests of the party seeking
indemnification in respect of such claim, demand, action, suit or
proceeding, which shall include the right to select and direct
legal counsel and other consultants to appear in proceedings on
behalf of such party and to propose, accept or reject offers of
settlement, all at its sole cost; provided that no such
settlement shall be made without the written consent of the
relevant Indemnified Party, such consent not to be unreasonably
withheld; provided, further, that if any such settlement is
reasonably likely to have a material adverse effect on the
relevant Indemnified Party's business operations, then,
notwithstanding the foregoing, such Indemnified Party shall be
entitled to withhold its consent to such settlement and take
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control of the defense and investigation of such claim, demand,
action, suit or proceeding, to employ and engage attorneys of its
own choice to handle and defend the same and to compromise or
settle such claim, demand, action suit or proceeding, all at the
indemnifying party's cost, risk and expense; and provided further
that if the claim is settled without the indemnifying party's
consent, the Indemnified Party shall be deemed to have waived all
rights hereunder against the indemnifying party for damages
arising out of such claim. Nothing herein shall prevent an
Indemnified Party from retaining its own counsel and
participating in its own defense at its own cost and expense.
The parties shall cooperate with each other in any notifications
to insurers.
3.5 Limitation of Liability.
(a) Limitation of Liability in General.
(i) Notwithstanding any other provision of
this Agreement or any of the other Operative Documents (except
Section 7.3(c) of the Master Operating Agreement) or the failure
of the essential purposes of any remedies set forth in this
Agreement or any of the other Operative Documents, Tissue Mill
Owner and MESC shall only be liable for direct damages as a
result of a breach or default by such party hereunder or
thereunder. In no event shall Tissue Mill Owner or MESC be
liable to the other, whether under contract, tort (including
negligence), strict liability, or any other cause of or form of
action whatsoever, for claims of non-party customers, cost of
money, loss of profits, loss of use of capital or revenue or any
other incidental, special or consequential loss or damage of any
nature arising at any time or from any cause whatsoever, or for
punitive or exemplary damages.
(ii) Neither Tissue Mill Owner nor MESC
shall be liable to the other party under this Section 3.5 for any
Losses until either any individual amount otherwise due the
Indemnified Party exceeds __________ Dollars ($____) or the
aggregate amount otherwise due the Indemnified Party being
indemnified exceeds an accumulated total of __________ Dollars
($____), whereupon, in each such case, the entirety of such
amount shall become due and payable; provided, however, that this
limitation shall not apply with respect to amounts payable
pursuant to Section 7.3(c) of the Master Operating Agreement.
(b) Insurance. In the event any insurer
providing insurance covering any judgment obtained by an
Indemnified Party against an indemnifying party for an
indemnified Loss refuses to pay such judgment, the party against
or through whom the judgment is obtained shall, at the request of
the prevailing party, execute such documents as may be necessary
to effect an assignment of its contractual rights against the
nonpaying insurer and thereby give the prevailing party the
opportunity to enforce its judgment directly against such
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insurer, provided that nothing in this Section 3.5(b) shall
relieve the indemnifying party of its liability hereunder or
under the other Operative Documents.
3.6 No Release of Insurers. The provisions of this
Article 3 shall not be construed so as to relieve any insurer of
its obligation to pay any insurance proceeds in accordance with
the terms and conditions of valid and collectible insurance
policies.
3.7 Representatives. No officer, director, agent,
attorney, employee or other individual representative of either
party shall be personally liable for any Environmental Claim or
Environmental Expense under the provisions contained in this
Article 3. Nothing herein shall relieve either party of any
liability to make any payment expressly required to be made by
such party pursuant to this Agreement, the Tissue Mill Energy
Services Agreement or the Master Operating Agreement.
3.8 Survival of Indemnities. The provisions of this
Article 2 shall survive the expiration of this Agreement, the
Asset Purchase Agreement, the Tissue Mill Energy Services
Agreement and the Master Operating Agreement or any earlier
termination thereof.
ARTICLE 4 - MISCELLANEOUS
4.1 No Third Party Beneficiary; No Dedication. This
Agreement is intended to be solely for the benefit of Tissue Mill
Owner and MESC and their respective Indemnified Parties,
successors and permitted assigns and is not intended to and shall
not confer any rights or benefits on any other third party. No
undertaking by any party pursuant hereto shall constitute the
dedication of such party's property or any portion thereof to any
other party or to the public, nor affect the status of such party
as an independent entity.
4.2 Confidential Information. Confidential
communications between MESC and Tissue Mill Owner hereunder shall
be managed in accordance with the provisions of Section 13.9 of
the Tissue Mill Energy Services Agreement.
4.3 Notices; Transfer of Funds. All payments,
notices, requests, demands and other communications which are
required or may be made or given under this Agreement shall be
managed in accordance with the provisions of Section 13.10 of the
Tissue Mill Energy Services Agreement.
4.4 Assignment of Agreement. Except as otherwise
provided by Article 15 of the Master Operating Agreement, neither
this Agreement nor any of the other Project Documents nor any of
the rights or obligations hereunder or thereunder may be assigned
by any party without the prior written consent of the others,
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except that (i) MESC may, without such consent, assign any or all
such rights to any Lender as collateral security and assign all
such rights and obligations to a wholly-owned subsidiary of The
Southern Company (or a partnership controlled by The Southern
Company) or subsidiaries of MESC or to a successor in interest to
MESC which shall assume all obligations and liabilities of MESC
under this Agreement and the other Project Documents, as
applicable and (ii) Tissue Mill Owner may, without such consent,
assign its rights, obligations and liabilities hereunder in
accordance with the last sentence of Sections 3.1 and 3.2 hereof,
respectively. [In connection with any such assignment by MESC,
Scott and the Mill Owners shall execute and deliver such consents
to such assignment as MESC or the applicable assignee shall
reasonably request.] Subject to the foregoing, this Agreement
and the other Project Documents shall be binding upon and inure
to the benefit of the parties hereto and thereto and their
respective successors and permitted assigns, and no other Person
shall have any right, benefit or obligation under this Agreement
or the other Project Documents as a third party beneficiary or
otherwise.
4.5 Delay and Waiver. No delay or omission to
exercise any right, power or remedy accruing upon the occurrence
of any MESC Event of Default or Tissue Mill Owner Event of
Default or any breach or default of Tissue Mill Owner or MESC
under this Agreement or any of the other Project Documents shall
impair any such right, power or remedy of the other party, nor
shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring, nor shall any waiver of
any single MESC Event of Default or Tissue Mill Owner Event of
Default or other breach or default be deemed a waiver of any
other MESC Event of Default or Tissue Mill Owner Event of Default
or other breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character
on the part of Tissue Mill Owner or MESC of any MESC Event of
Default or Tissue Mill Owner Event of Default or other breach or
default under this Agreement or any of the other Project
Documents, or any waiver on the part of Tissue Mill Owner or MESC
of any provision or condition of this Agreement or any of the
other Project Documents, must be in writing and shall be
effective only to the extent specifically set forth in such
writing.
4.6 Cumulative Remedies. All rights and remedies of
the parties hereto are cumulative of each other and of every
other right or remedy such party may otherwise have at law or in
equity, and the exercise of one or more rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
4.7 Dispute Resolution. All disputes arising
hereunder shall be resolved in accordance with the provisions set
forth in Article 16 of the Master Operating Agreement.
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4.8 Service of Process, Consent to Jurisdiction. The
parties hereby incorporate the provisions of Section 13.15 of the
Tissue Mill Energy Services Agreement herein by this reference
with respect to service of process and consent to jurisdiction.
4.9 Entire Agreement; Amendments. This Agreement and
any agreement, document or instrument attached hereto or referred
to herein integrate all the terms and conditions mentioned herein
or incidental hereto and supersede all oral negotiations and
prior writings in respect to the subject matter hereof. Except
as provided in the immediately following sentence, in the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail as against such other agreement, except that in the event
of any conflict between the terms, conditions, and provisions of
this Agreement and those of the Master Operating Agreement, the
Master Operating Agreement shall prevail. This Agreement may
only be amended or modified by an instrument in writing signed by
Tissue Mill Owner and MESC.
4.10 Headings. The headings of the various Articles
and Sections of this Agreement are for convenience of reference
only and shall not modify, define or limit any of the terms or
provisions hereof.
4.11 Governing Law. This Agreement shall be governed
by, construed, interpreted and the rights of the parties shall be
determined in accordance with the laws of the State of New York
(without reference to the choice of law provisions of New York
law (except Section 5-1401 of the New York General Obligations
Law), except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a
party to or the subject of this Agreement, and as to those
matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
4.12 Attorneys' Fees. Subject to Article 16 of the
Master Operating Agreement, if any party to this Agreement brings
a court action to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and
expenses, including, without limitation, reasonable attorneys'
fees, incurred in connection with such action, including any
appeal of such action.
4.13 WAIVER OF JURY TRIAL. THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER OPERATIVE DOCUMENTS, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF THE PARTIES HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS
AGREEMENT.
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4.14 Severability. Any provision of this Agreement
that shall be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
In the event any such provision of this Agreement is so held
invalid, the parties shall promptly renegotiate in good faith new
provisions to restore this Agreement as near as possible to its
original intent and effect. To the extent permitted by
Applicable Law, the parties hereto hereby waive any provision of
law that renders any provision hereof prohibited or unenforceable
in any respect.
4.15 Counterparts. This Agreement may be signed in
multiple originals and/or using counterpart signature pages. All
such multiple originals shall constitute but one and the same
document.
4.16 Non-Interference; Access. Tissue Mill Owner and
MESC shall not undertake or engage in, or permit any Person under
its control to undertake or engage in, any activities which
unreasonably interfere with the operation of the Energy Complex
or the Tissue Mill. In the event MESC or Tissue Mill Owner is
granted access to the other party's facility, the party granted
access shall, and shall cause its agents, employees, contractors
and subcontractors to, comply with all safety requirements of the
party granting access.
4.17 Decision-Making by Parties. Except where this
Agreement expressly provides for a different standard, whenever
this Agreement provides for a determination, decision,
permission, consent or approval of a party, the party shall
promptly make such determination, decision, grant or withholding
of permission, consent or approval in a commercially reasonable
manner. Any denial of consent required to be made in a
commercially reasonable manner shall include in reasonable detail
the reason for denial or aspect of the request that was not
acceptable.
4.18 No Recourse to Affiliates. This Agreement is
solely and exclusively between MESC and Tissue Mill Owner, and
any obligations created herein shall be the sole obligations of
the parties hereto. No party shall have recourse to any parent,
subsidiary, partner, joint venturer, affiliate, director or
officer of the other party for performance of said obligations
unless the obligations are assumed in writing by the Person
against whom recourse is sought.
4.19 Cooperation with Lenders. Tissue Mill Owner shall
reasonably cooperate with MESC and its Lenders from time to time
in connection with MESC's financing and/or refinancing of the
Energy Complex, including, without limitation, by furnishing such
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non-privileged information, giving such certificates and
furnishing a Consent in the form of Exhibit C to the Tissue Mill
Energy Services Agreement and such opinions of counsel and other
matters as MESC and its Lenders may reasonably request, provided
that the foregoing undertaking shall not obligate Tissue Mill
Owner to materially change any rights or benefits, or materially
increase any burdens, liabilities or obligations of Tissue Mill
Owner under this Agreement or any other Project Document to which
it is a party. MESC shall reasonably cooperate with Tissue Mill
Owner and its lenders from time to time in connection with the
financing and/or refinancing of the Tissue Mill, including,
without limitation, the furnishing of such information, the
giving of such certificates and the furnishing of [a Lender
Consent], such reasonable opinions of counsel and other matters
as Tissue Mill Owner and its lenders may reasonably request,
provided that the foregoing undertaking shall not obligate MESC
to materially change any rights or benefits, or materially in-
crease any burdens, liabilities or obligations under this
Agreement or any other Project Document to which it is a party.
Any confidential information provided by either party pursuant to
this Section 4.19 shall be governed in accordance with Section
4.2.
4.20 Further Assurances. Tissue Mill Owner and MESC
agree to cooperate in all reasonable respects necessary to
implement the matters contemplated by this Agreement, and each
will take all reasonable actions within its authority to secure
the cooperation of its Affiliates.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have by their
respective duly authorized officers caused this Tissue Mill
Environmental Indemnity Agreement to be executed as of the day
and year first above written.
Tissue MILL OWNER: SCOTT PAPER COMPANY,
a Pennsylvania corporation,
in its capacity as Tissue Mill Owner
By:
Name:
Title:
MESC: MOBILE ENERGY SERVICES COMPANY, INC.,
an Alabama corporation
By:
Name:
Title:
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Exhibit B-1(d)
ENVIRONMENTAL GUARANTY, dated as of _______ 1994 (this
"Guaranty"), made by The Southern Company, a Delaware corporation
("Guarantor"), in favor of Scott Paper Company, a Pennsylvania
corporation ("Scott"), in its capacity as the owner of its
Mobile, Alabama pulp mill (the "Pulp Mill") (in such capacity,
"Pulp Mill Owner"); Scott, in its capacity as the owner of its
Mobile, Alabama tissue mill (the "Tissue Mill") (in such
capacity, "Tissue Mill Owner"); and S.D. Warren Company, a
Pennsylvania corporation ("S.D. Warren"), in its capacity as the
owner of its Mobile, Alabama paper mill (the "Paper Mill", and
collectively with the Pulp Mill and the Tissue Mill, the "Mills")
(in such capacity, "Paper Mill Owner", and collectively with Pulp
Mill Owner and Tissue Mill Owner, the "Guaranteed Parties").
RECITALS
A. Concurrently herewith, Pulp Mill Owner and Mobile
Energy Services Company, Inc., an Alabama corporation and a
subsidiary of Guarantor ("MESC"), will enter into a Pulp Mill
Energy Services Agreement, pursuant to which, among other things,
MESC will provide liquor processing services, steam processing
services and power processing services to the Pulp Mill, and Pulp
Mill Owner will accept certain waste products produced by the
MESC, whether for use at the Pulp Mill or for disposal.
B. Concurrently herewith, Tissue Mill Owner and MESC
will enter into a Tissue Mill Energy Services Agreement, pursuant
to which, among other things, MESC will provide steam processing
services and power processing services to the Tissue Mill.
C. Concurrently herewith, Paper Mill Owner and MESC
will enter into a Paper Mill Energy Services Agreement, pursuant
to which, among other things, MESC will provide steam processing
services and power processing services to the Paper Mill.
D. Concurrently herewith, MESC, Scott, Paper Mill
Owner, Pulp Mill Owner and Tissue Mill Owner will enter into a
Master Operating Agreement in order to, among other things,
define and allocate certain rights and obligations among MESC,
Pulp Mill Owner, Tissue Mill Owner, Paper Mill Owner and Scott.
E. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Common
Services Agreement, which provides, among other things, for the
sharing of certain services and facilities described therein
among the parties thereto.
F. Concurrently herewith, Pulp Mill Owner, Tissue
Mill Owner, Paper Mill Owner and MESC will enter into a Water
Procurement and Effluent Service Agreement, pursuant to which,
among other things, Pulp Mill Owner will provide water and waste
treatment services to each of the Mills and to MESC.
<PAGE>
G. Concurrently herewith, Pulp Mill Owner and MESC
will enter into a Boiler Ash Disposal Agreement pursuant to
which, among other things, Pulp Mill Owner will treat and dispose
of certain waste products produced by MESC.
H. Concurrently herewith, (i) MESC and Pulp Mill
Owner will enter into a Pulp Mill Environmental Indemnity
Agreement; (ii) MESC and Paper Mill Owner will enter into a Paper
Mill Environmental Indemnity Agreement; and (iii) MESC and Tissue
Mill Owner will enter into a Tissue Mill Environmental Indemnity
Agreement, in each case pursuant to which MESC and the applicable
Mill Owner will indemnify each other for certain specified
environmental claims relating to certain environmental
conditions, if and when any such claims arise. For purposes of
this Guaranty, the Pulp Mill Environmental Indemnity Agreement,
the Tissue Mill Environmental Indemnity Agreement and the Paper
Mill Environmental Indemnity Agreement shall be referred to
collectively as the "Environmental Indemnity Agreements".
In consideration of the agreements herein and in the
other Operative Documents (as defined in Exhibit A to the Master
Operating Agreement) and in order to induce each of Pulp Mill
Owner, Tissue Mill Owner and Paper Mill Owner to enter into their
respective Environmental Indemnity Agreements, Guarantor hereby
agrees as follows:
ARTICLE 1 - DEFINITIONS; INTERPRETATION
1.1 Definitions. Except as otherwise expressly
provided herein, capitalized terms used in this Guaranty shall
have the meanings given in Exhibit A to the Master Operating
Agreement.
1.2 Rules of Interpretation. Except as otherwise
expressly provided herein, the rules of interpretation set forth
in Exhibit A to the Master Operating Agreement shall apply to
this Guaranty.
ARTICLE 2 - GUARANTY
2.1 Guaranty. (a) Subject to the limitation set forth
in Section 2.2 below, Guarantor hereby irrevocably, absolutely
and unconditionally guarantees to the Guaranteed Parties the
prompt and full payment of all payment obligations of MESC now or
hereafter existing under the Environmental Indemnity in each case
when due and payable by MESC in accordance with the terms thereof
(the "Guaranteed Obligations"). Without limiting the generality
of the foregoing, but subject to Section 2.2 below, Guarantor's
liability shall extend to all amounts which constitute part of
the Guaranteed Obligations and would be owed by MESC to any
Guaranteed Party pursuant to the Environmental Indemnity
Agreements, but for the fact that such Guaranteed Obligations are
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unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving MESC.
(b) This Guaranty is a primary obligation of
Guarantor and is an absolute, unconditional and irrevocable
guaranty of payment and not of collectability or performance.
Subject to the limitation set forth in Section 2.2 below, if MESC
shall fail to pay any of its obligations to any of the Guaranteed
Parties under any of the Environmental Indemnity Agreements when
due, Guarantor shall forthwith pay such obligations in
immediately available funds.
2.2 Limitation of Guaranty. Notwithstanding any other
provision contained in this Guaranty (including, without
limitation, Section 2.1 hereof) or in any of the other Operative
Documents, Guarantor's aggregate liability under this Guaranty
shall not exceed $15,000,000 in the aggregate on a cumulative
basis (the "Maximum Guaranteed Amount"). For the avoidance of
doubt, at such time as the aggregate amount of all payments made
by Guarantor hereunder equals or exceeds the Maximum Guaranteed
Amount, Guarantor shall cease to have any liability hereunder and
this Guaranty shall terminate and be of no further force or
effect.
2.3 Guaranty Absolute. (a) Subject to Sections 2.2
and 4.11, Guarantor guarantees that the Guaranteed Obligations
(up to the Maximum Guaranteed Amount) will be paid strictly in
accordance with the terms of the applicable Environmental
Indemnity Agreement, regardless of any Governmental Rule now or
hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Guaranteed Parties with respect
thereto. The obligations of Guarantor under this Guaranty are
independent of the Guaranteed Obligations, and a separate action
or actions may be brought and prosecuted against Guarantor to
enforce this Guaranty, irrespective of whether any action is
brought against MESC or whether MESC is joined in any such action
or actions. The liability of Guarantor under this Guaranty shall
be irrevocable and absolute irrespective of:
(i) any change in the time, manner or place of payment
of, or in any other term of, all or any of the
Guaranteed Obligations, or any other amendment or
waiver of, or any consent to departure from, the
Environmental Indemnity Agreements; or
(ii) any change, restructuring or termination of the
corporate structure or existence of MESC.
This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be returned
by any Guaranteed Party upon the insolvency, bankruptcy or
reorganization of MESC or the Guarantor or otherwise, all as
though such payment had not been made; provided that Guarantor's
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<PAGE>
aggregate liability hereunder shall at all times be limited to
the Maximum Guaranteed Amount.
(b) This Guaranty shall not confer upon any Guaranteed
Party any right of payment or enforcement with respect to the
Environmental Indemnity Agreements that is in any manner broader
or more expansive than such parties' rights of payment and
enforcement with respect to MESC under the Environmental
Indemnity Agreements.
2.4 Waiver. Guarantor hereby waives promptness,
diligence, presentment, demand of payment, notice of acceptance
and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that any
Guaranteed Party exhaust any right or take any action against
MESC or any other person or entity.
2.5 Subrogation. Notwithstanding any payment or
payments made by Guarantor hereunder, Guarantor hereby
irrevocably waives any and all rights of subrogation to the
rights of the Guaranteed Parties against MESC and any and all
rights of reimbursement, assignment, indemnification or implied
contract or any similar rights against MESC or against any
endorser or other guarantor of all or any part of the Guaranteed
Obligations. If, notwithstanding the foregoing, any amount shall
be paid to Guarantor on account of such subrogation rights at any
time when all of the Guaranteed Obligations (up to the Maximum
Guaranteed Amount) shall not have been paid in full, such amount
shall be held by Guarantor in trust for the Guaranteed Parties,
segregated from other funds of Guarantor, and shall, forthwith
upon receipt by Guarantor, be turned over to the Guaranteed
Parties in the exact form received by Guarantor, to be applied
against the Guaranteed Obligations, whether matured or unmatured,
in such order as the Guaranteed Parties may determine.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Guarantor hereby represents and warrants as follows:
3.1 Organization. Guarantor is a corporation duly
organized, validly existing and in good standing under the laws
of the state of its incorporation.
3.2 Authorization; No Conflict. The execution and
delivery by Guarantor of this Guaranty, and the performance by
Guarantor of its obligations hereunder (i) are within Guarantor's
corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) do not contravene its articles of
incorporation or bylaws or any Governmental Rule applicable to or
binding on Guarantor or any of its properties and (iv) do not
require the consent or approval of any Person which has not
already been obtained.
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3.3 Enforceability. This Guaranty constitutes the
legal, valid and binding obligation of Guarantor enforceable
against Guarantor in accordance with its terms, except to the
extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).
ARTICLE 4 - MISCELLANEOUS
4.1 Payment of Claims; No Liability. Guarantor shall
pay all valid claims made under this Guaranty (up to the Maximum
Guaranteed Amount) in the order in which such claims are received
by Guarantor and in the manner prescribed in Section 4.3 hereof.
Guarantor shall have no liability to any Guaranteed Party for any
payment made pursuant hereto to any other Guaranteed Party,
notwithstanding the fact that any such payment will reduce the
Maximum Guaranteed Amount.
4.2 Continuing Guaranty; Assignment. Subject to
Sections 2.2 and 4.11, this Guaranty is a continuing guaranty and
shall (i) be binding upon Guarantor, its successors and assigns,
and (ii) inure to the benefit of, and be enforceable by, the
Guaranteed Parties and their respective successors and permitted
assigns. The obligations of Guarantor under this Guaranty may be
assigned or delegated in writing without the prior written
consent of the Guaranteed Parties to any Affiliate of Guarantor
which at the time of such assignment or delegation has at least
one hundred fifty million dollars ($150,000,000) in net assets.
4.3 Notices; Transfer of Funds. All notices,
requests, demands and other communications which are required or
may be given under this Guaranty shall be in writing and shall be
deemed to have been duly given when received if personally
delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method, subject to the
sender's facsimile machine receiving the correct answerback of
the addressee and confirmation of uninterrupted transmission by a
transmission report or the recipient confirming by telephone to
sender that he has received the facsimile message; the day after
it is sent, if sent for next day delivery to a domestic address
by recognized overnight delivery service (e.g., FedEx); and upon
receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent (i) if to any
Guaranteed Party, to its address set forth in Section 17.6 of the
Master Operating Agreement and (ii) if to Guarantor, to:
The Southern Company
Attention:
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Telecopy:
with a copy to:
Troutman Sanders
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2216
Attention: Hugh M. Davenport, Esq.
Telecopy: (404) 885-3525
and:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Tim Flato, Esq.
Telecopy: (415) 395-8095
or to such other place and with such other copies as any
Guaranteed Party or Guarantor may designate as to itself by
written notice to the others pursuant to this Section 4.3.
Payments to be made to any Guaranteed Party hereunder
shall be made by wire transfer of funds to such Guaranteed
Party's account specified on Annex 1 hereto or such other account
as such Guaranteed Party may designate by notice hereunder.
4.4 Delay and Waiver. No failure on the part of any
Guaranteed Party to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other
right.
4.5 Entire Agreement; Amendments. This Guaranty and
any agreement, document or instrument attached hereto or referred
to herein integrate all the terms and conditions mentioned herein
or incidental hereto and supersede all oral negotiations and
prior writings in respect to the subject matter hereof. In the
event of any conflict between the terms, conditions and
provisions of this Guaranty and any such agreement, document or
instrument, the terms, conditions and provisions of this Guaranty
shall prevail. This Guaranty may only be amended or modified by
an instrument in writing signed by Guarantor and each of the
Guaranteed Parties.
4.6 Headings. The headings of the various Sections of
this Guaranty are for convenience of reference only and shall not
modify, define or limit any of the terms or provisions hereof.
4.7 Governing Law; Consent to Jurisdiction. (a) This
Guaranty shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of
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New York without reference to the choice of law provisions of New
York law (except Section 5-1401 of the New York General
Obligations Law), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity
which is a party to or the subject of this Guaranty, and as to
those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern.
(b) Each party hereto irrevocably and unconditionally
(i) agrees that any suit, action or other legal proceeding
arising out of this Guaranty may be brought in the United States
District Court for the Southern District of New York or, if such
court does not have jurisdiction or will not accept jurisdiction,
in any court of general jurisdiction in New York, New York; (ii)
consents to the jurisdiction of any such court in any such suit,
action or proceeding; and (iii) waives any objection which such
party may have to the laying of venue of any such suit, action or
proceeding in any such court.
4.8 WAIVER OF JURY TRIAL. EACH OF GUARANTOR AND THE
GUARANTEED PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR IN CONNECTION WITH THIS GUARANTY OR ANY MATTER ARISING
HEREUNDER.
4.9 Severability. Any provision of this Guaranty that
shall be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
4.10 No Recourse to Affiliates. Any obligations
created herein shall be the sole obligations of Guarantor, unless
and to the extent that such obligations are assigned or delegated
by Guarantor pursuant to Section 4.2. The Guaranteed Parties
shall not have recourse to any parent, subsidiary, partner, joint
venturer, affiliate, director or officer of Guarantor (or any
Person to whom Guarantor's obligations hereunder are assigned or
delegated pursuant to Section 4.2) for performance of said
obligations unless the obligations are assumed in writing by the
Person against whom recourse is sought.
4.11 Termination. Subject to Section 2.2 hereof,
this Guaranty shall terminate and be of no further force and
effect upon the earliest to occur of (i) all Guaranteed
Obligations having been paid in full, (ii) the expiration of the
Lease Term, and (iii) with respect to any Guaranteed Party, upon
termination of such Guaranteed Party's Environmental Indemnity
Agreement (in each case after allowing for any Mill Permitted
Transfers; provided that this Guaranty shall immediately
terminate and be of no further force and effect with respect to
the applicable Guaranteed Party and Permitted Transferee upon any
7
<PAGE>
such Mill Permitted Transfer unless the Permitted Transferee at
the time of such transfer has at least one hundred fifty million
dollars ($150,000,000) in net assets; provided, further, that
with respect to any termination of this Guaranty with respect to
any Guaranteed Party pursuant to clause (iii) above, the Maximum
Guaranteed Amount remaining outstanding at such time hereunder
shall be permanently reduced (A) by one-third (1/3) with respect
to the first such termination pursuant to clause (iii) above, (B)
by one-half with respect to the second such termination pursuant
to clause (iii) above and (C) to zero (-0-) with respect to the
third such termination pursuant to clause (iii) above. Upon any
termination of this Guaranty pursuant to this Section 4.11, each
applicable Guaranteed Party shall deliver to Guarantor written
evidence in form and substance reasonably satisfactory to
Guarantor of such termination and of the release of Guarantor
from its obligations hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, Guarantor has by its duly
authorized officer caused this Guaranty to be executed as of the
date first above written.
THE SOUTHERN COMPANY,
a Delaware corporation
By:
Name:
Title:
9
<PAGE>
ANNEX 1
Accounts for Payments
10
<PAGE>
Exhibit B-1(e)
L&W Draft No. 9
December 7, 1994
EXHIBIT A
(Energy Services Agreements)
(Master Operating Agreement)
(Mill Environmental Indemnity Agreements)
(Lease Agreement)
(Asset Purchase Agreement)
(Employee Transition Agreement)
(Scott Environmental Indemnity Agreement)
(Environmental Guaranty)
(Southern Company Guaranty)
DEFINITIONS
1 "Abandonment" means (i) the announcement by MESC at any
2 time after the Closing Date of its decision to suspend for more
3 than ( ) Days or abandon the operation of the Energy
4 Complex or (ii) the suspension for more than ( ) Days (as
5 extended during the continuance of a Force Majeure Event), aban-
6 donment or indefinite deferral of the operation of the Energy
7 Complex.
8
9 "Accounts" means the accounts, notes and other
10 receivables (whether current or noncurrent) of Scott listed on
11 Schedule 1.1(a) to the Asset Purchase Agreement.
12
13 "Actions" has the meaning given in Section 4.9 of the
14 Asset Purchase Agreement.
15
16 "Actual Capacity" means the Actual Power Processing
17 Capacity, Actual Steam Processing Capacity, Actual Liquor
18 Processing Capacity or Actual Process Water Capacity, as the
19 context may require.
20
21 "Actual Energy Complex Capacity" means the Actual
22 Liquor Processing Capacity, the Actual Steam Processing Capacity
23 and the Actual Power Processing Capacity.
24
25 "Actual 50 Header Pressure" means (i) in the case of
26 the Paper Mill, the actual steam pressure as measured at the
27 Paper Mill Steam 50 Delivery Point; (ii) in the case of the Pulp
28 Mill, the actual steam pressure as measured at the Pulp Mill
29 Steam 50 Delivery Point; and (iii) in the case of the Tissue
30 Mill, the actual steam pressure as measured at the Tissue Mill
31 Steam 50 Delivery Point.
32
33 "Actual 550 Header Pressure" means (i) in the case of
34 the Paper Mill, the actual steam pressure as measured at the
35 Paper Mill Steam 550 Delivery Point; (ii) in the case of the Pulp
36 Mill, the actual steam pressure as measured at the Pulp Mill
37 Steam 550 Delivery Point; and (iii) in the case of the Tissue
<PAGE>
1 Mill, the actual steam pressure as measured at the Tissue Mill
2 Steam 550 Delivery Point.
3
4 "Actual Header Pressure" means (i) in the case of the
5 Paper Mill, the Paper Mill's Actual 50 Header Pressure, the Paper
6 Mill's Actual 130 Header Pressure, the Paper Mill's Actual 310
7 Header Pressure and the Paper Mill's Actual 550 Header Pressure,
8 individually or collectively, as the context may require; (ii) in
9 the case of the Pulp Mill, the Pulp Mill's Actual 50 Header
10 Pressure, the Pulp Mill's Actual 130 Header Pressure, the Pulp
11 Mill's Actual 310 Header Pressure and the Pulp Mill's Actual 550
12 Header Pressure, individually or collectively, as the context may
13 require; and (iii) in the case of the Tissue Mill's Actual 50
14 Header Pressure, the Tissue Mill's Actual 50 Header Pressure, the
15 Tissue Mill's Actual 130 Header Pressure, the Tissue Mill's
16 Actual 310 Header Pressure and the Tissue Mill's Actual 550
17 Header Pressure, individually or collectively, as the context may
18 require.
19
20 "Actual Liquor Processing Capacity" means the actual
21 capability of the Energy Complex to provide Liquor Processing
22 Services at any time.
23
24 "Actual 1325 Header Pressure" means (i) in the case of
25 the Paper Mill, the actual steam pressure as measured at the
26 Paper Mill Steam 130 Delivery Point; (ii) in the case of the Pulp
27 Mill, the actual steam pressure as measured at the Pulp Mill
28 Steam 130 Delivery Point; and (iii) in the case of the Tissue
29 Mill, the actual steam pressure as measured at the Tissue Mill
30 Steam 1325 Delivery Point.
31
32 "Actual Power Processing Capacity" means the actual
33 capability of the Energy Complex to provide Power Processing
34 Services at any time.
35
36 "Actual Process Water Capacity" means the actual
37 capability of the Pulp Mill to provide Process Water at any time.
38
39 "Actual Steam Processing Capacity" means the actual
40 capability of the Energy Complex to provide Steam Processing
41 Services at any time/
42
43 "Actual 300 Header Pressure" means (i) in the case of
44 the Paper Mill, the actual steam pressure as measured at the
45 Paper Mill Steam 310 Delivery Point; (ii) in the case of the Pulp
46 Mill, the actual steam pressure as measured at the Pulp Mill
47 Steam 310 Delivery Point; and (iii) in the case of the Tissue
48 Mill, the actual steam pressure as measured at the Tissue Mill
49 Steam 300 Delivery Point.
50
51 "Adverse Financial Effect" means the extent to which
52 MESC is adversely financially affected as the direct result of a
53 Change Event, measured as any Change in Net Costs, provided that
54 an "Adverse Financial Effect" shall in no event include or be
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<PAGE>
1 calculated to include amount which is intended to provide MESC
2 with any specified or benchmark rate of return, debt coverage
3 ratio or other similar ratio or amount which is based upon an
4 anticipated or expected economic benefit to be derived from, or
5 the anticipated or expected financial performance of, the
6 operation of the Energy Complex.
7
8 "AEA" means the Atomic Energy Act of 1954, 42 U.S.C.
9 Section 2011 et seq.
10
11 "Affected Party" has the meaning given in Section 12.2
12 of the Master Operating Agreement.
13
14 "Affiliate" of a specified Person means any other
15 Person that directly, or indirectly through one or more
16 intermediaries, controls, is controlled by or is under common
17 control with the specified Person, or who holds or beneficially
18 owns ten percent (10%) or more of any class of voting securities
19 of the specified Person.
20
21 "Agency Biomass" means wood residues from third parties
22 similar to Pulp Mill Biomass as well as scrape, dust, and other
23 waste from sawmills or other wood processors which the Pulp Mill
24 obtains as agent for MESC.
25
26 "Aggregate Current Nomination" means the Aggregate
27 Current Power Processing Nomination, the Aggregate Current Steam
28 Processing Nomination or the Current Liquor Processing
29 Nomination, as the context may require.
30
31 "Aggregate Current Power Processing Nomination" means
32 the Current Pulp Mill Power Processing Nomination, the Current
33 Paper Mill Power Processing Nomination and the Current Tissue
34 Mill Power Processing Nomination, collectively.
35
36 "Aggregate Current Steam Processing Nomination" means
37 the Current Pulp Mill Steam Processing Nomination, the Current
38 Paper Mill Steam Processing Nomination and the Current Tissue
39 Mill Steam Processing Nomination, collectively.
40
41 "Aggregate Demand" means the Conversion Demand, the
42 Aggregate Steam Processing Demand and the Aggregate Power
43 Processing Demand, collectively.
44
45 "Aggregate Make-Up Water Requirement" means the
46 aggregate of the Pulp Mill Make-Up Water Requirement, the Paper
47 Mill Make-Up Water Requirement and the Tissue Mill Make-Up Water
48 Requirement.
49
50 "Aggregate Operating Water Requirement" means the
51 aggregate of the MESC Operating Water Requirement, the Pulp Mill
52 Operating Water Requirement, the Paper Mill Operating Water Re-
53 quirement and the Tissue Mill Operating Water Requirement.
54
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<PAGE>
1 "Aggregate Power Processing Demand" means the Pulp Mill
2 Power Processing Demand, the Tissue Mill Power Processing Demand
3 and the Paper Mill Power Processing Demand, individually or
4 collectively, as the context may require.
5
6 "Aggregate Power Processing Requirement" means the
7 aggregate of the Pulp Mill Power Processing Requirement, the
8 Tissue Mill Power Processing Requirement and the Paper Mill Power
9 Processing Requirement.
10
11 "Aggregate Process Water Requirement" means the
12 Aggregate Operating Water Requirement and the Aggregate Make-Up
13 Water Requirement.
14
15 "Aggregate Requirement" means the Aggregate Power
16 Processing Requirement, Aggregate Steam Processing Requirement,
17 Aggregate Make-Up Water Requirement, Aggregate Operating Water
18 Requirement, Aggregate Process Water Requirement or Liquor
19 Processing Requirement, individually or collectively, as the
20 context may require.
21
22 "Aggregate Steam Processing Demand" or "SPDtotal" means
23 the Pulp Mill Steam Processing Demand, the Tissue Mill Steam
24 Processing Demand and the Paper Mill Steam Processing Demand,
25 collectively.
26
27 "Aggregate Steam Processing Requirement" means the
28 aggregate of the Pulp Mill Steam Processing Requirement, the
29 Tissue Mill Steam Processing Requirement and the Paper Mill Steam
30 Processing Requirement.
31
32 "Air Compressor Facilities" means the Air Compressors
33 and the building containing the Air Compressors.
34
35 "Air Compressors" means (i) three Atlas Copco Model
36 ZR7A air compressors; (ii) two Joy Model TA-25V air compressors;
37 (iii) one Ingersoll-Rand Model 2AC1155M3 air compressor; (iv)
38 three compressor cooling water pumps, (v) an air receiver, (vi)
39 two bulk chemical tanks and associated feed pumps and (vii)
40 associated structures, valves, piping and electrical service.
41
42 "Alabama Environmental Laws" means any state or local
43 law, regulated rule or ordinance now or hereafter in effect
44 relating to Environmental Conditions including, without
45 limitation, Preservation Development, Etc., of Coastal Areas,
46 Ala. Code Section 9-7-1 et seq., the Alabama Water Pollution
47 Control Act, Ala. Code Section 22-22-1 et seq., the Alabama
48 Environmental Management Act, Ala. Code Section 22-22A-1 et seq.,
49 the Alabama Safe Drinking Water Act, Ala. Code Section 22-23-1 et
50 seq., Water Well Standards, Ala. Code Section 22-24 et seq.,
51 Water Wastewater Systems and Treatment Plants, Ala. Code
52 Section 22-25-1 et seq., Sewage Collection, Treatment, and
53 Disposal Facilities, Ala. Code Section 22-26-1 et seq., the Solid
54 Wastes Disposal Act, Ala. Code Section 22-27-1 et seq., the
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<PAGE>
1 Alabama Air Pollution Control Act, Ala. Code Section 22-28-1 et
2 seq., the Hazardous Wastes Management and Minimization Act, Ala.
3 Code Section 22-30-1 et seq., the Alabama Hazardous Substance
4 Cleanup Fund, Ala. Code Section 22-30A-1 et seq., the Water
5 Pollution Control Authority, Ala. Code Section 22-34-1 et seq.,
6 the Alabama Underground Storage Tank Trust Fund Act, Ala. Code
7 Section 22-35-1 et seq., the Alabama Underground Storage Tank and
8 Wellhead Protection Act, Ala. Code Section 22-36-1 et seq., the
9 Alabama Lead Ban Act, Ala. Code Section 22-37-1 et seq.; any
10 amendments thereto now or hereafter adopted or that otherwise
11 become effective; any plans, rules, regulations, orders or
12 ordinances adopted (including, without limitation fire, land,
13 use, zoning and other codes and regulations relating to
14 Environmental Conditions), or other guidance or policies
15 promulgated pursuant to the preceding laws; any local laws,
16 ordinances, codes or regulations pertaining to or otherwise
17 addressing Environmental Conditions; or any terms or conditions
18 in state or local permits, licenses or other authorizations
19 relating to Environmental Conditions; any common law principles
20 (including without limitation decisions by or orders of courts,
21 agencies, boards of appeals or similar bodies with mandatory or
22 persuasive authority) relating to Environmental Conditions.
23
24 "Alabama PSC" means the Alabama Public Service
25 Commission and any successor thereto.
26
27 "Annual Scheduled Outage Allowance" has the meaning
28 given in Section 3.6(a)(i) of the Master Operating Agreement.
29
30 "Anticipated Rules" means, either individually or
31 collectively, (i) the Cluster Rule and (ii) additional proposed
32 rules regarding or affecting combustion equipment associated with
33 pulp and paper mills, expected to be proposed in late 1994 or
34 early 1995, and expected to be promulgated along with the Cluster
35 8 Rule, as and in such form as the rules and regulations
36 described in clauses (i) and (ii) may be amended or modified
37 before such rules and regulations ultimately are promulgated.
38
39 "APC" means Alabama Power Company.
40
41 "Applicable Delivery Point" means: with respect to
42 Green Liquor, the Green Liquor Delivery Point; with respect to
43 Steam being delivered to the Pulp Mill, the Pulp Mill Steam
44 Delivery Point; with respect to Steam being delivered to the
45 Tissue Mill, the Tissue Mill Steam Delivery Point; with respect
46 to Steam being delivered to the Paper Mill, the Paper Mill Steam
47 Delivery Point; with respect to Power Processing Services being
48 delivered to the Pulp Mill, the Pulp Mill Power Processing
49 Delivery Point; with respect to Power Processing Services being
50 delivered to the Tissue Mill, the Tissue Mill Power Processing
51 Delivery Point; with respect to Power Processing Services being
52 delivered to the Paper Mill, the Paper Mill Power Processing
53 Delivery Point; with respect to Black Liquor, the Black Liquor
54 Delivery Point; with respect to Weak Wash, the Weak Wash Delivery
A-5
<PAGE>
1 Point; with respect to Pulp Mill Return Condensate, the Pulp Mill
2 Return Condensate Delivery Point; with respect to Tissue Mill
3 Return Condensate, the Tissue Mill Return Condensate Delivery
4 Point; with respect to Paper Mill Return Condensate, the Paper
5 Mill Return Condensate Delivery Point; with respect to Make-Up
6 Water, the Make-Up Water Delivery Point; with respect to Soap,
7 the Soap Delivery Point; with respect to Recycled Brine, the
8 Recycled Brine Delivery Point; with respect to Digester Foul
9 Condensate, the Digester Foul Condensate Delivery Point; with
10 respect to Stripped Condensate, the Stripped Condensate Delivery
11 Point; with respect to Evaporator Clean Condensate, the
12 Evaporator Clean Condensate Delivery Point; with respect to Hot
13 Process Water, the Hot Process Water Delivery Point; with respect
14 to Sludge, the Sludge Delivery Point; with respect to Stripper
15 Off Gas, the Stripper Off Gas Delivery Point; with respect to
16 Noncondensible Gas, the Noncondensible Gas Delivery Point; with
17 respect to Biomass, the Biomass Delivery Point; with respect to
18 Operating Water being delivered to the Energy Complex, the Energy
19 Complex Operating Water Delivery Point; with respect to Operating
20 Water being delivered to the Tissue Mill, the Tissue Mill
21 Operating Water Delivery Point; with respect to Operating Water
22 being delivered to the Paper Mill, the Paper Mill Operating Water
23 Delivery Point; with respect to Waste Water being delivered from
24 the Energy Complex, the Energy Complex Waste Water Delivery
25 Point; with respect to Waste Water being delivered from the
26 Tissue Mill, the Tissue Mill Waste Water Delivery Point; with
27 respect to Waste Water being delivered from the Paper Mill, the
28 Paper Mill Waste Water Delivery Point; with respect to Sanitary
29 Sewage being delivered from the Energy Complex, the Energy
30 Complex Sanitary Sewage Delivery Point; with respect to Sanitary
31 Sewage being delivered from the Tissue Mill, the Tissue Mill
32 Sanitary Sewage Delivery Point; and with respect to Sanitary
33 Sewage being delivered from the Paper Mill, the Paper Mill
34 Sanitary Sewage Delivery Point.
35
36 "Applicable Law" means any Governmental Rule or Permit
37 which is applicable to or affects the operation, maintenance,
38 ownership, leasing or use of the Assets, the Energy Complex, the
39 Leased Premises, the Real Property or the Pulp Mill, the Tissue
40 Mill or the Paper Mill, including any zoning, environmental
41 protection, pollution, sanitation or safety Governmental Rule or
42 Permit and any waiver, exemption, release, variance, order,
43 Permit, authorization, right or license of, from, imposed or
44 otherwise issued by any Governmental Authority.
45
46 "Applicable Measuring Devices" means: with respect to
47 Steam, the Steam Measuring Devices; with respect to Black Liquor,
48 the Black Liquor Measuring Devices; with respect to Return
49 Condensate, the Return Condensate Measuring Devices; with respect
50 to Make-Up Water, the Make-Up Water Measuring Devices; with
51 respect to Sludge, the Sludge Measuring Devices; with respect to
52 Biomass, the Biomass Measuring Devices; with respect to
53 Electricity, the Electricity Measuring Devices; with respect to
54 Coal, the Coal Measuring Devices; with respect to Gas, the Gas
A-6
<PAGE>
1 Measuring Devices; with respect to Hot Process Water, the Hot
2 Process Water Measuring Devices.
3
4 "Appraiser" has the meaning given in Section 15.1(b) of
5 the Lease.
6
7 "Arbitration Notice" has the meaning given in Section
8 16.3(b) of the Master Operating Agreement.
9
10 "Asset FMV" has the meaning given in Section 15.1(d) of
11 the Lease.
12
13 "Asset Lease Assumption Agreements" means the 1984 Tax-
14 Exempt Lease Agreement, the 1984 Taxable Lease Agreement, the
15 1973 Tax-Exempt Lease Agreement, the 1976 Tax-Exempt Lease
16 Agreement and the Lease Assignment Agreement.
17
18 "Asset Purchase Agreement" means the Asset Purchase
19 Agreement dated as of December 12, 1994, between Scott, as
20 Seller, and MESC, as Buyer.
21
22 "Assets" means the Purchased Assets and the Leased
23 Assets.
24
25 "Assignment and Assumption Agreement" means the
26 Assignment and Assumption Agreement dated as of December 12,
27 1994, between Scott and MESC, substantially in the form of
28 Exhibit D to the Asset Purchase Agreement.
29
30 "Assumed Liabilities" has the meaning given in Section
31 2.2 of the Asset Purchase Agreement.
32
33 "Available" means for Liquor Processing Services, Steam
34 Processing Services and Power Processing Services, as the context
35 may require, the Energy Complex's actual operational capability
36 to generate and provide the Mills' Requirements for such
37 Processing Services, provided that each of the Mill's
38 Requirements (collectively) for a Processing Service do not
39 exceed the applicable Demand.
40
41 "Available Agency Biomass" means _________________.
42
43 "Available Export Biomass" means _________________.
44
45 "Available Timberland Biomass" means _________________.
46
47 "Award" has the meaning given in Section 14.1(c) of the
48 Lease.
49
50 "Back-Up Power" means the power purchased by the Mill
51 Owners from APC that is treated as back-up power by APC under the
52 1983 Alabama Power Contract as such contract was applied by Scott
53 and APC prior to the Closing Date.
54
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<PAGE>
1 "Back-Up Power Demand Allowance" means the demand
2 allowance calculated in accordance with Section E of Part 5 of
3 Exhibit I of the Master Operating Agreement related to the
4 monthly peak demands in megawatts used by APC in determining its
5 charges to the Mills for Back-Up Power.
6
7 "Back-Up Power Liquidated Damages" has the meaning
8 given in Section 7.3(c)(iii)(A) of the Master Operating
9 Agreement.
10
11 "Back-Up Power Usage Allowance" means the usage
12 allowance calculated in accordance with Section D of Part 5 of
13 Exhibit I of the Master Operating Agreement related to the
14 megawatt hours of Back-Up Power purchased by the Mills.
15
16 "Bankruptcy Law" means Title 11, United States Code,
17 and any other state or federal insolvency, reorganization,
18 moratorium or similar law for the relief of debtors.
19
20 "Base Rent", with respect to the Lease, has the meaning
21 given in Section 5.1 of the Lease, and, with respect to the
22 Supplementary Lease, has the meaning given in Section 5.1 of the
23 Supplementary Lease.
24
25 "Beneficial Financial Effects" means the extent to
26 which MESC is beneficially financially affected by a Change
27 Event, including decreased costs and expenses of the Energy
28 Complex or increased revenues, in each case which result directly
29 from such Change Event.
30
31 "Bi-Annual Utilities Cold Shutdown Standards" means
32 [the cold shutdown standards set forth in Exhibit J to the Master
33 Operating Agreement, as such standards may be revised from time
34 to time by the Expanded Site Operating Committee.]
35
36 "Billing Period" means a Month in any Contract Year,
37 except that the first Billing Period shall begin on the Closing
38 Date and shall end on the last Day of the Month during which the
39 Closing Date occurred and the last Billing Period shall end on
40 the last Day of the last Contract Year.
41
42 "Billing Period Report" means (i) with respect to the
43 Pulp Mill Energy Services Agreement, a report containing the
44 information required to be provided by Section 9.1 of the Pulp
45 Mill Energy Services Agreement, (ii) with respect to the Tissue
46 Mill Energy Services Agreement, a report containing the
47 information required to be provided by Section 9.1 of the Tissue
48 Mill Energy Services Agreement, and (iii) with respect to the
49 Paper Mill Energy Services Agreement, a report containing the
50 information required to be provided by Section 9.1 of the Paper
51 Mill Energy Services Agreement.
52
53 "Bill of Sale" means the bill of sale to be delivered
54 to MESC by Scott on the Closing Date pursuant to the Asset
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<PAGE>
1 Purchase Agreement, substantially in the form of Exhibit C to
2 the Asset Purchase Agreement.
3
4 "Biomass" shall refer to Timberland Biomass, Agency
5 Biomass, Woodyard Biomass and Export Chip Biomass.
6
7 "Biomass Delivery Point" means the locations at which
8 Scott shall deliver Biomass to MESC pursuant to the Biomass
9 Agreement, as more particularly described in Exhibit U to the
10 Master Operating Agreement.
11
12 "Biomass Measuring Devices" means those devices
13 described in Exhibit U of the Master Operating Agreement.
14
15 "Biomass Testing Protocol" means _________________.
16
17 "Black Liquor" means black liquor generated by the Pulp
18 Mill from the processing of pulp, having the characteristics set
19 forth in Exhibit B to the Master Operating Agreement.
20
21 "Black Liquor Delivery Point" means the locations at
22 which Pulp Mill Owner shall deliver Black Liquor to MESC pursuant
23 to the Pulp Mill Energy Services Agreement, as more particularly
24 described in Exhibit T to the Master Operating Agreement.
25
26 "Black Liquor Measuring Devices" means those devices
27 described in Exhibit U to the Master Operating Agreement.
28
29 "Black Liquor Testing Protocol" means ____________.
30
31 "Boiler Ash Disposal Agreement" means the Boiler Ash
32 Disposal Agreement dated as of _________, 1994, between Pulp Mill
33 Owner and MESC.
34
35 "Boiler Ash Service" has the meaning given in Section
36 3.1 of the Boiler Ash Disposal Agreement.
37
38 "Bond Transfer Agreement" means [AGREEMENT BY TRT TO
39 TRANSFER THE 1994 BONDS TO MESC], substantially in the form of
40 Exhibit M to the Asset Purchase Agreement.
41
42 "Books and Records" means, to the extent relating to
43 periods of time prior to the Closing, (a) all books, records,
44 lists, files and papers in the possession of Scott or its agents
45 pertaining to the Assets and the Energy Complex, and all records
46 and lists concerning suppliers to and personnel of the Energy
47 Complex, (b) all books, ledgers, files, reports, plans, drawings,
48 maps, photographs, technical manuals and operating records of
49 every kind maintained by Scott with respect to the Energy
50 Complex, whether in hard copy or computer format, (c) all
51 software used by Scott in connection with the operation of the
52 Energy Complex, to the extent transferable, (d) all telephone and
53 telecopy numbers used by Scott in connection with the operation
54 of the Energy Complex and (e) all purchasing records related to
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1 the Energy Complex. Income tax returns of Scott shall not be
2 part of the Books and Records.
3
4 "Brownstock Equipment" means unbleached fiber
5 processing equipment in the Pulp Mill.
6
7 "Buyer" means Mobile Energy Services Company, Inc., an
8 Alabama corporation.
9
10 "CAA" means the Clean Air Act, 42 U.S.C Section 7401 et
11 seq.
12
13 "Capital Change Threshold" has the meaning given in
14 Section 8.6(a) of the Master Operating Agreement.
15
16 "Casualty" means any damage or destruction affecting
17 any part of the Real Property, the Leased Premises, the Energy
18 Complex or the Mills, as applicable.
19
20 "CERCLA" means the Comprehensive Environmental
21 Response, Compensation and Liability Act, 42 U.S.C. Section 9601
22 et seq.
23
24 ["Change Event" means a Process Model Adjustment Event
25 or a Financial Adjustment Event, individually or collectively, as
26 the context may require.]
27
28 ["Change in Net Costs" means, as the direct result of a
29 Change Event, any change in MESC's capital costs or operations
30 and maintenance costs the Energy Complex, net of any offsetting
31 financial benefit that will be recovered by MESC through (i) an
32 automatic adjustment (including any change through indices or
33 escalators) applicable to the Process Model, Processing Charges,
34 Demand Charges or any other charges payable by the Mill Owners
35 under their respective Energy Services Agreement, the Master
36 Operating Agreement or any other Project Document, (ii) reduced
37 operating costs or other monetary benefit derived by MESC in
38 connection with such Change Event or (iii) insurance proceeds
39 received in connection with such Change Event.]
40
41 "Change of Law" means any change in any Applicable Law
42 whether now existing or hereinafter adopted, after the Closing
43 Date, including, without limitation, any change in Environmental
44 Laws after the Closing Date (including, without limitation, the
45 Anticipated Rules).
46
47 "Christmas Slowdown Committee" means a committee
48 appointed by the Site Operating Committee consisting of one
49 representative from the Energy Complex and each of the Mills,
50 each with an equal vote.
51
52 "Christmas Slowdown Standards" means the standards set
53 forth in Exhibit K to the Master Operating Agreement.
54
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1 "Claims", with respect to the Project Documents, has
2 the meaning set forth in Section 12.2 of each of the Energy
3 Services Agreements, and with respect to the Purchase Documents,
4 has the meaning given in Section 10.4(c) of the Asset Purchase
5 Agreement.
6
7 "Closing" has the meaning given in Section 3.1 of the
8 Asset Purchase Agreement.
9
10 "Closing Date" means the date on which the Closing
11 occurs.
12
13 "Closing Mill Owner" has the meaning given in Section
14 3.10(b) of the Master Operating Agreement.
15
16 "Cluster Rule" means those certain air and water
17 quality regulations proposed by the United States Environmental
18 Protection Agency regarding the pulp and paper industry at 58
19 Federal Register 66078-66216 (Dec. 17, 1993).
20
21 "Code" means the Internal Revenue Code of 1986, as
22 amended, and the rules and regulations thereunder.
23
24 "Cold Shutdown" means a "cold shutdown" of the Energy
25 Complex and the Mills for the maintenance of the Steam, Process
26 Water, Electricity and Compressed Air distribution systems, the
27 Process Sewers and storm sewers and other shared infrastructure.
28
29 "Common Facilities" has the meaning given in the Common
30 Facilities Agreement.
31
32 "Common Services Agreement" means the Common Services
33 Agreement, dated as of December 12, 1994, among MESC, Pulp Mill
34 Owner, Tissue Mill Owner and Paper Mill Owner.
35
36 "Compressed Air" means compressed air having the
37 characteristics set forth in Exhibit B to the Master Operating
38 Agreement.
39
40 "Compressed Air Load-Shedding Plan" means the load-
41 shedding plan set forth in Exhibit N to the Master Operating
42 Agreement, as such plan may be revised from time to time by the
43 Site Operating Committee.
44
45 "Condemnation" has the meaning given in Section 14.1(a)
46 of the Leases.
47
48 "Condemnor" has the meaning given in Section 14.1(d) of
49 the Leases.
50
51 "Confidentiality Agreement" means the Confidentiality
52 Agreement dated as of December 12, 1994, among SEI, MESC, Scott,
53 S.D. Warren Company [and Sappi], as amended, amended and restated
54 or otherwise modified from time to time.
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<PAGE>
1 "Consent" means any authorization, waiver, release,
2 exemption, consent or other approval of, from or imposed by any
3 Person (other than a Governmental Authority).
4
5 "Consent to Assignment" means the Consent to Assignment
6 in the form of Exhibit V to the Asset Purchase Agreement.
7
8 "Contract" means any written agreement, contract,
9 commitment, note, loan, evidence of indebtedness, purchase or
10 sales order, letter of credit, franchise agreement, undertaking,
11 covenant not to compete, employment agreement, license,
12 instrument, obligation or commitment.
13
14 "Contract Year" means (i) for the first Contract Year,
15 the period beginning on the Closing Date and ending at 7a.m.
16 Mobile, Alabama time on the last Saturday of the immediately
17 succeeding calendar year and (ii) thereafter, each period
18 beginning at 7a.m., Mobile, Alabama time on the last Saturday of
19 December and ending at 7a.m., Mobile, Alabama time on the last
20 Saturday of December of the immediately succeeding calendar year,
21 provided that the final Contract Year shall terminate on the date
22 that the Master Operating Agreement or Energy Services Agreement,
23 as applicable, expires or is otherwise terminated in accordance
24 with the terms thereof.
25
26 "Control of the Premises" has the meaning given in
27 Section 11.5(e)(iv)(C)(i) of the Leases.
28
29 "Consuming Facilities" has the meaning given in Section
30 5.1(a) of the Master Operating Agreement.
31
32 "Consuming Facility Owners" has the meaning given in
33 Section 5.1(a) of the Master Operating Agreement.
34
35 "Conversion Demand" or "CD" means 42.7 MMlb of virgin
36 dry black liquor solids per week as such amount may be adjusted
37 pursuant to Exhibit C of the Master Operating Agreement.
38
39 "Conversion Demand Band" means a range between (and
40 inclusive of) 42.7MMlb and 34.16 MMlb of Virgin Dry Black Liquor
41 Solids/week, provided that beginning the first Day of the third
42 Contract Year, the Conversion Demand Band shall equal a range
43 between (and inclusive of) the revised Conversion Demand as a
44 result of the Testing and eighty percent (80%) of the Maximum
45 Liquor Processing Capacity on the first Day of the third Contract
46 Year, provided that if the Maximum Liquor Processing Capacity
47 subsequently changes, then the Conversion Demand Band shall be
48 reset to equal a range between (and inclusive of) the Maximum
49 Liquor Processing Capacity and eighty percent (80%) of the
50 Maximum Liquor Processing Capacity.
51
52 "Conversion Demand Charge" has the meaning given in
53 Section 7.2 of the Pulp Mill Energy Services Agreement.
54
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<PAGE>
1 "Conversion Demand Charge Reduction Factor" means (i)
2 the Liquor Processing Curtailment Amount divided by the then
3 Current Liquor Processing Nomination for the period during which
4 the Liquor Processing Shortfall Event occurred.
5
6 "Converted Demand" has the meaning given in Section
7 3.10(d) of the Master Operating Agreement.
8
9 "Credits" means all claims, credits, causes of action,
10 choses in action, rights of recovery and rights of set-off of any
11 kind held by Scott against any person or entity relating to the
12 Assets or the operation of the Energy Complex, including, without
13 limitation, insurance proceeds relating to the Assets, as more
14 particularly described on Schedule 1.1(c) to the Asset Purchase
15 Agreement.
16
17 "Curing Mill Owner" has the meaning given in Section
18 11.3(a) of the Master Operating Agreement.
19
20 "Current Liquor Processing Nomination" has the meaning
21 given in Section 3.5(b)(i) of the Master Operating Agreement.
22
23 "Current Nomination" means (i) when applied to Liquor
24 Processing Services, the Current Liquor Processing Nomination,
25 (ii) when applied to Steam Processing Services, the Current Pulp
26 Mill Steam Processing Nomination, the Current Paper Mill Steam
27 Processing Nomination and the Current Tissue Mill Steam
28 Processing Nomination, individually or collectively, as the
29 context may require, and (iii) when applied to Power Processing
30 Services, the Current Pulp Mill Power Processing Nomination, the
31 Current Paper Mill Power Processing Nomination and the Current
32 Tissue Mill Power Processing Nomination, individually or
33 collectively, as the context may require.
34
35 "Current Paper Mill Power Processing Nomination" means
36 the maximum amount of power processing required of MESC, measured
37 in kilowatts, pursuant to the Paper Mill Energy Services
38 Agreement during any fifteen (15) minute period during such Day,
39 which amount (when taken together with the Current Pulp Mill
40 Power Processing Nomination and the Current Tissue Mill Power
41 Processing Nomination) shall not exceed the Aggregate Power
42 Processing Demand, as such nomination may be revised from time to
43 time in accordance with Section 3.5(c) of the Master Operating
44 Agreement.
45
46 "Current Paper Mill Steam Processing Nomination" means
47 the maximum amount of each of 50 psi Steam, 135 psi Steam, 300
48 psi Steam and 55 psi Steam, measured in MMBTUs, to be processed
49 by MESC pursuant to the Paper Mill Energy Services Agreement
50 during any one (1) hour period during such Day, which amount
51 (when taken together with the Current Pulp Mill Steam Processing
52 Nomination and the Current Tissue Mill Steam Processing
53 Nomination) shall not exceed the Aggregate Power Processing
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<PAGE>
1 Demand, as such nomination may be revised from time to time in
2 accordance with Section 3.5(c) of the Master Operating Agreement.
3
4 "Current Paper Mill Power Processing Nomination" means
5 the maximum amount of power processing required of MESC, measured
6 in kilowatts, pursuant to the Paper Mill Energy Services
7 Agreement during any fifteen (15) minute period during such Day,
8 which amount (when taken together with the Current Paper Mill
9 Power Processing Nomination and the Current Tissue Mill Power
10 Processing Nomination) shall not exceed the Aggregate Power
11 Processing Demand, as such nomination may be revised from time to
12 time in accordance with Section 3.5(c) of the Master Operating
13 Agreement.
14
15 "Current Power Processing Nomination" means the Current
16 Pulp Mill Power Processing Nomination, the Current Tissue Mill
17 Power Processing Nomination and the Current Tissue Mill Power
18 Processing Nomination.
19
20 "Current Pulp Mill Steam Processing Nomination" means
21 the maximum amount of each of 50 psi Steam, 135 psi Steam, 300
22 psi Steam and 55 psi Steam, measured in MMBTUs, to be processed
23 by MESC pursuant to the Pulp Mill Energy Services Agreement
24 during any one (1) hour period during such Day, which amount
25 (when taken together with the Current Paper Mill Steam Processing
26 Nomination and the Current Tissue Mill Steam Processing
27 Nomination) shall not exceed the Aggregate Power Processing
28 Demand, as such nomination may be revised from time to time in
29 accordance with Section 3.5(c) of the Master Operating Agreement.
30
31 "Current Steam Processing Nomination" means the Current
32 Pulp Mill Steam Processing Nomination, the Current Tissue Mill
33 Steam Processing Nomination and the Current Tissue Mill Steam
34 Processing Nomination.
35
36 "Current Tissue Mill Power Processing Nomination" means
37 the maximum amount of power processing required of MESC, measured
38 in kilowatts, pursuant to the Tissue Mill Energy Services
39 Agreement during any fifteen (15) minute period during such Day,
40 which amount (when taken together with the Current Paper Mill
41 Power Processing Nomination and the Current Pulp Mill Power
42 Processing Nomination) shall not exceed the Aggregate Power
43 Processing Demand, as such nomination may be revised from time to
44 time in accordance with Section 3.5(c) of the Master Operating
45 Agreement.
46
47 "Current Tissue Mill Steam Processing Nomination" means
48 the maximum amount of each of 50 psi Steam, 135 psi Steam, 300
49 psi Steam and 55 psi Steam, measured in MMBTUs, to be processed
50 by MESC pursuant to the Tissue Mill Energy Services Agreement
51 during any one (1) hour period during such Day, which amount
52 (when taken together with the Current Pulp Mill Steam Processing
53 Nomination and the Current Paper Mill Steam Processing
54 Nomination) shall not exceed the Stipulated Power Processing
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<PAGE>
1 Capacity, as such nomination may be revised from time to time in
2 accordance with Section 3.5(c) of the Master Operating Agreement.
3
4 "CWA" means the Clean Water Act, 33 U.S.C. Section 1251
5 et seq.
6
7 "Daily Nominations Report" means the report to be
8 completed by the Daily Site Operating Committee pursuant to
9 Section 3.5(b) of the Master Operating Agreement, which report
10 shall consist of (i) a completed form of Daily Nomination Request
11 and (ii) the other items required to be set forth on such form by
12 the last paragraph of Section 3.5(b) of the Master Operating
13 Agreement.
14
15 "Daily Nomination Request" means the request for
16 Processing Services made by each Mill Owner at each Site Morning
17 Meeting by filling in those items on the form of Daily
18 Nominations Request attached as Exhibit G to the Master Operating
19 Agreement which indicate which production units which will be in
20 operation at such Mill Owner's Mill during any given Day, and the
21 levels at which each such unit shall be run.
22
23 "Daily Power Processing Amount" means the Daily Pulp
24 Mill Power Processing Amount, the Paper Mill Daily Power
25 Processing Amount and the Tissue Mill Daily Power Processing
26 Amount, as the context may require.
27
28 "Daily Steam Processing Amount" means the Pulp Mill
29 Daily Steam Processing Amount, the Paper Mill Daily Steam
30 Processing Amount and the Tissue Mill Daily Steam Processing
31 Amount, as the context may require.
32
33 "Daily Site Operating Committee" has the meaning given
34 in Section 3.4(a) of the Master Operating Agreement.
35
36 "Daily Site Operating Committee Guidelines" means those
37 guidelines set forth in Exhibit E to the Master Operating
38 Agreement, as they may be revised from time to time by the Site
39 Operating Committee.
40
41 "Date of Taking" has the meaning given in Section
42 14.1(b) of the Leases.
43
44 "Day" means a period of twenty-four (24) consecutive
45 hours beginning and ending at 7a.m. The reference date for any
46 Day shall be the calendar date on which the twenty-four (24) hour
47 period begins.
48
49 "Demand" means Steam Processing Demand, Power
50 Processing Demand or Conversion Demand, individually or
51 collectively, as the context may require.
52
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<PAGE>
1 "Demand Anniversary Date" means the first (1st) day of
2 the sixth (6th) Contract Year and the first day of every second
3 Contract Year thereafter.
4
5 "Demand Charge" means the Conversion Demand Charge, the
6 Steam Processing Demand Charge and the Power Processing Demand
7 Charge, individually or collectively, as the context may require.
8
9 "Demand Charge Escalator" means ____________________.
10
11 "Demand Charge Reduction" means the Pulp Mill Demand
12 Charge Reduction, the Paper Mill Demand Charge Reduction and the
13 Tissue Mill Demand Charge Reduction, individually or
14 collectively, as the context may require.
15
16 "Demand Period" means the five (5) Contract Year period
17 prior to the first (1st) Demand Anniversary Date and each two (2)
18 Contract Year period between the successive Demand Anniversary
19 Dates.
20
21 "Demand Reservation Charge" means an amount equal to
22 the portion of MESC's shutdown, "mothballing" and maintenance
23 costs reasonably incurred in order to preserve any Reserved
24 Demand for a Mill Owner.
25
26 "Deposits" means all deposits, refunds, prepayments and
27 prepaid expenses relating to the Assets or the operation of the
28 Energy Complex, as listed on Schedule 1.1(d) to the Asset
29 Purchase Agreement.
30
31 "Digester Foul Condensate" means foul condensate
32 generated by the Pulp Mill, having the characteristics set forth
33 in Exhibit B to the Master Operating Agreement.
34
35 "Digester Foul Condensate Delivery Point" means the
36 locations at which Pulp Mill Owner shall deliver Digester Foul
37 Condensate to MESC pursuant to the Pulp Mill Energy Services
38 Agreement, as more particularly described in Exhibit T to the
39 Master Operating Agreement.
40
41 "Dispute" has the meaning given in Section 16.1 of the
42 Master Operating Agreement.
43
44 "Dollars" or "$" means United States dollars or such
45 coin or currency of the United States of America as at the time
46 of payment shall be legal tender for the payment of public and
47 private debts in the United States of America.
48
49 "DSOC Member" has the meaning given in Section 3.4(a)
50 of the Master Operating Agreement.
51
52 "Emills" means the total Kwh measured at and delivered to
53 the Pulp Mill, Paper Mill and Tissue Mill, supplied by both MESC
54 and APC, during the relevant Billing Period.
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<PAGE>
1 "Epaper" means the total Kwh measured at and delivered to
2 the Paper Mill, supplied by both MESC and APC, during the
3 relevant Billing Period.
4
5 "Epulp" means the total Kwh measured at and delivered to
6 the Pulp Mill, supplied by both MESC and APC, during the relevant
7 Billing Period.
8
9 "Etissue" means the total Kwh measured at and delivered
10 to the Tissue Mill, supplied by both MESC and APC, during the
11 relevant Billing Period.
12
13 "Easement Deeds" means (a) the Easement Deed between
14 MESC and Scott, as Pulp Mill Owner, dated as of December 12,
15 1994, granting MESC certain easements located on Lots 3, 5, 8 and
16 11 of the Scott Subdivision; (b) the Easement Deed between MESC
17 and Scott, as Pulp Mill Owner, dated as of December 12, 1994,
18 granting Scott, as Pulp Mill Owner, certain easements located on
19 Lots 7 and 9 of the Scott Subdivision; (c) the Easement Deed
20 between MESC and Scott, as Tissue Mill Owner, dated as of
21 December 12, 1994, granting MESC certain easements located on
22 Lots 6 and 10 of the Scott Subdivision; (d) the Easement Deed
23 between MESC and Scott, as Tissue Mill Owner, dated as of
24 December 12, 1994, granting Scott, as Tissue Mill Owner, certain
25 easements located on Lots 7 and 9 of the Scott Subdivision; (e)
26 the Easement Deed between MESC and Paper Mill Owner, dated as of
27 December 12, 1994, granting MESC certain easements located on
28 Lots 1, 2 and 4 of the Scott Subdivision; and (f) the Easement
29 Deed between MESC and Paper Mill Owner, dated as of December 12,
30 1994, granting Paper Mill Owner certain easements located on Lots
31 7 and 9 of the Scott Subdivision.
32
33 "Electricity" means electrical energy generated by the
34 Energy Complex, as measured at the Pulp Mill Power Processing
35 Delivery Point, the Tissue Mill Power Processing Delivery Point
36 and/or the Paper Mill Power Processing Delivery Point, as
37 applicable, provided to Pulp Mill Owner, Tissue Mill Owner and
38 Paper Mill Owner pursuant to the Energy Services Agreements.
39
40 "Electricity Load-Shedding Plan" means the load-
41 shedding plan set forth in Exhibit L to the Master Operating
42 Agreement, as such plan may be revised from time to time by the
43 Site Operating Committee.
44
45 "Electricity Measuring Devices" means those devices
46 described on Exhibit U to the Master Operating Agreement.
47
48 "Employee" means an employee currently or formerly
49 employed by Seller in the Energy Complex or for whom an ERISA
50 Affiliate may have any liability as a result of such employment.
51
52 "Employee Benefit Plan" means any employee benefit
53 plan, program or arrangement, whether oral or written, which
54 Seller or an ERISA Affiliate maintains, participates in or
A-17
<PAGE>
1 contributes to, and which covers and provides benefits for any
2 Energy Complex Employee, including without limitation the
3 following types of Employee Benefit Plans:
4
5 (A) Executive Arrangements - any profit sharing, stock
6 option, stock appreciation, phantom stock,
7 deferred compensation, severance, golden parachute
8 or other executive compensation plan, rabbi trust,
9 program, contract, arrangement or practice;
10
11 (B) ERISA Plans - any "employee benefit plan" (as
12 defined in Section 3(3) of ERISA), including, but
13 not limited to, any Multiemployer Plan, Pension
14 Plan or Welfare Plan; and
15
16 (C) Other Employee Fringe Benefits - any stock
17 purchase, scholarship, day care, prepaid legal
18 services, severance pay or other fringe benefits
19 plan, program, arrangement, contract or practice.
20
21 "Employee Transition Agreement" means the Employee
22 Transition Agreement dated as of December 12, 1994, among Scott,
23 MESC and SEI, substantially in the form of Exhibit O to the Asset
24 Purchase Agreement.
25
26 "End of Term Option" has the meaning given in Section
27 16.2 of the Lease.
28
29 "End of Term Option Term" has the meaning given in
30 Section 16.2 of the Lease.
31
32 "Energy Accounting Interval" means one (1) hour.
33
34 "Energy Complex" means the cogeneration power
35 production and recovery complex located on the grounds of Scott's
36 pulp and tissue mill in Mobile, Alabama and including the Assets
37 and the Leased Premises, as generally described on Schedule
38 1.1(e) to the Asset Purchase Agreement.
39
40 "Energy Complex Annual Operating Plan" means the annual
41 operating plan to be furnished by MESC to the Site Operating
42 Committee pursuant to Section 3.3(a) of the Master Operating
43 Agreement.
44
45 "Energy Complex Bond Documents" means the Asset Lease
46 Assumption Agreements the [TRT Agreement] and the [Bond Transfer
47 Agreement].
48
49 "Energy Complex Bonds" means those bonds described in
50 Recital E to the Asset Purchase Agreement.
51
52 "Energy Complex Contracts" means the Contracts listed
53 on Part II of Schedule 4.6 to the Asset Purchase Agreement.
54
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<PAGE>
1 "Energy Complex Employees" means those employees of
2 Scott assigned to the Energy Complex and listed on Schedule to
3 the Employee Transition Agreement.
4
5 "Energy Complex Operating Water Delivery Point" means
6 the location at which Pulp Mill Owner shall deliver Operating
7 Water to MESC, as more particularly described in Exhibit T to the
8 Master Operating Agreement.
9
10 "Energy Complex Outage" means an Outage with respect to
11 the Energy Complex.
12
13 "Energy Complex Permits" means the Permits listed on
14 Part I of Schedule 4.6 to the Asset Purchase Agreement.
15
16 "Energy Complex Premises" means Lots 7 and 9 of the
17 Scott Subdivision, excluding the compressed air station located
18 on Lot 9 [DESCRIPTION OF EXCLUDED LAND BEING PREPARED].
19
20 "Energy Complex Sanitary Sewage Delivery Point" means
21 the locations at which MESC shall deliver Sanitary Sewage to the
22 Pulp Mill pursuant to the Water Agreement, as more particularly
23 described in Exhibit T to the Master Operating Agreement.
24
25 "Energy Complex Scheduled Outage Allowance" has the
26 meaning given in Section 3.7(a)(i) of the Master Operating
27 Agreement.
28
29 "Energy Complex Triggering Event" means any of the
30 following occurrences which are not the result of a Force Majeure
31 Event or Permitted Energy Complex Outage: (i) a failure by MESC
32 to perform any of its obligations under Article 4 of any of the
33 Energy Services Agreements [or under Section 5.3 of the Master
34 Operating Agreement] which (a) [has a Mill Material Adverse
35 Effect] and (b) is a MESC Event of Default or (ii) [the Steam
36 Processing Availability Factor for any consecutive seven (7) Day
37 period during the Term is less than ninety percent (90%); (iii)
38 the Steam Processing Availability Factor is less than ninety
39 percent (90%) during any seven (7) Days within a fourteen (14)
40 Day period; (iv) an Unscheduled Outage of the entire Pulp Mill,
41 Paper Mill and Tissue Mill for any five (5) Day period during the
42 Term due to a cumulative shortfall in Processing Services; (v) an
43 Unscheduled Outage of the entire Pulp Mill, Paper Mill and Tissue
44 Mill for any five (5) Day within a fourteen (14) Day period
45 during the Term due to a cumulative shortfall in Processing
46 Services; (vi) one (1) paper machine or one (1) wet lap machine
47 is out of service for a fifteen Day period due to a shortfall in
48 a Processing Service; (vii) one (1) paper machine or one (1) wet
49 lap machine is out of service for any fifteen (15) Days within a
50 thirty (30) Day period due to a shortfall in a Processing
51 Service;] (viii) the occurrence of ( ) or more Unit
52 Trips during any ( ) Day period during the Term; (ix)
53 Unscheduled Energy Complex Outages in any Contract Year during
54 the Term exceed percent ( %) of the Energy Complex
A-19
<PAGE>
1 Unscheduled Outage Allowance applicable to such Contract Year;
2 (x) an Abandonment has occurred.
3
4 "Energy Complex Unscheduled Outage Allowance" and
5 "Energy Complex Unscheduled Outage Allowances" each have the
6 meaning given in Section 3.6(a)(iii) of the Master Operating
7 Agreement.
8
9 "Energy Complex Waste Water Delivery Point" means the
10 location at which MESC shall deliver Waste Water to the Pulp Mill
11 pursuant to the Water Agreement, as more particularly described
12 in Exhibit T to the Master Operating Agreement.
13
14 "Energy Services Agreements" means the Pulp Mill Energy
15 Services Agreement, the Tissue Mill Energy Services Agreement and
16 the Paper Mill Energy Services Agreement, individually or
17 collectively, as the context may require.
18
19 "Energy Tax" means ___________________.
20
21 "Environmental Claims" means all claims, demands,
22 suits, causes of action for personal injury or property damage
23 (excluding any depreciation of property values, lost use of
24 property, lost revenues, costs of specific performance or
25 consequential or punitive damages including any such claims,
26 demands, suits or causes of action occasioned by the claims,
27 demands, suits or causes of action of persons not party to the
28 Project Documents) arising out of Environmental Conditions or
29 Environmental Noncompliance, including, without limitation,
30 actual or threatened damages to natural resources; claims for the
31 recovery of response costs, or administrative or judicial orders
32 directing the performance of investigations, removal, remedial or
33 other response actions under CERCLA, RCRA or other Environmental
34 Laws; a requirement to implement "corrective action" pursuant to
35 any order or permit issued pursuant to RCRA; claims for
36 restitution, contribution or equitable indemnity from third
37 parties or any governmental agency; fines, penalties, liens
38 against property; claims for injunctive relief or other orders or
39 notices of violation from federal, state or local agencies or
40 courts; any requirement to install pollution control equipment to
41 comply with any Environmental Laws if the Mills were not in
42 compliance with such Laws prior to the Closing Date; and, with
43 regard to any present or former employees or other natural
44 persons, exposure to or injury from Environmental Conditions or
45 Environmental Noncompliance.
46
47 "Environmental Conditions" means (i) any environmental
48 conditions, circumstances or other matters of fact, pertaining
49 to, relating to or otherwise affecting the environment, including
50 without limitation any natural resources (including flora and
51 fauna), soil, surface water, ground water, any present or
52 potential drinking water supply, subsurface strata or the ambient
53 air, and relating to or arising out of the presence, use,
54 handling, storage, treatment, recycling, generation,
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<PAGE>
1 transportation, release, spilling, leaking, pumping, pouring,
2 emptying, discharging, injecting, escaping, leaching, disposal
3 (including, without limitation, the abandonment or discarding of
4 barrels, containers and other closed receptacles containing any
5 Hazardous Materials), dumping or threatened release (as such term
6 is used in CERCLA or other similar Environmental Laws) of
7 Hazardous Materials, and (ii) the exposure of any persons
8 (including, without limitation, any present or former employee)
9 to Hazardous Materials within any workplace within any of the
10 Mills or the Energy Complex (as the case may be), or the exposure
11 of other natural persons within or outside the boundaries of any
12 of the Mills or the Energy Complex (as the case may be) to
13 Hazardous Materials related to or otherwise arising from
14 operations, acts, omissions or other conduct at any of the Mills
15 or the Energy Complex (as the case may be).
16
17 "Environmental Expenses" means all liabilities, losses,
18 costs and expenses arising out of Environmental Conditions or
19 Environmental Noncompliance, including, without limitation, costs
20 of investigation, cleanup, remedial, removal or other response
21 action, the costs associated with posting financial assurances
22 for the completion of response, remedial or corrective actions,
23 the preparation of any closure or other necessary or required
24 plans or analyses, or other reports or analyses submitted to or
25 prepared by regulating agencies, including the cost of health
26 risk assessments, epidemiological studies and the like, retention
27 of engineers and other expert consultants, legal counsel, capital
28 improvements (including without limitation costs to install any
29 pollution control equipment to comply with any Environmental
30 Laws, if the Mills were not in compliance with such Laws prior to
31 the Closing Date), operation and maintenance testing and
32 monitoring costs, power and utility costs and pumping taxes or
33 fees, and administrative, oversight and other costs incurred by
34 Governmental Authorities; provided, however, that "Environmental
35 Expenses" shall only include those Environmental Expenses which
36 are reasonably necessary to incur and are in reasonable amounts
37 in view of the then existing circumstances giving rise to such
38 Environmental Expenses.
39
40 "Environmental Guaranty" means the Environmental
41 Guaranty dated as of December 12, 1994, by The Southern Company
42 in favor of the Mill Owners, substantially in the form of Exhibit
43 F to the Asset Purchase Agreement.
44
45 "Environmental Laws" means any law, regulation, rule or
46 ordinance now or hereafter in effect relating to Environmental
47 Conditions, including, without limitation, CERCLA, the TSCA, the
48 RCRA, the CWA, the CAA, the FIFRA, the AEA, the EPCRKA, the Safe
49 Drinking Water Act, 42 U.S.C. Section 300f et seq., the Hazardous
50 Materials Transportation Act, 49 U.S.C Section 1802, the Oil
51 Pollution Act of 1990, 33 U.S.C. Section 2761, the Occupational
52 Health and Safety Act, 29 U.S.C. Section 651 et seq., and the
53 Pollution Prevention Act, 42 U.S.C. Section 13101 et seq.; the
54 Alabama Environmental Laws; any amendments thereto now or
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<PAGE>
1 hereafter adopted or that otherwise become effective; any plans,
2 rules, regulations or ordinances adopted (including without
3 limitation fire, land use, zoning, and other codes and
4 regulations relating to Environmental Conditions), or other
5 guidelines, guidance or policies promulgated pursuant to the
6 preceding laws; and any common law principles (including without
7 limitation decisions by or orders of courts, agencies, boards of
8 appeals or similar bodies with mandatory or persuasive authority)
9 relating to the Environmental Conditions.
10
11 "Environmental Noncompliance" means any violation of
12 Environmental Laws, including, without limitation: (a) the
13 discharge, emission, release or threatened release (as such term
14 is used in CERCLA, the CWA, the CAA or other similar
15 Environmental Laws) of any Hazardous Materials in violation of
16 any Environmental Laws; (b) any noncompliance with Environmental
17 Laws regarding the construction, modification, operation and
18 maintenance of physical structures, equipment, processes or
19 facilities; (c) any noncompliance with federal, state or local
20 requirements governing occupational safety and health related to
21 Hazardous Materials; (d) any facility operations, procedures,
22 designs, or other matters which do not conform to the statutory
23 or regulatory requirements of Environmental Laws, including,
24 without limitation, the CAA, the CWA, the TSCA and the RCRA; (e)
25 the failure to have obtained or to maintain in full force and
26 effect Permits, variances or other authorizations necessary for
27 the legal operation of any equipment, process, facility or any
28 other activity, to the extent required for compliance with
29 Environmental Laws; or (f) the operation of any facility, process
30 or equipment in violation of any Permit condition, schedule of
31 compliance, administrative or court order, to the extent required
32 for compliance with Environmental Laws.
33
34 "Environmental Report" means collectively, (i) that
35 certain Phase I Environmental Site Assessment dated September
36 1994; (ii) that certain Phase II Environmental Site Assessment
37 dated November 1994; (iii) that certain Compliance Assessment
38 dated December __, 1994; and (iv) that certain Expanded Landfill
39 Assessment regarding the Lott Road Landfill dated December __,
40 1994, each of which were prepared by Dames & Moore.
41
42 "EPCRKA" means the Emergency Planning and Community
43 Right to Know Act, 42 U.S.C. Section 11001 et seq.
44
45 "ERISA" means the Employee Retirement Income Security
46 Act of 1974, as amended.
47
48 "ERISA Affiliate" means any entity which is a member of
49 a "controlled group of corporations" with or is under "common
50 control" with Seller as defined in Section 414(b), (c), (m) or
51 (o) of the Code.
52
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<PAGE>
1 "ERISA Plan", "ERISA Pension Plan", or "ERISA Welfare
2 Plan" means an Employee Benefit Plan, a Pension Plan, or a
3 Welfare Plan, respectively, which is subject to ERISA.
4
5 "ESA Renewal Term" means the Pulp Mill ESA Renewal
6 Term, the Tissue Mill ESA Renewal Term or the Paper Mill ESA
7 Renewal Term, individually or collectively, as the context may
8 require.
9
10 "Escalated at PPI" means, where used in relation to a
11 dollar value in this Agreement or the Energy Services Agreements,
12 that the applicable dollar value shall be adjusted by reference
13 to a factor, the numerator of which is, as of the Reference Date,
14 the latest available PPIn and the denominator of which is PPIbase.
15
16 "Estimated Common Services" has the meaning given in
17 Section ____ of the Common Services Agreement.
18
19 "Estoppel and Consent" has the meaning given in Section
20 11.1(a) of the Lease.
21
22 "Evaporator Clean Condensate" means evaporator clean
23 condensate derived from the processing of Digester Foul
24 Condensate by MESC pursuant to the Pulp Mill Energy Services
25 Agreement, having the characteristics set forth in Exhibit B to
26 the Master Operating Agreement.
27
28 "Evaporator Clean Condensate Delivery Point" means the
29 locations at which MESC shall deliver Evaporator Clean Condensate
30 to Pulp Miller Owner pursuant to the Pulp Mill Energy Services
31 Agreement, as more particularly described in Exhibit T to the
32 Master Operating Agreement.
33
34 "Excluded Assets" means, notwithstanding any other
35 provision of the Asset Purchase Agreement, the following assets
36 of Scott which are not to be acquired by Buyer under the Asset
37 Purchase Agreement:
38
39 (a) Cash, certificates of deposit and other bank
40 deposits, treasury bills and other cash equivalents;
41
42 (b) life insurance policies of officers and other
43 employees of Seller and other insurance policies relating to the
44 Energy Complex;
45
46 (c) all refunds or credits, if any, of Taxes due
47 to or from Seller and (i) accrued on or before the Closing Date
48 or (ii) which otherwise cannot be assigned by law;
49
50 (d) all claims, causes of action, choses in
51 action, rights of recovery and rights of set-off of any kind
52 against any person or entity arising out of or relating to the
53 Energy Complex or the Assets to the extent related to Excluded
54 Liabilities and accrued on or before the Closing Date;
A-23
<PAGE>
1 (e) the Underground Storage Tanks;
2
3 (f) the Air Compressor Facilities; and
4
5 (g) the other real and personal property of Seller
6 listed or described on Schedule 1.1(g) to the Asset Purchase
7 Agreement.
8
9 "Excluded Liabilities" has the meaning given in Section
10 2.3 of the Asset Purchase Agreement.
11
12 "Exercise Notice" means _____________________.
13
14 "Existing SEI Pension Plan" means the Pension Plan For
15 Employees of Southern Company Services, Inc., as adopted by SEI.
16
17 "Expanded Site Operating Committee" means a committee
18 comprised of the Site Operating Committee and additional non-
19 voting members selected by the Site Operating Committee to
20 schedule and oversee Cold Shutdowns.
21
22 "Export Chip Biomass" means bark, fines, knots and
23 other rejects from off-site woodyards, chipyards, and debarking
24 facilities, which are used in creating pulp chips not intended
25 for the Pulp Mill, and which are owned by or under dedicated
26 contracts to supply other than the Pulp Mill.
27
28 "Facility" has the meaning given in Article 2 of the
29 Lease.
30
31 "FERC" means the Federal Energy Regulatory Commission,
32 and any successor thereto.
33
34 "FIFRA" means the Federal Insecticide, Fungicide and
35 Rodenticide
36 Act, 7 U.S.C. Section 136 et seq.
37
38 "Financial Adjustment" means an adjustment in the
39 amounts payable to MESC as a result of a Financial Adjustment
40 Event and as determined in accordance with Article 8 of the
41 Master Operating Agreement.
42
43 "Financial Adjustment Events" has the meaning given in
44 Section 8.2 of the Master Operating Agreement.
45
46 "Financial Adjustment Event Notice" has the meaning set
47 forth in Section 8.4 of the Master Operating Agreement.
48
49 "Financial Adjustment Event Record" has the meaning set
50 forth in Section 8.10 of the Master Operating Agreement.
51
52 "Financial Effects" means Adverse Financial Effects and
53 Beneficial Financial Effects, individually or collectively, as
54 the context may require.
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<PAGE>
1 "Financing" means [the financing (or refinancing) of
2 the acquisition of the Assets by MESC at any time on or
3 after the Closing Date].
4
5 "Financing Documents" means the documents, instruments
6 and other agreements evidencing, and securing the payment of, the
7 Financing.
8
9 "Fire Prevention Water" means the water for fire
10 protection to be provided by Pulp Mill Owner pursuant to Article
11 6 of the Water Agreement.
12
13 "Fixtures and Equipment" means the power boilers,
14 recovery boilers, turbines, transmission lines, water pipelines,
15 natural gas supply lines, evaporator trains, storage tanks, air
16 compressors, feedwater treatment systems, air emission control
17 systems, cooling towers, control rooms and other auxiliaries,
18 furniture, office equipment, communications equipment, fixtures,
19 furnishings, machinery, vehicles, spare parts, equipment,
20 computers, air conditioning ventilation and heating equipment,
21 control stations, keys and other tangible personal property owned
22 and used by Scott in connection with the operation of the Energy
23 Complex and listed on Schedule 1.1(f) to the Asset Purchase
24 Agreement (which Schedule also includes Fixtures and Equipment
25 that comprise part of the Leased Assets).
26
27 "Force Majeure Event" (i) with respect to the Pulp Mill
28 Energy Services Agreement, has the meaning given in Section 11.1
29 of the Pulp Mill Energy Services Agreement, (ii) with respect to
30 the Tissue Mill Energy Services Agreement, has the meaning given
31 in Section 11.1 of the Tissue Mill Energy Services Agreement,
32 (iii) with respect to the Paper Mill Energy Services Agreement,
33 has the meaning given in Section 11.1 of the Paper Mill Energy
34 Services Agreement and (iv) with respect to the Master Operating
35 Agreement, has the meaning given in Section 12.1 of the Master
36 Operating Agreement.
37
38 ["Forfeited Demand" has the meaning given in Section
39 3.10(c) of the Master Operating Agreement.]
40
41 "Freeze Condition Preparedness Committee" has the
42 meaning given in Section 3.8(b) of the Master Operating
43 Agreement.
44
45 "Freeze Condition Preparedness Plan" has the meaning
46 given in Section 3.8(b) of the Master Operating Agreement.
47
48 "GAAP" means generally accepted accounting principles
49 in the United States, consistently applied.
50
51 "Gas" means natural gas provided to the Consuming
52 Facility Owners pursuant to Section 5.1 of the Master Operating
53 Agreement.
54
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<PAGE>
1 "Gas Delivery Point" means the location at which Tissue
2 mill Owner will cause Gas to be delivered to the Consuming
3 Facility Owners pursuant to the Master operating Agreement, as
4 more particularly described in Exhibit T to the Master Operating
5 Agreement.
6
7 "Gas Measuring Devices" means those devices described
8 in Exhibit T to the Master Operating Agreement.
9
10 "Governmental Authority" means any national, state or
11 local government (whether domestic or foreign), any political
12 subdivision thereof or any other governmental, quasi-
13 governmental, judicial, public or statutory instrumentality,
14 authority, body, agency, department, bureau or entity, (including
15 any zoning authority, the SEC, FERC, the Alabama PSC or any
16 comparable authority) or any arbitrator with authority to bind a
17 party at law.
18
19 "Governmental Rule" means any law, rule, regulation,
20 ordinance, order, code, Permit, interpretation, judgment, decree,
21 directive, guideline, policy or similar form of decision of any
22 Governmental Authority having the effect and force of law,
23 including without limitation any Environmental Laws.
24
25 "Green Liquor" means green liquor produced by the
26 processing of Black Liquor provided by Pulp Mill Owner to MESC
27 pursuant to the Pulp Mill Energy Services Agreement, having the
28 characteristics set forth in Exhibit B to the Master Operating
29 Agreement.
30
31 "Green Liquor Delivery Point" means the locations at
32 which MESC shall deliver Green Liquor to Pulp Mill Owner pursuant
33 to the Pulp Mill Energy Services Agreement, as more particularly
34 described in Exhibit T to the Master Operating Agreement.
35
36 "Hazardous Materials" means hazardous wastes, hazardous
37 substances, hazardous constituents, air contaminants or toxic
38 substances, whether solids, liquids or gases, including but not
39 limited to substances defined or otherwise regulated as
40 "hazardous materials," "regulated substances," "hazardous
41 wastes," "hazardous substances," "toxic substances,"
42 "pollutants," "contaminants," "carcinogens," "hazardous air
43 pollutants," "criteria pollutants," "reproductive toxins,"
44 "radioactive materials," "toxic chemicals," or other similar
45 designations in, or otherwise subject to regulation under, any
46 Environmental Laws, including without limitation, petroleum
47 hydrocarbons, asbestos-containing materials, urea formaldehyde
48 foam insulation, polychlorinated biphenyls and radionuclides.
49
50 "HHVbioagt" means BTU/lbbioagt, as determined at a
51 frequency necessary as judged by the Site Operating Committee to
52 achieve a technically valid and statistically valid Biomass
53 Testing Protocol.
54
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<PAGE>
1 "HHVbioexp" means BTU/lbbioexp, as determined at a
2 frequency necessary as judged by the Site Operating Committee to
3 achieve a technically valid and statistically valid Biomass
4 Testing Protocol.
5
6 "HHVbiotim" means BTU/lbbiotim, as determined at a
7 frequency necessary as judged by the Site Operating Committee to
8 achieve a technically valid and statistically valid Biomass
9 Testing Protocol.
10
11 "HHVbiowy" means BTU/lbbiowy, as determined at a frequency
12 necessary as judged by the Site Operating Committee to achieve a
13 technically valid and statistically valid Biomass Testing
14 Protocol.
15
16 "HHVbl" means BTU/lbdry solids (virgin), as determined at a
17 frequency necessary as judged by the Site Operating Committee to
18 achieve technically accurate and statistically valid Black Liquor
19 Testing Protocol;
20
21 "Hourly Energy Complex Employee" means an Energy
22 Complex Employee who is covered by a collective bargaining
23 agreement.
24
25 "Hourly Pension Plan" means the Scott Paper Company
26 Retirement Plan for Hourly Employees (Non-Contributory).
27
28 "Hot Process Water" means water which is a by-product
29 of the Liquor Processing Services provided by MESC pursuant to
30 the Pulp Mill Energy Services Agreement, having the
31 characteristics set forth in Exhibit B to the Master Operating
32 Agreement.
33
34 "Hot Process Water Delivery Point" means the location
35 at which MESC shall deliver Hot Process Water to Pulp Mill Owner
36 pursuant to the Pulp Mill Energy Services Agreement, as more
37 particularly described in Exhibit T to the Master Operating
38 Agreement.
39
40 "Hot Process Water Measuring Devices" means those
41 devices described on Exhibit U to the Master Operating Agreement
42 which are capable of measuring the quantity and quality of Hot
43 Process Water delivered by MESC to Pulp Mill Owner pursuant to
44 the Pulp Mill Energy Services Agreement.
45
46 "HSR Act" means the Hart-Scott-Rodino Antitrust
47 Improvements Act of 1976.
48
49 "Hurricane Preparedness Committee" has the meaning
50 given in Section 3.8(a) of the Master Operating Agreement.
51
52 "Hurricane Preparedness Plan" has the meaning given in
53 Section 3.8(a) of the Master Operating Agreement.
54
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<PAGE>
1 "IBEW" has the meaning given in Section 6.1 of the
2 Employee Transition Agreement.
3
4 "Impositions" has the meaning given in Section 5.4(a)
5 of the Leases.
6
7 "Indemnified Parties" means Scott Indemnified Parties,
8 Pulp Mill Owner Indemnified Parties, Tissue Mill Owner
9 Indemnified Parties, Paper Mill Owner Indemnified Parties or MESC
10 Indemnified Parties, as applicable.
11
12 "Industrial Development Board" means The Industrial
13 Development Board of the City of Mobile, Alabama.
14
15 "Initial Cure Period" means sixty (60) days.
16
17 "Initial Demand Period" means the period commencing on
18 the Closing Date and continuing until the fifth (5th) anniversary
19 of the Closing Date [Contract Year].
20
21 "Initial Lease Expiration Date" has the meaning given
22 in Section 3.1(a) of the Leases.
23
24 "Initial Lease Term" has the meaning given in Section
25 3.1(a) of the Leases.
26
27 "Initial Master Operating Agreement Term" has the
28 meaning given in Section 2.1 of the Master Operating Agreement.
29
30 "Initial Paper Mill ESA Term" has the meaning given in
31 Section 2.1 of the Paper Mill Energy Services Agreement.
32
33 "Initial Pulp Mill ESA Term" has the meaning given in
34 Section 2.1 of the Pulp Mill Energy Services Agreement.
35
36 "Initial Tissue Mill ESA Term" has the meaning given in
37 Section 2.1 of the Tissue Mill Energy Services Agreement.
38
39 "Interim Period" [has the meaning given in Exhibit Z to
40 the Master Operating Agreement.]
41
42 "Inter-Mill Default" means a final rating of BBB- or
43 better given to the Project by Standard and Poor and Fitch.
44
45 "Inter-Mill Events of Default" has the meaning given in
46 Section 11.1(a) of the Master Operating Agreement.
47
48 "Labor Dispute" means any national, regional or local
49 labor strikes, work stoppages, boycotts, walkouts and other labor
50 difficulties or shortages, including any of the foregoing which
51 affects access to the Energy Complex or a Mill or the ability to
52 ship or receive goods, including fuel or spare parts; provided
53 however, that a "Labor Dispute" shall not include (i) in the case
54 of MESC, any labor dispute at the Energy Complex or involving the
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<PAGE>
1 employees of MESC or the Operator; and (ii) in the case of a Mill
2 Owner, any labor dispute at such Mill Owner's Mill or involving
3 the Mill Owner's employees.
4
5 "Lease" means the Lease Agreement dated as of December
6 12, 1994, between Scott, as lessor, and MESC, as lessee.
7
8 "Leases" means the Lease and the Supplementary Lease.
9
10 "Leased Assets" means those assets leased, subleased or
11 assigned to Buyer pursuant to the Asset Lease Assumption
12 Agreements.
13
14 "Lease Assignment Agreement" has the meaning given in
15 Recital E to the Asset Purchase Agreement.
16
17 "Lease Events of Default", with respect to the Lease,
18 has the meaning given in Section 13.1(a) of the Lease and, with
19 respect to the Supplementary Lease, has the meaning given in
20 Section 13.1(a) of the Supplementary Lease.
21
22 "Leased Premises" has the meaning given in Article 2 of
23 the Leases, collectively.
24
25 "Leased Premises Closing" has the meaning given in
26 Section 16.5 of the Lease.
27
28 "Lease Renewal Expiration Date" has the meaning given
29 in Section 3.1(b) of the Lease.
30
31 "Lease Renewal Option", with respect to the Lease, has
32 the meaning given in Section 3.1(b) of the Lease and, with
33 respect to the Supplementary Lease, has the meaning given in
34 Section 3.1(b) of the Supplementary Lease.
35
36 "Lease Renewal Term" has the meaning given in Section
37 3.1(b) of the Leases.
38
39 "Lease Term" ", with respect to the Lease, has the
40 meaning given in Section 3.1(b) of the Lease and, with respect to
41 the Supplementary Lease, has the meaning given in Section 3.1(b)
42 of the Supplementary Lease.
43
44 "Leased Premises", with respect to the Lease, has the
45 meaning given in Article 2 of the Lease, and with respect to the
46 Supplementary Lease, has the meaning given in Article 2 of the
47 Supplementary Lease, and, with respect to the other Operative
48 Documents and this Exhibit A, has the meaning given in Article 2
49 of the Leases, collectively.
50
51 "Leasehold Interest", with respect to the Lease, has
52 the meaning given in Section 11.1(a) of the Lease and, with
53 respect to the Supplementary Lease, has the meaning given in
54 Section 11.1(a) of the Supplementary Lease.
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<PAGE>
1 "Leasehold Mortgage", with respect to the Lease, has
2 the meaning given in Section 11.1(a) of the Lease and, with
3 respect to the Supplementary Lease, has the meaning given in
4 Section 11.1(a) of the Supplementary Lease.
5
6 "Leasehold Mortgagee", with respect to the Lease, has
7 the meaning given in Section 11.1(b) of the Lease and, with
8 respect to the Supplementary Lease, has the meaning given in
9 Section 11.1(b) of the Supplementary Lease.
10
11 "Lender" means any Person providing the Financing,
12 other than MESC or any Affiliate of MESC.
13
14 "Lender Consent" means , in the
15 form of Exhibit AA to the Master Operating Agreement.
16
17 "Lien" means any Mortgage, lien, claim, pledge, option,
18 charge, easement, security interest, right-of-way, encroachment,
19 building or use restriction, conditional sales agreement,
20 encumbrance or other right of third parties, whether voluntarily
21 incurred or arising by operation of law, and includes, without
22 limitation, any agreement to give any of the foregoing in the
23 future, and any contingent sale or other title retention
24 agreement or lease in the nature thereof.
25
26 "Liquidated Damages" means the Liquor Processing
27 Damages, Steam Processing Liquidated Damages or Power Processing
28 Liquidated Damages, individually or collectively, as the
29 context may require.
30
31 "Liquor Hauling" means _____________________.
32
33 "Liquor Processing Charge" means the amount payable by
34 Pulp Mill Owner to MESC for Liquor Processing Services rendered
35 by MESC under the Pulp Mill Energy Services Agreement, which
36 amount shall be calculated in accordance with Part 4 of Exhibit C
37 to the Master Operating Agreement.
38
39 "Liquor Processing Curtailment Amount" means the amount
40 of black liquor reduction requested by the recovery operator
41 during a Liquor Processing Shortfall Event.
42
43 "Liquor Processing Demand Charge Reduction" has the
44 meaning given in Section 7.3(c)(i) of the Master Operating
45 Agreement.
46
47 ["Liquor Processing Factor" means, for the applicable
48 period, (i) the pounds of dry black liquor solids (on a virgin
49 basis), divided by (ii) air-dried tons of pulp.]
50
51 "Liquor Processing Liquidated Damages" has the meaning
52 given in Section 7.3(c)(i) of the Master Operating Agreement.
53
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<PAGE>
1 "Liquor Processing Requirement" means the Pulp Mill
2 Requirement of Liquor Processing Services, measured in MMlbs of
3 virgin dry black liquor solids per [week].
4
5 "Liquor Processing Services" means the processing of
6 Black Liquor into Green Liquor by the Energy Complex pursuant to
7 the Pulp Mill Energy Services Agreement.
8
9 "Liquor Processing Shortfall" means ______________.
10
11 "Liquor Processing Shortfall Event" has the meaning
12 given in Section 7.3(c)(i) of the Master Operating Agreement.
13
14 "Load-Shedding Plan" means the Steam Load-Shedding
15 Plan, the Electricity Load-Shedding Plan, the Compressed Air
16 Load-Shedding Plan, the Process Water Load-Shedding Plan or the
17 Waste Water Load-Shedding Plan, individually or collectively, as
18 the context may require.
19
20 "Local Tax" has the meaning given in Section 9.3(a) of
21 the Energy Services Agreement.
22
23 "Long-Term Maintenance Power" means the power purchased
24 by the Mill Owners from APC that is treated by APC as long-term
25 maintenance power under the terms of the 1986 Alabama Power
26 Contract, as the 1986 Alabama Power Contract was applied prior to
27 the Closing Date.
28
29 "Long-Term Maintenance Power Allowance" means the power
30 allowance calculated in accordance with Section F of Part 5 of
31 Exhibit I of the Master Operating Agreement related to the
32 megawatt hours of Long-Term Maintenance Power purchased by the
33 Mills.
34
35 "Losses" means any and all costs, expenses (including
36 reasonable attorneys' fees), claims, demands, losses,
37 liabilities, obligations, deficiencies, actions, lawsuits and
38 other proceedings, judgments and awards.
39
40 "Loss Proceeds Account" means an account established by
41 the Mill Owners and MESC with a financial institution acceptable
42 to MESC and the Mill Owners for the purpose of holding all MESC
43 Proceeds until such time as such MESC Proceeds are applied
44 pursuant to Section 10.7(b) of the Master Operating Agreement.
45
46 "Lot 9" has the meaning given in Recital D of the
47 Lease.
48
49 "Main Meter" has the meaning given in Section 5.1(e) of
50 the Master Operating Agreement.
51
52 "Maintenance Power" means Long-Term Maintenance Power
53 and Short-Term Maintenance Power, collectively.
54
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<PAGE>
1 "Maintenance Power Liquidated Damages" has the meaning
2 given in Section 7.3(c)(iii)(B).
3
4 "Major Maintenance Outage" means the temporary shutdown
5 of major equipment or machinery at the Energy Complex for any
6 major maintenance or overhaul thereof, the duration of which
7 major maintenance is set forth in Part 2 of Exhibit I to the
8 Master Operating Agreement and the timing of which shall be
9 determined by the Site Operating Committee in accordance with
10 Section 3.7(f) of the Master Operating Agreement.
11
12 "Major Maintenance Outage Allowance" means the power
13 allowance calculated in accordance with Section D of Exhibit I to
14 the Master Operating Agreement.
15
16 "Make-Up Water" means Pulp Mill Make-Up Water, Tissue
17 Mill Make-Up Water and Paper Mill Make-Up Water.
18
19 "Make-Up Water Delivery Point" means the locations at
20 which Pulp Mill Owner shall deliver Make-Up Water to MESC (on
21 behalf of Pulp Mill Owner, Tissue Mill Owner and Paper Mill
22 Owner) pursuant to the Energy Services Agreements and the Master
23 Operating Agreement, as more particularly described in Exhibit T
24 to the Master Operating Agreement.
25
26 "Make-Up Water Measuring Devices" means those devices
27 described in Exhibit U to the Master Operating Agreement which
28 are capable of measuring the quantity and quality of Make-Up
29 Water provided by Pulp Mill Owner, Tissue Mill Owner and Paper
30 Mill Owner to MESC pursuant to the Energy Services Agreements.
31
32 "Master Operating Agreement" means the Master Operating
33 Agreement dated as of December 12, 1994, between MESC and Scott,
34 in its capacity as each of Scott, Pulp Mill Owner and Tissue Mill
35 Owner and S.D. Warren Company, in its capacity as Paper Mill
36 Owner.
37
38 "Master Operating Agreement Renewal Term" has the
39 meaning given in Section 2.2 of the Master Operating Agreement.
40
41 "Material Adverse Effect" means an MESC Material
42 Adverse Effect or a Mill Material Adverse Effect.
43
44 "Maximum Biomass Capacity" means 120 short tons per
45 hour based on a maximum capacity for the No. 7 Power Boiler of 80
46 short tons per hour and a maximum capacity for the No. 6 Power
47 Boiler of 40 short tons per hour.
48
49 "Maximum Capacity" means the Maximum Liquor Processing
50 Capacity, Maximum Power Processing Capacity and Maximum Steam
51 Processing Capacity, individually or collectively, as the context
52 may require.
53
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<PAGE>
1 "Maximum Liquor Processing Capacity" means 42.7 MMlbs
2 of Virgin Dry Black Liquor Solids/week, which value shall
3 represent the technological capacity constraint associated with
4 the provision of Liquor Processing Services, as revised when
5 necessary by the Site Operating Committee to reflect additions to
6 or modifications of the Energy Complex or the Mills permitted by
7 the Master Operating Agreement or otherwise agreed upon by the
8 parties, provided that the Maximum Liquor Processing Capacity
9 shall be revised following the first Day of the third Contract
10 Year to 44.5 MMlbs of Virgin Dry Black Liquor Solids per week and
11 shall be reset [RESET WHEN] to reflect the decision of the SOC
12 following the Testing, but in no event less than 42.7MMlbs of
13 Virgin Dry Black Liquor Solids per week.
14
15 "Maximum Power Processing Capacity" means 94,000 KW,
16 which value shall represent the technological capacity constraint
17 associated with the provision of Power Processing Services, as
18 revised once pursuant to the Measuring, and by the Site Operating
19 Committee when necessary, to reflect additions to or
20 modifications of the Energy Complex or the Mills permitted by the
21 Master Operating Agreement or otherwise agreed upon by the
22 parties.
23
24 "Maximum Steam Processing Capacity" means 1,200
25 MMBTU/hr, which value shall represent the technological capacity
26 constraint associated with the provision of Steam Processing
27 Services, as revised when necessary by the Site Operating
28 Committee to reflect additions to or modifications of the Energy
29 Complex or the Mills permitted by the Master Operating Agreement
30 or otherwise agreed upon by the parties.
31
32 "Measuring" means the measure of the Aggregate Power
33 Processing Requirement, when total MESC generation equals 111,500
34 KW and the APC tie line equals zero (0), for any fifteen (15)
35 minute interval, using all such intervals in a Billing Period
36 that this is first achieved after December 1, 1995 (using the
37 meters which will be installed during the Interim Period).
38
39 "MESC" means Mobile Energy Services Company, Inc., an
40 Alabama corporation.
41
42 "MESC Contribution Amount" has the meaning given in
43 Section 10.7(a) of the Master Operating Agreement.
44
45 "MESC Cure Plan" has the meaning given in Section
46 11.4(a)(ii)(B) of the Master Operating Agreement.
47
48 "MESC Events of Default" means, as applied to any
49 Operative Document, the events of default listed therein and
50 designated "MESC Events of Default."
51
52 "MESC Indemnified Parties" means MESC, its Affiliates,
53 and its and their respective officers, directors, agents,
54 attorneys and employees.
A-33
<PAGE>
1 "MESC Material Adverse Effect" means a material adverse
2 effect on (a) the Assets, (b) the operation, maintenance or use
3 of the Energy Complex or the Leased Premises, (c) the use by MESC
4 or its Representatives any easement granted to MESC pursuant to
5 the Easement Deeds, (d) the ability of any of Scott, Pulp Mill
6 Owner, Tissue Mill Owner or Paper Mill Owner to observe and
7 perform its obligations under any of the Operative Documents or
8 (e) [OTHER].
9
10 "MESC Operating Water Requirement" means the MESC
11 Requirement of Operating Water on any Day.
12
13 "MESC Permitted Transfer" has the meaning given in
14 Section 15.1(a) of the Master Operating Agreement.
15
16 "MESC Proceeds" means all amounts and proceeds
17 (including instruments) in respect of any insurance policy
18 required to be maintained by MESC under Section 10.1 of the
19 Master Operating Agreement.
20
21 "MESC Processing By-Products" means Soap, Stripped
22 Condensate, Evaporator Clean Condensate, Hot Process Water,
23 Stripper Off Gases, Noncondensible Gases, Foul Oil and
24 .
25
26 "MESC Requirement" means, as applied to any product or
27 service provided by any of the Mills to MESC, that quantity of
28 such product or service required by MESC to fulfill its
29 obligations under the Energy Services Agreements and the Master
30 Operating Agreement during a specified time period.
31
32 "MESC SOC Representative" means a natural person with
33 the qualifications set forth in Section 3.1(a) of the Master
34 Operating Agreement, appointed to the Site Operating Committee by
35 MESC.
36
37 "MESC Step-In Rights" has the meaning given in Section
38 11.4(c)(ii)(A) of the Master Operating Agreement.
39
40 "Metered Flows" means Steam, Electricity, Black Liquor,
41 Return Condensate, Make-Up Water, Sludge, Biomass, Operating
42 Water, Coal and Natural Gas.
43
44 "Metering Contractor" has the meaning given in Section
45 6.2(a) of the Master Operating Agreement.
46
47 "Mill Annual Operating Plan" means the annual operating
48 plans to be furnished by each of the Mill Owners to the Site
49 Operating Committee pursuant to Section 3.3(b) of the Master
50 Operating Agreement.
51
52 "Mill Closure" means a Pulp Mill Closure, a Tissue Mill
53 Closure or a Paper Mill Closure, individually or collectively, as
54 the context may require.
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<PAGE>
1 "Mill Contracts" means all Contracts to which Pulp Mill
2 Owner, Tissue Mill Owner or Paper Mill Owner is a party or by
3 which Pulp Mill Owner, Tissue Mill Owner or Paper Mill Owner is
4 bound and which pertain to any part of the Mill or the operation
5 thereof.
6
7 "Mill Environmental Indemnity Agreements" means the
8 Pulp Mill Environmental Indemnity Agreement, the Paper Mill
9 Environmental Indemnity Agreement and the Tissue Mill
10 Environmental Indemnity Agreement.
11
12 "Mill Managers" means, with respect to each Mill Owner,
13 such Mill Owner's Plant Manager.
14
15 "Mill Material Adverse Effect" means, with respect to
16 any Mill Owner, a material adverse effect on (a) the operation,
17 maintenance or use of such Mill Owner's Mill or such Mill Owner's
18 portion of the Real Property, (b) the use by such Mill Owner or
19 its representatives of any easement granted to such Mill Owner by
20 MESC pursuant to the Easement Deeds, (c) the ability of MESC or
21 its Affiliates to observe and perform their respective
22 obligations under any of the Operative Documents.
23
24 "Mill Owner" means Pulp Mill Owner, Tissue Mill Owner
25 and Paper Mill Owner, individually or collectively, as the
26 context may require.
27
28 "Mill Owner Events of Default" means a Pulp Mill Owner
29 Event of Default, a Tissue Mill Owner Event of Default or a Paper
30 Mill Owner Event of Default.
31
32 "Mill Owner Step-In-Rights" has the meaning given in
33 Section 11.4(a)(ii)(A) of the Master Operating Agreement.
34
35 "Mill Permits" means all Permits necessary for the
36 conduct of, or relating to the ownership, use, operation or
37 maintenance of, any part of the Mill.
38
39 "Mill Permitted Transfer" has the meaning given in
40 Section 15.2(a) of the Master Operating Agreement.
41
42 "Mill Products" means Black Liquor, Weak Wash, Recycled
43 Brine, Digester Foul Condensate, Return Condensate, Make-Up
44 Water, Operating Water, Sludge, Biomass, Gas, Pulp, Boiler Ash
45 Service, Waste Water Treatment Services, Sanitary Sewage
46 Collection Services, Potable Water and Fire Prevention Water.
47
48 "Mills" means the Pulp Mill, the Tissue Mill and the
49 Paper Mill, collectively and "Mill" means any one of them, as the
50 context may require.
51
52 "Mill SOC Representative" means the Pulp Mill SOC
53 Representative, the Paper Mill SOC Representative or the Tissue
54 Mill SOC Representative, as applicable.
A-35
<PAGE>
1 "Mill-Wide Computer Information System" means
2 ____________________.
3
4 "Minimum Conversion Demand" means twenty percent (20%)
5 of the Maximum Liquor Processing Capacity.
6
7 "Minimum Economic Conversion Demand" means
8 _______________.
9
10 "Minimum Economic Power Processing Demand" means
11 _______________.
12
13 "Minimum Economic Steam Processing Demand" means
14 _______________.
15
16 ["Minimum Header Pressure" means (i) in the case of the
17 Paper Mill, the Paper Mill's Minimum 50 Header Pressure, the
18 Paper Mill's Minimum 130 Header Pressure, the Paper Mill's
19 Minimum 310 Header Pressure and the Paper Mill's Minimum 550
20 Header Pressure, individually or collectively, as the context may
21 require, each as set forth in Part 1 of Exhibit ; (ii) in the
22 case of the Pulp Mill, the Pulp Mill's Minimum 50 Header
23 Pressure, the Pulp Mill's Minimum 130 Header Pressure, the Pulp
24 Mill's Minimum 310 Header Pressure and the Pulp Mill's Minimum
25 550 Header Pressure, individually or collectively, as the context
26 may require, each as set forth in Part 2 of Exhibit ; and
27 (iii) in the case of the Tissue Mill, the Tissue Mill's Minimum
28 130 Header Pressure, the Tissue Mill's Minimum 310 Header
29 Pressure and the Tissue Mill's Minimum 550 Header Pressure,
30 individually or collectively, as the context may require, each as
31 set forth in Part 3 of Exhibit , provided that the minimum
32 header pressure set point shall be demonstrated to accommodate
33 all header pressure fluctuation due to Mill induced transient
34 conditions with the Energy Complex being operated according to
35 historical prudent operating standards.]
36
37 "Minimum Power Processing Demand" means thirty percent
38 (30%) of the then current Maximum Power Processing Capacity.
39
40 "Minimum Steam Processing Demand" means seven percent
41 (7%) of the then-current Maximum Steam Processing Capacity.
42
43 "Monetary Default", with respect to the Lease, has the
44 meaning given in Section 13.1(a)(i) of the Lease and, with
45 respect to the Supplementary Lease, has the meaning given in
46 Section 13.1(a)(i) of the Supplementary Lease.
47
48 "Month" means each four or five week period during each
49 Calendar Year, each of which shall begin at 7a.m. Mobile, Alabama
50 time on the last Saturday of the immediately preceding Month and
51 which shall end at 7a.m. on the date provided in Exhibit __ to
52 the Master Operating Agreement which corresponds to the
53 applicable calendar month.
54
A-36
<PAGE>
1 "Monthly Plans" means the monthly plans to be furnished
2 by the Site Operating Committee to MESC pursuant to Section
3 3.5(a) of the Master Operating Agreement.
4
5 "Mortgage" means any mortgage, deed of trust, deed to
6 secure debt, assignment, security interest, pledge, financing
7 statement or any other instrument(s) or agreement(s) intended to
8 grant security for any obligation encumbering an interest in real
9 property.
10
11 "Mortgagee's Cure" has the meaning given in Section
12 11.5(e)(iv) of the Leases.
13
14 "Mortgagee's Cure Rights" has the meaning given in
15 Section 11.5(e)(iv) of the Leases.
16
17 "Multiemployer Plan" means any Employee Benefit Plan
18 which is a "multiemployer plan," as defined in Section 3(37) and
19 Section 4001(a)(3) of ERISA.
20
21 "NetBTUpaper" means Steam Energy Processing usage by the
22 Paper Mill, net of Steam Condensate Return from the Paper Mill
23 during the relevant Billing Period.
24
25 "NetBTUpulp" means Steam Energy Processing usage by the
26 Pulp Mill, net of Steam Condensate Return from the Pulp Mill
27 during the relevant Billing Period.
28
29 "NetBTUtissue" means Steam Energy Processing usage by the
30 Tissue Mill, net of Steam Condensate Return from the Tissue Mill
31 during the relevant Billing Period.
32
33 "NetBTUtotal" means NetBTUpaper + NetBTUtissue + NetBTUpulp.
34
35 "New Lease" has the meaning given in Section 11.5(f) of
36 the Leases.
37
38 "New Tenant" has the meaning given in Section 11.5(f)
39 of the Leases.
40
41 "1984 Tax-Exempt Bonds" means those certain Variable
42 Rate Demand Solid Waste Revenue Refunding Bonds (Scott Paper
43 Company Project) Series 1984 A, B, C, D and E issued by the
44 Industrial Development Board in an original aggregate principal
45 amount of $93,000,000.
46
47 "1984 Tax-Exempt Lease Agreement" has the meaning given
48 in Recital E to the Asset Purchase Agreement.
49
50 "1984 Taxable Lease Agreement" has the meaning given in
51 Recital E to the Asset Purchase Agreement.
52
53 "1983 Alabama Power Contract" means the Agreement dated
54 as of July 20, 1983, between Scott and APC.
A-37
<PAGE>
1 "1986 Alabama Power Contract" means the Contract for
2 Electric Power dated as of April 14, 1986 between APC and Scott.
3
4 "1976 Tax-Exempt Lease Agreement" has the meaning given
5 in Recital E to the Asset Purchase Agreement.
6
7 "1973 Tax-Exempt Lease Agreement "has the meaning given
8 in Recital E to the Asset Purchase Agreement.
9
10 "Non-Affected Party" has the meaning given in
11 Section 12.2 of the Master Operating Agreement.
12
13 "Noncondensible Gas" means noncondensible gas produced
14 by the Energy Complex consisting of ___________, having the
15 characteristics set forth in Exhibit B to the Master Operating
16 Agreement.
17
18 "Noncondensible Gas Delivery Point" means the locations
19 at which MESC shall deliver Noncondensible Gas to Pulp Mill Owner
20 pursuant to the Pulp Mill Energy Services Agreement, as more
21 particularly described in Exhibit T to the Master Operating
22 Agreement.
23
24 "Non-Monetary Default" , with respect to the Lease, has
25 the meaning given in Section 13.1(a)(ii) of the Lease and, with
26 respect to the Supplementary Lease, has the meaning given in
27 Section 13.1(a)(ii) of the Supplementary Lease.
28
29 "Non-Technical Dispute" has the meaning given in
30 Section 16.1 of the Master Operating Agreement.
31
32 "Notice of Sale" has the meaning given in Section 16.1
33 of the Lease.
34
35 "Number 6 Evaporator Set" means the six-effect
36 evaporator set, including a high solids concentrator and foul
37 condensate stripping column located at the Energy Complex, and
38 designated as the Number 6 Evaporator Set.
39
40 "Number 6 Power Boiler" means the power boiler located
41 at the Energy Complex, and designated as the Number 6 Power
42 Boiler.
43
44 "Number 7 Power Boiler" means the multi-fuel power
45 boiler located at the Energy Complex, and designated as the
46 Number 7 Power Boiler.
47
48 "Number 7 Recovery Boiler" means the recovery boiler
49 located at the Energy Complex, and designated as the Number 7
50 Recovery Boiler.
51
52 "Number 8 Recovery Boiler" means the recovery boiler
53 located at the Energy Complex, and designated as the Number 8
54 Recovery Boiler.
A-38
<PAGE>
1 "Number 8 Testing" has the meaning given in Section 6.4
2 of the Master Operating Agreement.
3
4 "O&M Agreement" means the Operation and Maintenance
5 Agreement dated as of December 12, 1994, between MESC and SEI.
6
7 "Operating Water" means water to be provided by Pulp
8 Mill Owner to MESC, Tissue Mill Owner and Paper Mill Owner, and
9 to be used by Pulp Mill Owner, having the characteristics set
10 forth in Exhibit B to the Master Operating Agreement.
11
12 "Operating Water Measuring Devices" means those devices
13 described on Exhibit U to the Master Operating Agreement which
14 are capable of measuring the quantity and quality of Operating
15 Water delivered by Pulp Mill Owner to the Energy Complex, the
16 Tissue Mill and the Paper Mill pursuant to the Water Agreement.
17
18 "Operating Water Requirement" means the MESC Operating
19 Water Requirement, the Pulp Mill Operating Water Requirement, the
20 Tissue Mill Operating Water Requirement and the Paper Mill
21 Operating Water Requirement.
22
23 "Operational Change Threshold" has the meaning given in
24 Section 8.6(a) of the Master Operating Agreement.
25
26 "Operative Documents" means the Purchase Documents and
27 the Project Documents.
28
29 "Operator" means the Operator under the O&M Agreement.
30
31 "Option Exercise Deliveries" has the meaning given in
32 Section 16.3 of the Lease.
33
34 "Option Term" means _______________________.
35
36 "Outage" means a Scheduled Outage, a Major Maintenance
37 Outage or an Unscheduled Outage, as the context may require.
38
39 "Overdue Rate" means the Prime Rate plus two
40 percent (2%) per annum, not to exceed the maximum interest rate
41 allowed by then applicable law.
42
43 "Overuse Amount" has the meaning given in
44 Section 3.5(b) of the Master Operating Agreement.
45
46 "Paper Mill" means the "S.D. Warren" mill located in
47 Mobile, Alabama at Lots 1, 2 and 4 of the Scott Subdivision.
48
49 "Paper Mill Closure" means (i) a public announcement by
50 Paper Mill Owner that it will close the Paper Mill for a period
51 of at least ___ or that it will reduce production of paper at the
52 Paper Mill (permanently or for a period of at least ___) to less
53 than ___________ or (ii) the occurrence of a ___ period during
54 which, for any reason other than the occurrence of a Force
A-39
<PAGE>
1 Majeure Event, Paper Mill Owner's production of paper at the
2 Paper Mill is less than __________.
3
4 "Paper Mill Daily Power Processing Amount" means the
5 amount of Power Processing Services that Paper Mill Owner expects
6 to require during any given Day.
7
8 "Paper Mill Daily Steam Processing Amount" means the
9 amount of Steam Processing Services that Paper Mill Owner expects
10 to require during any given Day.
11
12 "Paper Mill Demand Charge Reduction" has the meaning
13 given in Section 7.3(c)(ii) of the Master Operating Agreement.
14
15 "Paper Mill Energy Services Agreement" shall mean the
16 Paper Mill Energy Services Agreement dated as of December 12,
17 1994, between S.D. Warren Company, in its capacity as Paper Mill
18 Owner, and MESC.
19
20 "Paper Mill Environmental Indemnity Agreement" means
21 the Paper Mill Environmental Indemnity Agreement dated as of
22 December 12, 1994, between MESC and Paper Mill Owner.
23
24 "Paper Mill ESA Renewal Term" has the meaning given in
25 Section 2.2(a) of the Paper Mill Energy Services Agreement.
26
27 "Paper Mill Make-Up Water" means water to be provided
28 to MESC by Paper Mill Owner pursuant to the Paper Mill Energy
29 Services Agreement in order to be converted into Steam, having
30 the characteristics set forth in Exhibit B to the Master
31 Operating Agreement.
32
33 "Paper Mill Operating Water Delivery Point" means the
34 locations at which Pulp Mill Owner shall deliver Operating Water
35 to Paper Mill Owner pursuant to the Master Operating Agreement,
36 as more particularly described in Exhibit T to the Master
37 Operating Agreement.
38
39 "Paper Mill Operating Water Requirement" means the
40 Paper Mill's requirement for Operating Water at any given time,
41 measured in gallons.
42
43 "Paper Mill Outage" means an Outage with respect to the
44 Paper Mill.
45
46 "Paper Mill Owner" means S.D. Warren Company, in its
47 capacity as the owner of the Paper Mill.
48
49 "Paper Mill Owner Events of Default" means, as applied
50 to any Project Document, the events of default listed therein and
51 designated "Paper Mill Owner Events of Default."
52
A-40
<PAGE>
1 "Paper Mill Owner Indemnified Parties" means Paper Mill
2 Owner, its Affiliates, and its and their respective officers,
3 directors, agents, attorneys and employees.
4
5 "Paper Mill Power Processing Charge" means the amount
6 payable by Paper Mill Owner to MESC for Power Processing Services
7 rendered by MESC pursuant to the Paper Mill Energy Services
8 Agreement, which amount shall be calculated in accordance with
9 Part 5 of Exhibit C to the Master Operating Agreement (and as
10 sometimes denominated as PPDpaper in such Exhibit C).
11
12 "Paper Mill Power Processing Delivery Point" means the
13 point of interconnection between the Energy Complex
14 and the Paper Mill [which is the load side of each 15KV bus
15 breaker feeding the Paper Mill], as more particularly described
16 in Exhibit T to the Master Operating Agreement.
17
18 "Paper Mill Power Processing Demand" or "PPDpaper" means
19 22,500 KW, as such amount may be adjusted pursuant to Exhibit C
20 to the Master Operating Agreement.
21
22 "Paper Mill Power Processing Demand Band" means a range
23 between (and inclusive of) 22,500 KW and 20,250 KW, which range
24 shall be adjusted once upon the completion of the Measuring
25 (using the meters which will be installed during the Interim
26 Period) so as to encompass the range between (and inclusive of)
27 the Paper Mill Power Processing Demand as revised pursuant to the
28 Measuring and an amount equal to ninety percent (90%) of such
29 revised Paper Mill Power Processing Demand, provided that this
30 Band shall not be further adjusted after the Measuring.
31
32 "Paper Mill Power Processing Demand Charge" has the
33 meaning given in Section 6.4(a) of the Paper Mill Energy Services
34 Agreement.
35
36 "Paper Mill Power Processing Requirement" means the
37 Paper Mill's requirement for Power Processing Services at any
38 given time, measured in kilowatts.
39
40 "Paper Mill Pulp Delivery Point" means the locations at
41 which Pulp Mill Owner shall deliver Pulp to the Paper Mill
42 pursuant to the Pulp Supply Agreement, as more particularly
43 described in [Exhibit T to the Master Operating Agreement].
44
45 "Paper Mill Requirement" means (i) as applied to Steam
46 Processing Services, Paper Mill Steam Processing Requirement,
47 (ii) as applied to Power Processing Services, the Paper Mill
48 Power Processing Requirement and (iii) as applied to Operating
49 Water, the Paper Mill Operating Water Requirement.
50
51 "Paper Mill Return Condensate" means water derived from
52 the Steam used by the Paper Mill, having the characteristics set
53 forth in Exhibit B to the Master Operating Agreement.
54
A-41
<PAGE>
1 "Paper Mill Return Condensate Delivery Point" means the
2 locations at which Paper Mill Owner shall deliver Paper Mill
3 Return Condensate to MESC pursuant to the Paper Mill Energy
4 Services Agreement, as more particularly described in Exhibit T
5 to the Master Operating Agreement.
6
7 "Paper Mill Sanitary Sewage Delivery Point" means the
8 locations at which Paper Mill Owner shall deliver Sanitary Sewage
9 to the Pulp Mill pursuant to the Master Operating Agreement, as
10 more particularly described in Exhibit T to the Master Operating
11 Agreement.
12
13 "Paper Mill Steam Delivery Points" means the Paper Mill
14 Steam 50 Delivery Point, the Paper Mill Steam 130 Delivery Point,
15 the Paper Mill Steam 310 Delivery Point and the Paper Mill Steam
16 550 Delivery Point.
17
18 "Paper Mill Steam Delivery Point" means the locations
19 at which MESC shall deliver Steam to Paper Mill Owner pursuant to
20 the Paper Mill Energy Services Agreement, as more particularly
21 described in Exhibit T to the Master Operating Agreement.
22
23 "Paper Mill Steam Energy Flow" is the sum of the Paper
24 Mill Steam 50 Flow, the Paper Mill Steam 130 Flow, the Paper Mill
25 Steam 310 Flow and the Paper Mill Steam 550 Flow (in MBTU/hr or
26 lb/hr as the context may require).
27
28 "Paper Mill Steam 50 Delivery Point" means the
29 locations at which MESC shall deliver [50 Steam] to Paper Mill
30 Owner pursuant to the Paper Mill Energy Services Agreement, as
31 more particularly described in Exhibit U to the Master Operating
32 Agreement.
33
34 "Paper Mill Steam 550 Delivery Point" means the
35 locations at which MESC shall deliver [550 Steam] to Paper Mill
36 Owner pursuant to the Paper Mill Energy Services Agreement, as
37 more particularly described in Exhibit U to the Master Operating
38 Agreement.
39
40 "Paper Mill Steam 130 Delivery Point" means the
41 locations at which MESC shall deliver [130 Steam] to Paper Mill
42 Owner pursuant to the Paper Mill Energy Services Agreement, as
43 more particularly described in Exhibit U to the Master Operating
44 Agreement.
45
46 "Paper Mill Steam Processing Charge" means the amount
47 payable by Paper Mill Owner to MESC for Steam Processing Services
48 rendered by MESC pursuant to the Paper Mill Energy Services
49 Agreement, which amount shall be calculated in accordance with
50 Exhibit C to the Master Operating Agreement.
51
52 "Paper Mill Steam Processing Deficiency Amount" means
53 the difference between the Paper Mill Steam Processing
54 Requirement and the Paper Mill Steam Energy Flow.
A-42
<PAGE>
1 "Paper Mill Steam Processing Demand" or "SPDpaper" means
2 420 MMBTU/hour, as such amount may be adjusted pursuant to
3 Exhibit C to the Master Operating Agreement.
4
5 "Paper Mill Steam Processing Demand Band" means a range
6 between (and inclusive of) 420 MMBTU/hr and 378 MMBTU/hr, which
7 range shall be adjusted once upon the adjustment to the Paper
8 Mill Steam Processing Demand made in April of 1996 so as to
9 encompass the range between (and inclusive of) the Paper Mill
10 Steam Processing Demand as revised in April of 1996, and an
11 amount equal to ninety percent (90%) of such revised Paper Mill
12 Steam Processing Demand, provided that this Band shall not be
13 further adjusted after this one-time revision in April of 1996.
14
15 "Paper Mill Steam Processing Demand Charge" has the
16 meaning given in Section 6.2(a) of the Paper Mill Energy Services
17 Agreement.
18
19 "Paper Mill Steam Processing Demand Charge Reduction"
20 has the meaning given in Section 7.3(c)(ii)(A) of the Master
21 Operating Agreement.
22
23 "Paper Mill Steam Processing Liquidated Damages" has
24 the meaning given in Section 7.3(c)(ii)(A) of the Master
25 Operating Agreement.
26
27 "Paper Mill Steam Processing Requirement" means the
28 Paper Mill's requirement for Steam Processing Services at any
29 given time, measured in MMBTU.
30
31 "Paper Mill Steam Processing Shortfall" means
32 _____________________.
33
34 "Paper Mill Steam Processing Shortfall Event" has the
35 meaning given in Section 7.3(c)(ii)(A) of the Master Operating
36 Agreement.
37
38 "Paper Mill Steam Processing Surcharge" means the
39 amount payable by Paper Mill Owner to MESC for certain Steam
40 Processing Services rendered by MESC pursuant to the Paper Mill
41 Energy Services Agreement, which amount shall be calculated in
42 accordance with Part 6 of Exhibit C to the Master Operating
43 Agreement.
44
45 "Paper Mill Steam 310 Delivery Point" means the
46 locations at which MESC shall deliver [310 Steam] to Paper Mill
47 Owner pursuant to the Paper Mill Energy Services Agreement, as
48 more particularly described in Exhibit U to the Master Operating
49 Agreement.
50
51 "Paper Mill Waste Water Delivery Point" means the
52 locations at which Paper Mill Owner shall deliver Waste Water to
53 the Pulp Mill pursuant to the Master Operating Agreement, as more
A-43
<PAGE>
1 particularly described in Exhibit T to the Master Operating
2 Agreement.
3
4 "Partial Casualty" means any Casualty that is not a
5 Total Casualty [or a Casualty that results in less than $7.5
6 million in damages to the Energy Complex, such amount of damages
7 to be verified by the Technical Expert].
8
9
10 "Peak Conversion Demand" means the amount of Liquor
11 Processing Services utilized by the Pulp Mill (measured in lbs of
12 Virgin Dry Black Liquor Solids sent to the liquor storage tanks)
13 during the Peak Conversion Demand Interval in any given Demand
14 Period in which the Liquor Processing Services consumed by the
15 Pulp Mill is at its highest.
16
17 "Peak Conversion Demand Interval" means a one (1) week
18 (one hundred sixty-eight (168) hour) interval of time used during
19 each Demand Period to determine the peak demand for usage of
20 Liquor Processing Services, which one week (168 hour) time
21 interval may begin at any minute during any such Demand Period
22 and will run for the following 10,080 minutes.
23
24 "Peak Paper Mill Power Processing Demand" means an
25 average of the amount of Power Processing Services consumed by
26 the Paper Mill (KW) during the five (5) Peak Power Processing
27 Demand Intervals in any given Demand Period in which the Power
28 Processing Services utilized by the Paper Mill were at the
29 highest levels.
30
31 "Peak Paper Mill Steam Processing Demand" means an
32 average of the amount of Steam Processing Services utilized by
33 the Paper Mill (measured in MMBTU/hour) during the five (5) Peak
34 Steam Processing Demand Intervals in any given Demand Period in
35 which the Steam Processing Services utilized by the Paper Mill
36 were at the highest levels.
37
38 "Peak Power Processing Demand" means the Peak Pulp Mill
39 Power Processing Demand, the Peak Tissue Mill Power Processing
40 Demand or the Peak Paper Mill Power Processing Demand, as the
41 context may require.
42
43 "Peak Power Processing Demand Interval" means a fifteen
44 (15) minute interval of time used during each Demand Period to
45 determine the peak demand for utilization of Power Processing
46 Services, which fifteen minute time interval may begin at any
47 minute during any such applicable period.
48
49 "Peak Pulp Mill Power Processing Demand" means an
50 average of the amount of Power Processing Services utilized by
51 the Pulp Mill (measured in KW) during the five (5) Peak Power
52 Processing Demand Intervals in any given Demand Period in which
53 the Power Processing Services utilized by the Pulp Mill were at
54 the highest levels.
A-44
<PAGE>
1 "Peak Pulp Mill Steam Processing Demand" means an
2 average of the amount of Steam Processing Services utilized by
3 the Pulp Mill (measured in MMBTU/hour) during the five (5) Peak
4 Steam Processing Demand Intervals in any given Demand Period in
5 which the Steam Processing Services utilized by the Pulp Mill
6 were at the highest levels.
7
8 "Peak Steam Processing Demand" means the Peak Pulp Mill
9 Steam Processing Demand, the Peak Tissue Mill Steam Processing
10 Demand or the Peak Paper Mill Steam Processing Demand, as the
11 context may require.
12
13 "Peak Steam Processing Demand Interval" means a one
14 hour interval of time used during each Demand Period to determine
15 the peak demand for utilization of Steam Processing Services,
16 which one hour time interval may begin at any minute during any
17 such applicable period and will run for the following sixty (60)
18 minutes.
19
20 "Peak Tissue Mill Power Processing Demand" means an
21 average of the amount of Power Processing Services consumed by
22 the Tissue Mill (KW) during the five (5) Peak Power Processing
23 Demand Interval in any given Demand Period in which the Power
24 Processing Services utilized by the Tissue Mill were at the
25 highest levels.
26
27 "Peak Tissue Mill Steam Processing Demand" means the
28 amount of Steam Processing Services consumed by the Tissue Mill
29 (measured in MMBTU/hour) during the five (5) Peak Steam
30 Processing Demand Intervals in any given Demand Period in which
31 the Steam Processing Services utilized by the Tissue Mill were at
32 the highest levels.
33
34 "Pension Plan" means any Employee Benefit Plan which is
35 an "employee pension benefit plan" as defined in Section 3(2) of
36 ERISA (other than a Multiemployer Plan).
37
38 "Permits" means all licenses, permits, franchises,
39 approvals, authorizations, consents, waivers, exemptions,
40 variances or orders of, or filings by any of the parties to the
41 Master Operating Agreement and required by, or otherwise issued
42 by any Governmental Authority.
43
44 "Permitted Energy Complex Outage" means (a) any Outage
45 taken by the Energy Complex which constitutes a part of the
46 Annual Scheduled Outage Allowance, the Major Maintenance Outage
47 Allowance, the Unscheduled Liquor Processing Outage Allowance,
48 the Unscheduled Steam Processing Outage Allowance, the
49 Supplemental Power Allowance, the Back-Up Power Usage Allowance,
50 the Back-Up Power Demand Allowance and the Long-Term Maintenance
51 Power Allowance or (b) any Outage taken by the Energy Complex
52 which constitutes a Cold Shutdown or Slowdown.
53
A-45
<PAGE>
1 "Permitted Encumbrances" has the meaning given in
2 Article 2 of the Lease.
3
4 ["Permitted Liens" means (a) Liens for Taxes that are
5 not delinquent or that are being contested in good faith by
6 appropriate proceedings; (b) such other Liens as, in the
7 aggregate, (i) are not substantial in amount, (ii) do not
8 materially detract from the value of the Assets and (iii) do not
9 materially interfere with the ability to operate the Energy
10 Complex; (c) Liens arising in connection with or under the Energy
11 Complex Tax Exempt Bonds; and (d) Permitted Encumbrances.]
12
13 "Permitted Transferee" means any Person to which or to
14 whom a Mill Permitted Transfer or an MESC Permitted Transfer is
15 made.
16
17 "Person" means any natural person, corporation,
18 partnership, firm, association, trust, unincorporated
19 organization, Governmental Authority or any other entity whether
20 acting in an individual, fiduciary or other capacity.
21
22 "Pine Bleaching Plant" means the portion of the Pulp
23 Mill responsible for bleaching softwood pulp fibers.
24
25 "Plant Manager" means ____________________.
26
27 "Potable Water" means the potable water to be provided
28 by Pulp Mill Owner pursuant to Article 5 of the Water Agreement.
29
30 "Power Processing Charge" means the Pulp Mill Power
31 Processing Charge, the Tissue Mill Power Processing Charge and
32 the Paper Mill Power Processing Charge.
33
34 "Power Processing Demand" means the Pulp Mill Power
35 Processing Demand, the Paper Mill Power Processing Demand and the
36 Tissue Mill Power Processing Demand, as the context requires.
37
38 "Power Processing Demand Charge" means the Pulp Mill
39 Power Processing Demand Charge, the Tissue Mill Power Processing
40 Demand Charge and the Paper Mill Power Processing Demand Charge,
41 individually or collectively, as the context may require.
42
43 "Power Processing Demand Margin" has the meaning given
44 in Part 3 of Exhibit C to the Master Operating Agreement.
45
46 "Power Processing Liquidated Damages" means the Backup
47 Power Liquidated Damages, the Maintenance Power Liquidated
48 Damages and Supplemental Power Liquidated Damages, individually
49 or collectively, as the context may require.
50
51 "Power Processing Requirement" means the Pulp Mill
52 Power Processing Requirement, the Tissue Mill Power Processing
53 Requirement or the Paper Mill Power Processing Requirement, as
54 the context may require.
A-46
<PAGE>
1 "Power Processing Services" means the processing of
2 various fuels into Electricity by the Energy Complex, pursuant to
3 the provisions of the Energy Services Agreements.
4
5 "PPI" means the Producer Price Index [particular
6 segment?] as published by the U.S. Department of Commerce, or if
7 that index is suspended or discontinued, the substitute index
8 determined in accordance with Section 17.23 of the Master
9 Operating Agreement.
10
11 "PPIbase" means the PPI for the calendar month ending
12 December 31, 1994.
13
14 "PPIn" means the PPI for the calendar month during
15 which the Reference Date occurs.
16
17 "Prime Rate" means the rate of interest per annum
18 publicly announced from time to time by [Chemical Bank] as its
19 prime rate in effect at its principal office in New York City.
20
21 "Process Model" has the meaning given in Section 4.2 of
22 the Master Operating Agreement.
23
24 "Process Model Adjustment" has the meaning given in
25 Section 8.1(a) of the Master Operating Agreement.
26
27 "Process Model Adjustment Event" has the meaning given
28 in Section 8.1(a) of the Master Operating Agreement.
29
30 "Process Model Adjustment Event Notice" has the meaning
31 given in Section 8.1(c) of the Master Operating Agreement.
32
33 "Process Water" means Make-Up Water and Operating
34 Water.
35
36 "Process Water Load-Shedding Plan" means the load-
37 shedding plan set forth in Exhibit O to the Master Operating
38 Agreement, as such exhibit may be revised from time to time by
39 the Site Operating Committee.
40
41 "Process Water Plant" means the process water plant
42 located at the Pulp Mill, as more fully described in Exhibit Y to
43 the Master Operating Agreement.
44
45 "Processing Amounts" means the Weekly Liquor Processing
46 Amount, the Daily Steam Processing Amount or the Daily Power
47 Processing Amount, individually or collectively, as the context
48 may require.
49
50 "Processing Charge" means a Liquor Processing Charge, a
51 Paper Mill Steam Processing Charge, a Paper Mill Power Processing
52 Charge, a Pulp Mill Steam Processing Charge, a Pulp Mill Power
53 Processing Charge, a Tissue Mill Steam Processing Charge or a
54 Paper Mill Power Processing Charge, as applicable.
A-47
<PAGE>
1 "Processing Requirement" means a Liquor Processing
2 Requirement, a Steam Processing Requirement or a Power Processing
3 Requirement, as applicable.
4
5 "Processing Services" means Liquor Processing Services,
6 Steam Processing Services and Power Processing Services.
7
8 "Project" means _________________.
9
10 "Project Documents" means the Energy Services
11 Agreements, the Master Operating Agreement, the Lease, the O&M
12 Agreement, the Confidentiality Agreement, the Common Services
13 Agreement, the Water Agreement, the Boiler Ash Disposal
14 Agreement, the Biomass Agreement, the Pulp Supply Agreement, the
15 Pulp Mill Environmental Indemnity Agreement, the Paper Mill
16 Environmental Indemnity Agreement, the Tissue Mill Environmental
17 Indemnity Agreement and the Easement Deeds, provided, that each
18 Project Document having a stated term (which may include a stated
19 renewal term) that has expired in full at the end of such stated
20 term (or such stated renewal term) and each Project Document not
21 having a stated term that has been fully performed in accordance
22 with its terms (including without limitation, through the final
23 payment of all amounts due or to become due thereunder) shall
24 cease to be a Project Document for all purposes with respect to
25 the Energy Services Agreements and the Master Operating
26 Agreement.
27
28 ["Proprietary Rights" means all of Scott's federal,
29 state and foreign registrations of trademarks and of other marks,
30 trade names or other trade rights, and all pending applications
31 for any such registrations and all of Scott's patents and
32 copyrights, and all pending applications therefor, in each case
33 used by Scott in connection with the operation of the Energy
34 Complex, and all other trade secrets, designs, plans,
35 specifications, technical information, service marks, know-how
36 and other proprietary rights, whether or not registered, created
37 or used by or on behalf of Scott in connection with the operation
38 of the Energy Complex, and all goodwill associated with any of
39 the above.]
40
41 "Provider" has the meaning given in Section 3.5(c)(i)
42 of the Master Operating Agreement.
43
44 "Prudent Mill Operating Standards" means a spectrum of
45 reasonable practices, methods and acts which (i) are commonly
46 used to operate pulp, tissue and paper making equipment and
47 associated facilities (as applicable) safely, reliably and
48 efficiently and having due regard to all applicable Governmental
49 Rules or (ii) in the exercise of reasonable judgment considering
50 the facts known when such practices, methods or acts are engaged
51 in, could have been expected to achieve the desired result
52 safely, reliably and efficiently and having due regard to all
53 applicable Governmental Rules, provided that, the foregoing
54 standards shall take into account that Process Water and Waste
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<PAGE>
1 Water Treatment Services are being provided on a cost-sharing
2 basis; provided further, that as between a Mill Owner and MESC,
3 such Mill Owner shall not have any obligation to repair, replace,
4 restore or rebuild its Mill or any equipment, machinery,
5 component or system which comprises part of such Mill (other than
6 the Pulp Mill Step-In Equipment).
7
8 "Prudent Operating Standards" means Prudent Mill
9 Operating Standards and Prudent Plant Operating Standards,
10 individually or collectively, as the context may require.
11
12 "Prudent Plant Operating Standards" means a spectrum of
13 reasonable practices, methods and acts which (i) are commonly
14 used to operate liquor processing, steam generating or
15 processing, electricity generating and compressed air equipment
16 and associated facilities of the type that comprise the Energy
17 Complex safely, reliably and efficiently and having due regard to
18 all applicable Governmental Rules or (ii) in the exercise of
19 reasonable judgment considering the facts known when such
20 practices, methods or acts are engaged in, could have been
21 expected to achieve the desired result safely, reliably and
22 efficiently and having due regard to all applicable Governmental
23 Rules, including, but not limited to, reasonable practices,
24 methods and acts to (a) have available adequate materials and
25 supplies to meet the Energy Complex's needs under normal
26 conditions and reasonably anticipated abnormal conditions; (b)
27 have available sufficient operating personnel with appropriate
28 experience and training to operate facilities of the type that
29 comprise the Energy Complex properly and efficiently and to
30 respond to reasonably anticipated abnormal conditions; (c)
31 perform preventative, routine and non-routine maintenance and
32 repairs appropriate for a facilities of the type that comprise
33 the Energy Complex; (d) perform monitoring and testing
34 appropriate for facilities of the type that comprise the Energy
35 Complex to ascertain whether the equipment will function as
36 expected under both normal and reasonably expected abnormal
37 conditions; and (e) operate equipment with appropriate regard to
38 safety and equipment limitations for facilities of the type that
39 comprise the Energy Complex.
40
41 "PUHCA" means the Public Utility Holding Company Act of
42 1935, as amended.
43
44 "Pulp" means Slush Pulp and Wet-lap Pulp, individually
45 or collectively, as the context may require.
46
47 "Pulp Load-Shedding Plan" means the load-shedding plan
48 set forth in Exhibit Q to the Master Operating Agreement, as such
49 plan may be revised from time to time by the Site Operating
50 Committee.
51
52 "Pulp Mill" means Scott's pulp mill located in Mobile,
53 Alabama at Lots 3, 5, 8 and 11 of the Scott Subdivision.
54
A-49
<PAGE>
1 "Pulp Mill Biomass" means Woodyard Biomass and
2 Timberland Biomass.
3
4 "Pulp Mill Closure" means (i) a public announcement by
5 Pulp Mill Owner that it will close the Pulp Mill for a period of
6 at least ___ or that it will reduce production of pulp at the
7 Pulp Mill (permanently or for a period of at least ___) to less
8 than ___________ or (ii) the occurrence of a ___ period during
9 which, for any reason other than the occurrence of a Force
10 Majeure Event, Pulp Mill Owner's production of pulp at the Pulp
11 Mill is less than __________.
12
13 "Pulp Mill Cure Plan" has the meaning given in Section
14 11.4(c)(ii) of the Master Operating Agreement.
15
16 "Pulp Mill Daily Power Processing Amount" means the
17 amount of Power Processing Services that Pulp Mill Owner expects
18 to require during any given Day.
19
20 "Pulp Mill Daily Steam Processing Amount" means the
21 amount of Steam Processing Services that Pulp Mill Owner expects
22 to require during any given Day.
23
24 "Pulp Mill Energy Services Agreement" means the Pulp
25 Mill Energy Services Agreement dated as of , 1994,
26 between Scott, in its capacity as Pulp Mill Owner, and MESC.
27
28 "Pulp Mill ESA Renewal Term" has the meaning given in
29 Section 2.2(a) of the Pulp Mill Energy Services Agreement.
30
31 "Pulp Mill Environmental Indemnity Agreement" means the
32 Pulp Mill Environmental Indemnity Agreement dated as of December
33 12, 1994, between MESC and Pulp Mill Owner.
34
35 "Pulp Mill Make-Up Water" means water to be provided to
36 MESC by Pulp Mill Owner pursuant to the Pulp Mill Energy Services
37 Agreement in order to be converted into Steam, having the
38 characteristics set forth in Exhibit B to the Master Operating
39 Agreement.
40
41 "Pulp Mill Operating Water Requirement" means the Pulp
42 Mill's requirement for Operating Water at any given time,
43 measured in [gallons].
44
45 "Pulp Mill Outage" means an Outage with respect to the
46 Pulp Mill.
47
48 "Pulp Mill Owner" means Scott, in its capacity as the
49 owner of the Pulp Mill.
50
51 "Pulp Mill Owner Events of Default" means, as applied
52 to any Project Document, the events of default listed therein and
53 designated "Pulp Mill Owner Events of Default."
54
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<PAGE>
1 "Pulp Mill Owner Indemnified Parties" means Pulp Mill
2 Owner, its Affiliates, and its and their respective officers,
3 directors, agents, attorneys and employees.
4
5 "Pulp Mill Power Processing Charge" means the amount
6 payable by Pulp Mill Owner to MESC for Power Processing Services
7 delivered by MESC pursuant to the Pulp Mill Energy Services
8 Agreement, which amount shall be calculated in accordance with
9 Part 5 of Exhibit C to the Master Operating Agreement.
10
11 "Pulp Mill Power Processing Delivery Point" means the
12 point of interconnection between the Energy Complex and the Pulp
13 Mill, which is the load side of each 15KV bus breaker feeding the
14 Pulp Mill, as more particularly described in Exhibit T to the
15 Master Operating Agreement.
16
17 "Pulp Mill Power Processing Demand" or "PPDpulp" means
18 32,000 KW, as such amount may be adjusted pursuant to Exhibit C
19 to the Master Operating Agreement.
20
21 "Pulp Mill Power Processing Demand Band" means a range
22 between (and inclusive of) 32,000 KW and 28,800 KW, which range
23 shall be adjusted once upon completion of the Measuring (using
24 the meters which will be installed during the Interim Period) so
25 as to encompass the range between (and inclusive of) the Pulp
26 Mill Power Processing Demand as revised pursuant to the Measuring
27 and an amount equal to ninety percent (90%) of such revised Pulp
28 Mill Power Processing Demand, provided that this Band shall not
29 be further adjusted after the Measuring.
30
31 "Pulp Mill Power Processing Demand Charge" has the
32 meaning given in Section 7.6(a) of the Pulp Mill Energy Services
33 Agreement.
34
35 "Pulp Mill Power Processing Requirement" means the Pulp
36 Mill's requirement for Power Processing Services at any given
37 time, measured in kilowatts.
38
39 "Pulp Mill Power Processing Surcharge" means the amount
40 payable by Pulp Mill Owner to MESC for certain Power Processing
41 Services rendered by MESC pursuant to the Pulp Mill Energy
42 Services Agreement, which amount shall be calculated in
43 accordance with Part 5 of Exhibit C to the Master Operating
44 Agreement.
45
46 "Pulp Mill Requirement" means (i) as applied to Liquor
47 Processing Services, the Pulp Mill Liquor Processing Requirement,
48 (ii) as applied to Steam Processing Services, the Steam
49 Processing Requirement, (iii) as applied to Power Processing
50 Services, the Pulp Mill Power Processing Requirement and (iv) as
51 applied to Operating Water, the Pulp Mill Operating Water
52 Requirement.
53
A-51
<PAGE>
1 "Pulp Mill Return Condensate" means water derived from
2 the Steam used by the Pulp Mill, having the characteristics set
3 forth in Exhibit B to the Master Operating Agreement.
4
5 "Pulp Mill Return Condensate Delivery Point" means the
6 locations at which Pulp Mill Owner shall deliver Pulp Mill Return
7 Condensate to MESC pursuant to the Pulp Mill Energy Services
8 Agreement, as more particularly described in Exhibit T to the
9 Master Operating Agreement.
10
11 "Pulp Mill SOC Representative" means a natural person
12 having the qualifications set forth in Section 3.1(a) of the
13 Master Operating Agreement and appointed to the Site Operating
14 Committee by Pulp Mill Owner.
15
16 "Pulp Mill Steam Curtailment Amount" means
17 ___________________.
18
19 "Pulp Mill Steam Delivery Point" means the locations at
20 which MESC shall deliver Steam to Pulp Mill Owner pursuant to the
21 Pulp Mill Energy Services Agreement, as more particularly
22 described in Exhibit T to the Master Operating Agreement.
23
24 "Pulp Mill Steam Energy Flow" is the sum of the Pulp
25 Mill Steam 50 Flow, the Pulp Mill Steam 130 Flow, the Pulp Mill
26 Steam 310 Flow and the Pulp Mill Steam 550 Flow.
27
28 "Pulp Mill Steam 50 Delivery Point" means the locations
29 at which MESC shall deliver [50 Steam] to Pulp Mill Owner
30 pursuant to the Pulp Mill Energy Services Agreement, as more
31 particularly described in Exhibit U to the Master Operating
32 Agreement.
33
34 "Pulp Mill Steam 550 Delivery Point" means the
35 locations at which MESC shall deliver [550 Steam] to Pulp Mill
36 Owner pursuant to the Pulp Mill Energy Services Agreement, as
37 more particularly described in Exhibit U to the Master Operating
38 Agreement.
39
40 "Pulp Mill Steam Processing Demand" or "SPDpulp" means
41 500 MMBTU/hour, as such amount may be adjusted pursuant to
42 Exhibit C to the Master Operating Agreement.
43
44 "Pulp Mill Steam Processing Demand Band" means a range
45 between (and inclusive of) 500 MMBTU/hr and 450 MMBTU/hr, which
46 range shall be adjusted once upon the adjustment to the Pulp Mill
47 Steam Processing Demand made in April of 1996 so as to encompass
48 the range between (and inclusive of) the Pulp Mill Steam
49 Processing Demand as revised pursuant to the Measuring and an
50 amount equal to ninety percent (90%) of such revised Pulp Mill
51 Steam Processing Demand, provided that this Band shall not be
52 further adjusted after this one-time revision in April of 1996.
53
A-52
<PAGE>
1 "Pulp Mill Steam 130 Delivery Point" means the
2 locations at which MESC shall deliver [130 Steam] to Pulp Mill
3 Owner pursuant to the Pulp Mill Energy Services Agreement, as
4 more particularly described in Exhibit U to the Master Operating
5 Agreement.
6
7 "Pulp Mill Steam Processing Charge" means the amount
8 payable by Pulp Mill Owner to MESC for Steam Processing Services
9 rendered by MESC pursuant to the Pulp Mill Energy Services
10 Agreement, which amount shall be calculated in accordance with
11 Part 6 of Exhibit C to the Master Operating Agreement.
12
13 "Pulp Mill Steam Processing Deficiency Amount" means
14 (i) the difference between the Pulp Mill Steam Processing
15 Requirement and the Pulp Mill Steam Energy Flow, when the Pulp
16 Mill Steam Energy Flow is less than _____ percent (__%) of the
17 Current Pulp Mill Steam Processing Nomination and (ii) zero, when
18 the Pulp Mill Steam Energy Flow is greater than or equal to ____
19 percent (__%) of the Current Pulp Mill Steam Processing
20 Nomination.
21
22 "Pulp Mill Steam Processing Demand Charge" has the
23 meaning given in Section 7.4 of the Pulp Mill Energy Services
24 Agreement.
25
26 "Pulp Mill Steam Processing Demand Charge Reduction"
27 has the meaning given in Section 7.3(c)(ii)(C) of the Master
28 Operating Agreement.
29
30 "Pulp Mill Steam Processing Liquidated Damages" has the
31 meaning given in Section 7.3(c)(ii)(C) of the Master Operating
32 Agreement.
33
34 "Pulp Mill Steam Processing Requirement" means the Pulp
35 Mill's requirement for Steam Processing Services at any given
36 time, measured in MMBTU.
37
38 "Pulp Mill Steam Processing Shortfall" means
39 _______________.
40
41 "Pulp Mill Steam Processing Shortfall Event" has the
42 meaning given in Section 7.3(c)(ii)(C) of the Master Operating
43 Agreement.
44
45 "Pulp Mill Steam Processing Surcharge" means the amount
46 payable by Pulp Mill Owner to MESC for certain Steam Processing
47 Services rendered by MESC pursuant to the Pulp Mill Energy
48 Services Agreement, which amount shall be calculated in
49 accordance with Part 6 of Exhibit C to the Master Operating
50 Agreement.
51
52 "Pulp Mill Steam 300 Delivery Point" means the
53 locations at which MESC shall deliver [300 Steam] to Pulp Mill
54 Owner pursuant to the Pulp Mill Energy Services Agreement, as
A-53
<PAGE>
1 more particularly described in Exhibit U to the Master Operating
2 Agreement.
3
4 "Pulp Mill Step-In Equipment" has the meaning given in
5 Section 11.4(c)(ii)(A) of the Master Operating Agreement.
6
7 "Pulp Mill Triggering Event" means any of the following
8 occurrences which are not the result of a Force Majeure Event:
9 (i) failure of Pulp Mill Owner to perform any of its obligations
10 under the Water Agreement or Pulp Mill Owner's failure to operate
11 the Pulp Mill Step-In Equipment of, as applicable, in accordance
12 with Prudent Mill Operating Standards which, (a) has a MESC
13 Material Adverse Effect and (b) is a Pulp Mill Owner Event of
14 Default; and (ii) abandonment of the Pulp Mill or a Mill Closure
15 with respect to the Pulp Mill, provided that neither clause (i)
16 nor clause (ii) shall constitute a Pulp Mill Triggering Event if
17 (x) the Mill Owners, or any of them, continue to pay MESC all
18 Demand Charges due to MESC by all of the Mill Owners despite any
19 reduction of Energy Complex Capacity due to the failure by Pulp
20 Mill Owner to perform any of its obligations under any of the
21 Project Documents and (y) each of the Mill Owners waives any MESC
22 Event of Default caused by the failure of Pulp Mill Owner to
23 perform any of its obligations under any of the Project
24 Documents.
25
26 "Pulp Supply Agreement" means the Pulp Supply Agreement
27 dated as of the date the closing of the sale of S.D. Warren by
28 Scott to Sappi Ltd., among Pulp Mill Owner, Tissue Mill Owner and
29 Paper Mill Owner.
30
31 "Purchase and Sale Agreement" has the meaning given in
32 Section 16.3(b) of the Lease.
33
34 "Purchase Documents" means the Asset Purchase
35 Agreement, the Bill of Sale, the Assignment and Assumption
36 Agreement, the Asset Lease Assumption Agreements, the TRT
37 Agreement, the Bond Transfer Agreement, the Scott Environmental
38 Indemnity Agreement, the Employee Transition Agreement, the
39 Southern Company Guaranty and .
40
41 "Purchase Price" has the meaning given in Section 2.4
42 of the Asset Purchase Agreement.
43
44 "Purchase Price Offset Amount" has the meaning given in
45 Section 3.2(b) of the Employee Transition Agreement.
46
47 "Purchased Assets" means all of the properties, assets
48 and rights of Scott, whether tangible or intangible, comprising
49 or used or useful in connection with, the Energy Complex,
50 including all of Scott's right, title and interest in, to and
51 under the following (but excluding therefrom the Excluded
52 Assets):
53
54 1. all Accounts;
A-54
<PAGE>
1 2. all Credits;
2
3 3. all Deposits;
4
5 4. all Energy Complex Contracts
6
7 5. all Fixtures and Equipment;
8
9 6. all Books and Records;
10
11 [7. all Proprietary Rights, to the extent
12 transferable;]
13
14 8. all Transferred Permits;
15
16 9. all Supplies;
17
18 10. all Warranties, to the extent assignable;
19
20 [11. Other].
21
22 "PURPA" means the Public Utility Regulatory Policies
23 Act of 1978, as amended.
24
25 "Qualified Purchaser" means a purchaser of all or any
26 portion of the capital stock of MESC or all or any portion of the
27 Energy Complex which (i) is not a direct competitor of Scott or
28 the Mill Owners or any Affiliate of such competitor, (ii) agrees
29 to be bound by the terms of the Confidentiality Agreement and
30 (iii) by making such purchase, will not implicate or otherwise
31 conflict with the Territorial Act.
32
33 "Qualifying Facility" means a qualifying cogeneration
34 facility or a qualifying small power production facility within
35 the meaning of PURPA.
36
37 "RCRA" means the Resource Conservation and Recovery
38 Act, 42 U.S.C. Section 6901 et seq.
39
40 "Real Property" means the real property (including the
41 Leased Premises) owned or leased by Scott located in Mobile,
42 Alabama, as more particularly described on Schedule 1.1(i) to the
43 Asset Purchase Agreement.
44
45 "Reallocation Date" means the first day of each
46 Contract Year.
47
48 "Release Date" has the meaning given in Section 4 of
49 the Lease Assignment and Assumption Agreement.
50
51 "Recipient" has the meaning given in Section 3.5(c)(i)
52 of the Master Operating Agreement.
53
A-55
<PAGE>
1 "Recycled Brine" means recycled brine, having the
2 characteristics set forth in Exhibit B to the Master Operating
3 Agreement.
4
5 "Recycled Brine Delivery Point" means the locations at
6 which Pulp Mill Owner shall deliver Recycled Brine to MESC
7 pursuant to the Pulp Mill Energy Services Agreement, as more
8 particularly described in Exhibit T to the Master Operating
9 Agreement.
10
11 "Reference Date" means the date of the calculation of
12 the escalation of a subject dollar value, whether such dollar
13 value is being Escalated at PPI or being escalated with reference
14 to another escalator or index.
15
16 "Regular Meeting" has the meaning given in Section
17 3.1(c) of the Master Operating Agreement.
18
19 "Reply Notice" has the meaning given in Section 16.3(b)
20 of the Master Operating Agreement.
21
22 "Representative" means any officer, director,
23 principal, attorney, agent, employee or other representative.
24
25 "Repurchase Notice" has the meaning given in Section
26 15.1(a) of the Lease.
27
28 "Repurchase Option" has the meaning given in Section
29 15.1 of the Lease.
30
31 "Requested Change" has the meaning given in Section
32 3.5(c)(i) of the Master Operating Agreement.
33
34 "Required Biomass Amount" means an amount of Biomass or
35 Roundwood Bark equal to the minimum quantity of biomass which
36 must be used by the Energy Complex in order for it to comply with
37 the Internal Revenue Service definition of "solid waste disposal
38 facility" so as to maintain the tax-exempt status of the Energy
39 Complex Tax Exempt Bonds, which amount shall be based upon the
40 configuration of the Energy Complex on the Closing Date and upon
41 applicable Governmental Rules in effect on the Closing Date, and
42 which amount, as of the Closing Date, shall be consistent with
43 the requirement that Biomass constitute at least sixty-five
44 percent (65%) by weight and volume, of the total materials
45 introduced into the Number 7 Power Boiler.
46
47 "Requirement" means (i) in the case of MESC, the MESC
48 Operating Water Requirement, (ii) in the case of Pulp Mill Owner,
49 the Liquor Processing Requirement, Pulp Mill Power Processing
50 Requirement, Pulp Mill Steam Processing Requirement, Pulp Mill
51 Make-Up Water Requirement and Pulp Mill Operating Water Require-
52 ment, individually or collectively, as the context may require,
53 (iii) in the case of Paper Mill Owner, the Paper Mill Power
54 Processing Requirement, Paper Mill Steam Processing Requirement,
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<PAGE>
1 Paper Mill Make-Up Water Requirement and Paper Mill Operating
2 Water Requirement, individually or collectively, as the context
3 may require, and (iv) in the case of Tissue Mill Owner, the
4 Tissue Mill Power Processing Requirement, Tissue Mill Steam Pro-
5 cessing Requirement, Tissue Mill Make-Up Water Requirement and
6 Tissue Mill Operating Water Requirement, individually or
7 collectively, as the context may require.
8
9 "Reserved Demand" has the meaning given in Section
10 3.10(a) of the Master Operating Agreement.
11
12 "Resetting Mill Owner" has the meaning given in Part 1
13 of Exhibit C of the Master Operating Agreement.
14
15 "Restoration Work" has the meaning given in Section
16 10.10 of the Master Operating Agreement.
17
18 "Retained Mills" has the meaning given in Section 5.3
19 of the Leases.
20
21 "Return Condensate" means Pulp Mill Return Condensate,
22 Tissue Mill Return Condensate and Paper Mill Return Condensate.
23
24 "Return Condensate Measuring Devices" means those
25 devices described on Exhibit U to the Master Operating Agreement
26 which are capable of measuring the quantity and quality of Pulp
27 Mill Return Condensate, Tissue Mill Return Condensate and Paper
28 Mill Return Condensate delivered by Pulp Mill Owner, Tissue Mill
29 Owner and Paper Mill Owner to MESC pursuant to the Energy
30 Services Agreements.
31
32 "Returns" means all returns, declarations, reports,
33 statements and other documents required to be filed in respect of
34 Taxes.
35
36 "Roundwood Bark" means _________________.
37
38 "Salaried Energy Complex Employee" means an Energy
39 Complex Employee who is not covered by a collective bargaining
40 agreement.
41
42 "Salaried Pension Plan" means the Scott Paper Company
43 Retirement Plan for Salaried Employees.
44
45 "Sanitary Sewage" means sanitary sewage to be collected
46 by Pulp Mill Owner from MESC pursuant to the Water Agreement.
47
48 "Sanitary Sewage Collection Services " means the
49 sanitary sewage collection services to be provided by Pulp Mill
50 Owner pursuant to Article 5 of the Water Agreement.
51
52 "Sanitary Sewage Delivery Point" means the locations at
53 which MESC, Tissue Mill Owner or Paper Mill Owner shall deliver
54 Sanitary Sewage to the Pulp Mill pursuant to the Master Operating
A-57
<PAGE>
1 Agreement, as more particularly described in Exhibit T to the
2 Master Operating Agreement.
3
4 "Sappi" means Sappi, Ltd., a South African corporation.
5
6 "Scheduled Energy Complex Outage" means the temporary
7 shutdown of any major machinery or equipment at the Energy
8 Complex for the inspection, repair or maintenance thereof (other
9 than Major Maintenance Outages), the timing and duration of which
10 shutdown is indicated on the Yearly Outages Schedule by the Site
11 Operating Committee pursuant to Section 3.6(c) of the Master
12 Operating Agreement.
13
14 "Scheduled Mill Outage" means the temporary shutdown of
15 any major machinery or equipment at any of the Mills, for the
16 inspection, repair or maintenance thereof the timing and duration
17 of which shutdown is indicated on the Yearly Outages Schedule by
18 the Site Operating Committee pursuant to Section 3.7(b) of the
19 Master Operating Agreement.
20
21 "Scheduled Outage" means a Scheduled Energy Complex
22 Outage or a Scheduled Mill Outage, as the context may require.
23
24 "Scott" means Scott Paper Company, a Pennsylvania
25 corporation.
26
27 "Scott Easements" means _______________________.
28
29 "Scott Environmental Indemnity Agreement" means the
30 Scott Environmental Indemnity Agreement, dated as of _______,
31 1994, between Scott and MESC, substantially in the form of
32 Exhibit E to the Asset Purchase Agreement.
33
34 "Scott Indemnified Parties" means Scott, its
35 Affiliates, and its and their respective officers, directors,
36 agents, attorneys and employees.
37
38 "Scott Material Adverse Effect" means a material
39 adverse effect on (a) the operation, maintenance or use by Scott
40 of the Mill or the Real Property, (b) the use by Scott or its
41 Representatives of the [Easements], (c) the ability of MESC or
42 its Affiliates to observe and perform their respective
43 obligations under any of the Operative Documents, or (d) [OTHER].
44
45 "Scott Permitted Transfer" means _____________________.
46
47 "Scott Subdivision" means the Scott Paper Company
48 subdivision, as shown on a plat thereof recorded in Map Book 64,
49 page 39, in the Office of the Judge of Probate of Mobile County,
50 Alabama.
51
52 "S.D. Warren Company" means S.D. Warren Company, a
53 Pennsylvania corporation.
54
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<PAGE>
1 "SEC" means the United States Securities and Exchange
2 Commission and any successor thereto.
3
4 "SEI" means Southern Electric International, Inc., a
5 Delaware corporation.
6
7 "SEI's Actuary" has the meaning given in Section 3.2(b)
8 of the Employee Transition Agreement.
9
10 "SEI's Pension Plan" has the meaning given in Section
11 2.4(c) of the Employee Transition Agreement.
12
13 "SEI Operator" has the meaning given in Section 3.1(b)
14 of the Energy Services Agreements.
15
16 "Seller" means Scott Paper Company, a Pennsylvania
17 corporation.
18
19 "Seller's Actuary" has the meaning given in Section
20 2.4(c) of the Employee Transition Agreement.
21
22 "Senior Management" means, in the case of the Mills, a
23 senior officer of each Mill Owner and, in the case of MESC, a
24 senior officer of SEI.
25
26 "Services" means Liquor Processing Services and the
27 Shared Services, and "Service" means any one of them, as the
28 context may require.
29
30 "Shared Services" means Steam Processing Services,
31 Power Processing Services, Process Water and Compressed Air.
32
33 "Short Term Maintenance Power" means the power
34 purchased by Mill Owners from APC that is treated by APC as short
35 term maintenance power under the term of the 1983 Alabama Power
36 Contract, as such contract was applied by Scott and APC prior to
37 the Closing Date.
38
39 "Short Term Maintenance Power Allowance" means the
40 power allowance calculated in accordance with Section G of Part 5
41 of Exhibit I to the Master Operating Agreement, related to the
42 megawatt hours of Short-Term maintenance power purchased by the
43 Mills.
44
45 "Shortfall Event" means a Liquor Processing Shortfall
46 Event or a Steam Processing Shortfall Event, as the context may
47 require.
48
49 ["Shortfall Hour" means, for a Liquor Processing
50 Shortfall Event or a Steam Processing Shortfall Event, each sixty
51 (60) minute period of the day, from the occurrence of the
52 applicable Shortfall Event until such time as MESC is capable of
53 providing the applicable then Current Nomination, during which
54 the Shortfall Event continues.]
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<PAGE>
1 "Shutdown" means ____________________.
2
3 "Site" means, collectively, the Real Property, the
4 Mills and the Energy Complex.
5
6 "Site Morning Meeting" has the meaning given in Section
7 3.4(a) of the Master Operating Agreement.
8
9 "Site Operating Committee" has the meaning given in
10 Section 3.1(a) of the Master Operating Agreement.
11
12 "Site Operating Principles" means those principles set
13 forth on Exhibit D to the Master Operating Agreement, as such
14 principles may be revised from time to time by agreement among
15 MESC and the Mill Owners.
16
17 "Slowdown" means the "Christmas slowdown" of Energy
18 Complex and Mill operations on December 24 and 25 of each year,
19 as required by agreements between the parties and certain [labor
20 unions].
21
22 "Sludge" means sludge having the characteristics set
23 forth in Exhibit B to the Master Operating Agreement.
24
25 "Sludge Delivery Point" means the locations at which
26 Pulp Mill Owner shall deliver Sludge to MESC pursuant to the Pulp
27 Mill Energy Services Agreement, as more particularly described in
28 Exhibit T to the Master Operating Agreement.
29
30 "Sludge Measuring Devices" means those devices
31 described on Exhibit U to the Master Operating Agreement which
32 are capable of measuring the quantity and quality of Sludge
33 delivered by Pulp Mill Owner to MESC pursuant to the Pulp Mill
34 Energy Services Agreement.
35
36 "Slush Pulp" has the meaning given in the Pulp Supply
37 Agreement.
38
39 "Soap" means raw by-product soap having the
40 characteristics set forth in Exhibit B to the Master Operating
41 Agreement, to be produced by the Energy Complex and to be
42 accepted by Pulp Mill Owner pursuant to the Pulp Mill Energy
43 Services Agreement.
44
45 "Soap Delivery Point" means the locations at which MESC
46 shall deliver Soap to Pulp Mill Owner pursuant to the Pulp Mill
47 Energy Services Agreement, as more particularly described in
48 Exhibit T to the Master Operating Agreement.
49
50 "SOC Representatives" has the meaning given in Section
51 3.1(a) of the Master Operating Agreement.
52
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<PAGE>
1 "Solid Waste" means Pulp Mill Biomass, Agency Biomass,
2 Export Chip Biomass and dewatered sludge from the Pulp Mill's
3 wastewater treatment system.
4
5 "Southeast Timberlands" means Scott, in its capacity as
6 owner of ____________.
7
8 "Southern" means The Southern Company, a Delaware
9 corporation.
10
11 "Southern Company Guaranty" means the Guaranty dated as
12 of ___________, 1994, by The Southern Company in favor of Seller,
13 substantially in the form of Exhibit N to the Asset Purchase
14 Agreement.
15
16 "Southern Comfort Letter" means the letter dated
17 , from The Southern Company to Scott.
18
19 "Southern Operations" means (a) with respect to all
20 times prior to the Closing, the Pulp Mill, the Tissue Mill, the
21 Energy Complex and the Southeast Timberlands, and (b) with
22 respect to all times subsequent to the Closing, the Pulp Mill,
23 the Tissue Mill and the Southeast Timberlands.
24
25 "Special Meeting" has the meaning given in Section
26 3.1(c) of the Master Operating Agreement.
27
28 "Steam" means steam having the characteristics set
29 forth in Exhibit B to the Master Operating Agreement, such steam
30 to be provided at 50 psi, 135 psi, 300 psi and/or 550 psi, as
31 such pressures may be prescribed in a Current Steam Processing
32 Nomination.
33
34 "Steam Delivery Points" means the Paper Mill Steam
35 Delivery Points, the Pulp Mill Steam Delivery Points and the
36 Tissue Mill Steam Delivery Points, individually or collectively,
37 as the context may require.
38
39 "Steam Demand Charge Reduction Factor" means the
40 applicable Steam Processing Deficiency Amount divided by the then
41 Current Steam Processing Nomination for the applicable Mill for
42 the hour during which the Steam Processing Shortfall Event
43 occurred.
44
45 "Steam Load-Shedding Plan" means the load-shedding plan
46 set forth in Exhibit M to the Master Operating Agreement, as such
47 plan may be revised from time to time by the Site Operating
48 Committee.
49
50 "Steam Measuring Devices" means those devices described
51 on Exhibit U to the Master Operating Agreement which are capable
52 of measuring the quantity and quality of Steam delivered by MESC
53 to Pulp Mill Owner, Tissue Mill Owner and Paper Mill Owner
54 pursuant to the Energy Services Agreements.
A-61
<PAGE>
1 ["Steam Processing Availability Factor" means (i) (a)
2 all of the Hours during the applicable measurement period for
3 which the Energy Complex was Available multiplied by (b) the
4 [Average] Actual Steam Processing Capacity, divided by (ii) (a)
5 the Stipulated Steam Processing Capacity multiplied by (b) (x)
6 the total number of hours during such measurement period minus
7 (y) the hours during such measurement period of all Scheduled
8 Energy Complex Outages, Major Maintenance Outages, Unscheduled
9 Energy Complex Outages (to the extent such Unscheduled Energy
10 Complex Outages do not exceed the Annual Energy Complex
11 Unscheduled Outage Allowance) and outages caused by Force Majeure
12 Events.]
13
14 "Steam Processing Deficiency Amount" means the Paper
15 Mill Steam Processing Deficiency Amount, the Pulp Mill Steam
16 Processing Deficiency Amount and the Tissue Mill Steam Processing
17 Deficiency Amount, individually or collectively, as the context
18 may require.
19
20 "Steam Processing Demand" means the Pulp Mill Steam
21 Processing Demand, the Tissue Mill Steam Processing Demand or the
22 Paper Mill Steam Processing Demand, as the context may require.
23
24 "Steam Processing Demand Charge" means the Pulp Mill
25 Steam Processing Demand Charge, the Tissue Mill Steam Processing
26 Demand Charge and the Paper Mill Steam Processing Demand Charge.
27
28 "Steam Processing Liquidated Damages" means the Paper
29 Mill Steam Processing Liquidated Damages, the Pulp Mill Steam
30 Processing Liquidated Damages and the Tissue Mill Steam
31 Processing Liquidated Damages, individually or collectively, as
32 the context may require.
33
34 "Steam Processing Requirement" means the Pulp Mill
35 Steam Processing Requirement, the Tissue Mill Steam Processing
36 Requirement or the Paper Mill Steam Processing Requirement, as
37 the context may require.
38
39 "Steam Processing Services" means the processing of
40 Return Condensate and Make-Up Water into Steam by the Energy
41 Complex, pursuant to the provisions of the Energy Services
42 Agreements.
43
44 "Steam Processing Shortfall Event" means a Paper Mill
45 Steam Processing Shortfall Event, Pulp Mill Steam Processing
46 Shortfall Event and Tissue Mill Steam Processing Shortfall Event,
47 individually or collectively, as the context may require.
48
49 "Stipulated Make-Up Water Capacity" means the capacity
50 for receiving and processing treated water and turning such water
51 into boiler feed water, which amount shall not exceed [2400]
52 gallons per minute.
53
A-62
<PAGE>
1 "Stipulated Process Water Capacity" means, unless
2 changed by written agreement of Pulp Mill Owner, Tissue Mill
3 Owner, Paper Mill Owner and MESC, a quantity of Process Water
4 equal to [65 million gallons] of Process Water per Day.
5
6 "StmBTUpaper" means Measured Steam Energy Flow to the
7 Paper Mill during the relevant Billing Period.
8
9 "StmBTUpulp" means Measured Steam Energy Flow to the
10 Pulp Mill during the relevant Billing Period.
11
12 "StmBTUtissue" means Measured Steam Energy Flow to the
13 Tissue Mill during the relevant Billing Period.
14
15 "Stripped Condensate" means stripped condensate having
16 the characteristics set forth in Exhibit B to the Master
17 Operating Agreement.
18
19 "Stripped Condensate Delivery Point" means the
20 locations at which MESC shall deliver Stripped Condensate to Pulp
21 Mill Owner pursuant to the Pulp Mill Energy Services Agreement,
22 as more particularly described in Exhibit T to the Master
23 Operating Agreement.
24
25 "Stripper Off Gas" means stripper off gas produced by
26 MESC having the characteristics set forth in Exhibit B to the
27 Master Operating Agreement, to be accepted and disposed of by
28 Pulp Mill Owner pursuant to the Pulp Mill Energy Services
29 Agreement.
30
31 "Stripper Off Gas Delivery Point" means the locations
32 at which MESC shall deliver Stripper Off Gas to Pulp Mill Owner
33 pursuant to the Pulp Mill Energy Services Agreement, as more
34 particularly described in Exhibit T to the Master Operating
35 Agreement.
36
37 "Supplemental Power" means the power purchased by the
38 Mill Owners from APC that is treated by APC as supplemental power
39 under the 1986 APC Power Contract as such contract was applied by
40 Scott and APC prior to the Closing Date.
41
42 "Supplemental Power Allowance" means the power
43 allowance calculated in accordance with Section C of Part 5 of
44 Exhibit I of the Master Operating Agreement.
45
46 "Supplementary Lease" means the Supplementary Lease
47 Agreement dated as of December 12, 1994, between Scott, as
48 lessor, and MESC, as lessee.
49
50 "Supplementary Working Agreements and Interpretations"
51 means either those agreements and policies contained on pp. 60-
52 129 of the collective bargaining agreements between Seller and
53 the IBEW, or A Report to Scott/Mobile Employees relating to
A-63
<PAGE>
1 Supplementary Working Agreements and Interpretations between
2 Seller and the UPIU.
3
4 "Supplies" means the supplies and inventories used or
5 held for use by Scott in connection with the operation of the
6 Energy Complex, and described on Schedule 1.1(j) to the Asset
7 Purchase Agreement.
8
9 "Tall Oil Plant" means the equipment and assets located
10 at the Pulp Mill which are used for Soap processing.
11
12 "Taxes" means all federal, state, local, foreign and
13 other net income, gross income, gross receipts, sales, use, ad
14 valorem, transfer, franchise, profits, withholding, payroll,
15 employment, excise, property, customs, duties or other taxes,
16 fees, assessments or charges of any kind whatsoever, together
17 with any interest and any penalties, additions to tax or
18 additional amount with respect thereto.
19
20 "Technical Dispute" means any dispute (i) which any
21 Project Document expressly provides shall be a Technical Dispute
22 or (ii) in the absence of such an express provision, any dispute
23 which the parties to such dispute agree, by its nature, will
24 require the application of engineering principles or such other
25 specialized technical knowledge in order to reach resolution
26 thereof, provided that if the parties cannot agree whether a
27 dispute under this clause (ii) is a Technical Dispute, then the
28 matter shall be deemed not to be a Technical Dispute and shall be
29 resolved as a Non-Technical Dispute in accordance with Section
30 16.3 of the Master Operating Agreement.
31
32 "Technical Expert" means [any person selected in
33 accordance with Section 16.2 of the Master Operating Agreement to
34 resolve Technical Disputes and who (i) has reasonable
35 professional qualifications and practical experience in the
36 subject matter of the dispute; (ii) has no interest or duty which
37 conflicts or may conflict with his functions as a Technical
38 Expert, such person being required to fully disclose any such
39 interest or duty before his appointment or, if such interest or
40 duty arises during such appointment, immediately upon becoming
41 aware of such interest or duty; and (iii) is not an employee of
42 any of the parties to the Master Operating Agreement or the
43 Operator or any of their respective Affiliates].
44
45 "Temporary Technical Expert" has the meaning given in
46 Section 16.2 of the Master Operating Agreement.
47
48 "Territorial Act" means Chapter 14 of Title 37 of the
49 Code of Alabama (1975).
50
51 "Timberland Biomass" means limbs, tops, scrub,
52 nonmerchantable trees, site preparation thinnings and other waste
53 cuttings from timberlands owned by or under dedicated contract to
54 supply the Pulp Mill.
A-64
<PAGE>
1 "Tissue Mill" means Tissue Mill Owner's tissue mill
2 located in Mobile, Alabama at Lots 6 and 10 of the Scott
3 Subdivision.
4
5 "Tissue Mill Closure" means (i) a public announcement
6 by Tissue Mill Owner that it will close the Tissue Mill for a
7 period of at least ________ or that it will reduce production of
8 tissue at the Tissue Mill (permanently or for a period of at
9 least ________) to less than ___________ or (ii) the occurrence
10 of a ________ period during which, for any reason other than the
11 occurrence of a Force Majeure Event, production of tissue at the
12 Tissue Mill is less than __________.
13
14 "Tissue Mill Daily Power Processing Amount" means the
15 amount of Power Processing Services that Tissue Mill Owner
16 expects to require during any given Day.
17
18 "Tissue Mill Daily Steam Processing Amount" means the
19 amount of Steam Processing Services that Tissue Mill Owner
20 expects to require during any given Day.
21
22 "Tissue Mill Energy Services Agreement" means the
23 Tissue Mill Energy Services Agreement dated as of ,
24 1994, between Scott, in its capacity as Tissue Mill Owner, and
25 MESC.
26
27 "Tissue Mill Environmental Indemnity Agreement" means
28 the Tissue Mill Environmental Indemnity Agreement dated as of
29 December 12, 1994, between MESC and Tissue Mill Owner.
30
31 "Tissue Mill ESA Renewal Term" has the meaning given in
32 Section 2.2(a) of the Tissue Mill Energy Services Agreement.
33
34 "Tissue Mill Make-Up Water" means water to be provided
35 to MESC by Tissue Mill Owner pursuant to the Tissue Mill Energy
36 Services Agreement in order to be converted into Steam, having
37 the characteristics set forth in Exhibit B to the Master
38 Operating Agreement.
39
40 "Tissue Mill Operating Water Delivery Point" means the
41 locations at which Pulp Mill Owner shall deliver Operating Water
42 to Tissue Mill Owner pursuant to the Master Operating Agreement,
43 as more particularly described in Exhibit T to the Master
44 Operating Agreement.
45
46 "Tissue Mill Operating Water Requirement" means the
47 Tissue Mill's requirement for Operating Water at any time,
48 measured in gallons.
49
50 "Tissue Mill Outage" means an Outage with respect to
51 the Tissue Mill.
52
53 "Tissue Mill Owner" means Scott, in its capacity as the
54 owner of the Tissue Mill.
A-65
<PAGE>
1 "Tissue Mill Owner Events of Default" means, as applied
2 to any Project Document, the events of default listed therein and
3 designated "Tissue Mill Owner Events of Default."
4
5 "Tissue Mill Owner Indemnified Parties" means Tissue
6 Mill Owner, its Affiliates, and its and their respective
7 officers, directors, agents, attorneys and employees.
8
9 "Tissue Mill Power Processing Charge" means the amount
10 payable by Tissue Mill Owner to MESC for Power Processing
11 Services delivered by MESC under the Tissue Mill Energy Services
12 Agreement, which amount shall be calculated in accordance with
13 Part 5 of Exhibit C to the Master Operating Agreement.
14
15 "Tissue Mill Power Processing Demand Band" means a
16 range between (and inclusive of) 39,500 KW and 35,550 KW, which
17 range shall be adjusted once upon the completion of the Measuring
18 (using the meters which will be installed during the Interim
19 Period) so as to encompass the range between (and inclusive of)
20 the Tissue Mill Power Processing Demand as revised pursuant to
21 the Measuring and an amount equal to ninety percent (90%) of such
22 revised Tissue Mill Power Processing Demand, provided that this
23 Band shall not be further adjusted after the Measuring.
24
25 "Tissue Mill Power Processing Delivery Point" means the
26 point of interconnection between the Energy Complex and the
27 Tissue Mill, which is the load side of each 15KV bus breaker
28 feeding the tissue Mill, as more particularly described in
29 Exhibit T to the Master Operating Agreement.
30
31 "Tissue Mill Power Processing Demand" or "PPDtissue"
32 means 39,500 KW,as such amount may be adjusted pursuant to
33 Exhibit C to the Master Operating Agreement.
34
35 "Tissue Mill Power Processing Demand Charge" has the
36 meaning given in Section 6.4(a) of the Tissue Mill Energy
37 Services Agreement.
38
39 "Tissue Mill Power Processing Requirement" means the
40 Tissue Mill's requirement for Power Processing Services at any
41 given time, measured in kilowatts.
42
43 "Tissue Mill Power Processing Surcharge" means the
44 amount payable by Tissue Mill Owner to MESC for certain Power
45 Processing Services rendered by MESC pursuant to the Tissue Mill
46 Energy Services Agreement, which amount shall be calculated in
47 accordance with Part 5 of Exhibit C to the Master Operating
48 Agreement.
49
50 "Tissue Mill Pulp Delivery Point" means the locations
51 at which Pulp Mill Owner shall deliver Pulp to the Tissue Mill
52 pursuant to the Master Operating Agreement, as more particularly
53 described in Exhibit T to the Master Operating Agreement.
54
A-66
<PAGE>
1 "Tissue Mill Requirement" means (i) as applied to Steam
2 Processing Services, that quantity of the Tissue Mill Steam
3 Processing Requirement, (ii) as applied to Power Processing
4 Services, the Tissue Mill Power Processing Requirement and (iii)
5 as applied to Operating Water, the Tissue Mill Operating Water
6 Requirement.
7
8 "Tissue Mill Return Condensate" means water derived
9 from the Steam used by the Tissue Mill, having the
10 characteristics set forth in Exhibit B to the Master Operating
11 Agreement.
12
13 "Tissue Mill Return Condensate Delivery Point" means
14 the locations at which Tissue Mill Owner shall deliver Return
15 Condensate to MESC pursuant to the Tissue Mill Energy Services
16 Agreement, as more particularly described in Exhibit T to the
17 Master Operating Agreement.
18
19 "Tissue Mill Sanitary Sewage Delivery Point" means the
20 locations at which Tissue Mill Owner shall deliver Sanitary
21 Sewage to the Pulp Mill pursuant to the Master Operating
22 Agreement, as more particularly described in Exhibit T to the
23 Master Operating Agreement.
24
25 "Tissue Mill Steam Delivery Point" means the locations
26 at which MESC shall deliver Steam to Tissue Mill Owner pursuant
27 to the Tissue Mill Energy Services Agreement, as more
28 particularly described in Exhibit T to the Master Operating
29 Agreement.
30
31 "Tissue Mill Steam Energy Flow" is the sum of the
32 Tissue Mill Steam 50 Flow, the Tissue Mill Steam 130 Flow, the
33 Tissue Mill Steam 310 Flow and the Tissue Mill Steam 550 Flow.
34
35 "Tissue Mill Steam 50 Delivery Point" means the
36 locations at which MESC shall deliver [50 Steam] to Tissue Mill
37 Owner pursuant to the Tissue Mill Energy Services Agreement, as
38 more particularly described in Exhibit U to the Master Operating
39 Agreement.
40
41 "Tissue Mill Steam 550 Delivery Point" means the
42 locations at which MESC shall deliver [550 Steam] to Tissue Mill
43 Owner pursuant to the Tissue Mill Energy Services Agreement, as
44 more particularly described in Exhibit U to the Master Operating
45 Agreement.
46
47 "Tissue Mill Steam 130 Delivery Point" means the
48 locations at which MESC shall deliver [130 Steam] to Tissue Mill
49 Owner pursuant to the Tissue Mill Energy Services Agreement, as
50 more particularly described in Exhibit U to the Master Operating
51 Agreement.
52
53 "Tissue Mill Steam Processing Charge" means the amount
54 payable by Tissue Mill Owner to MESC for Steam Processing
A-67
<PAGE>
1 Services rendered by MESC pursuant to the Tissue Mill Energy
2 Services Agreement, which amount shall be calculated in
3 accordance with Part 6 of Exhibit C to the Master Operating
4 Agreement.
5
6 "Tissue Mill Steam Processing Deficiency Amount" means
7 the difference between the Tissue Mill Steam Processing
8 Requirement and the Tissue Mill Steam Energy Flow.
9
10 "Tissue Mill Steam Processing Demand" or "SPDtissue"
11 means 280 MMBTU/hour, as such amount may be adjusted pursuant to
12 Exhibit C to the Master Operating Agreement.
13
14 "Tissue Mill Steam Processing Demand Band" means a
15 range between (and inclusive of) 280 MMBTU/hr and 252 MMBTU/hr,
16 which range shall be adjusted once upon the adjustment to the
17 Tissue Mill Steam Processing Demand made in April of 1996 so as
18 to encompass the range between (and inclusive of) the Tissue Mill
19 Steam Processing Demand as revised in April of 1996, and an
20 amount equal to ninety percent (90%) of such revised Tissue Mill
21 Steam Processing Demand, provided that this Band shall not be
22 further adjusted after this one-time revision in April of 1996.
23
24 "Tissue Mill Steam Processing Demand Charge" has the
25 meaning given in Section 7.2(a) of the Tissue Mill Energy
26 Services Agreement.
27
28 "Tissue Mill Steam Processing Demand Charge Reduction"
29 has the meaning given in Section 7.3(c)(ii)(B) of the Master
30 Operating Agreement.
31
32 "Tissue Mill Steam Processing Requirement" means the
33 Tissue Mill's requirement of Steam Processing Services at any
34 given time, measured in MMBTU.
35
36 "Tissue Mill Steam Processing Shortfall" means
37 _______________.
38
39 "Tissue Mill Steam Processing Shortfall Event" has the
40 meaning given in Section 7.3(c)(ii)(B) of the Master Operating
41 Agreement.
42
43 "Tissue Mill Steam Processing Surcharge" means the
44 amount payable by Tissue Mill Owner to MESC for certain Steam
45 Processing Services rendered by MESC pursuant to the Tissue Mill
46 Energy Services Agreement, which amount shall be calculated in
47 accordance with Part 6 of Exhibit C to the Master Operating
48 Agreement.
49
50 "Tissue Mill Steam 310 Delivery Point" means the
51 locations at which MESC shall deliver [310 Steam] to Tissue Mill
52 Owner pursuant to the Tissue Mill Energy Services Agreement, as
53 more particularly described in Exhibit U to the Master Operating
54 Agreement.
A-68
<PAGE>
1 "Tissue Mill Waste Water Delivery Point" means the
2 locations at which Tissue Mill Owner shall deliver Waste Water to
3 the Pulp Mill pursuant to the Master Operating Agreement, as more
4 particularly described in Exhibit T to the Master Operating
5 Agreement.
6
7 "Total Biomass" means the sum for a given Billing
8 Period of the biomass weighed by the scales between the biomass
9 hoppers and the power boilers, which sum shall be transmitted by
10 MESC to Pulp Mill Owner within three (3) days of the end of each
11 Billing Period.
12 ["Total Casualty" means any Casualty which results in
13 (a) damage or destruction to the Energy Complex which exceeds
14 [$150 million], such amount of damage or destruction to be
15 verified by the Technical Expert; or (b) damage or destruction to
16 equipment, machinery, components or systems of the Energy Complex
17 which, without regard to the amount of loss proceeds, cannot be
18 replaced, restored or rebuilt within [twenty-four (24) months] of
19 the occurrence of such Casualty and which results in (i) an
20 Actual Liquor Processing Capacity less than ______ Klbs/Day or
21 (ii) an Actual Steam Processing Capacity less than _____
22 [MMBTU/hr], provided that the feasibility of accomplishing such
23 restoration, replacement or rebuilding within such [twenty-four
24 (24) month] period and the effect of such Casualty on the Actual
25 Liquor Processing Capacity and Actual Steam Processing Capacity
26 shall be verified by the Technical Expert.]
27
28 "Transfer Option" has the meaning given in Section 16.1
29 of the Lease.
30
31 "Transfer Option Term" has the meaning given in Section
32 16.1
33 of the Lease.
34
35 "Transferred Permits" means those Energy Complex
36 Permits which may be lawfully and validly transferred and
37 assigned by Scott to Buyer under the Asset Purchase Agreement, as
38 listed on Part III of Schedule 4.7 to the Asset Purchase
39 Agreement.
40
41 "Transferring Party" has the meaning given in Section
42 11.4 of the Leases.
43
44 "Triggering Event" means a Energy Complex Triggering
45 Event or a Pulp Mill Triggering Event, as the context may
46 require.
47
48 "TRT" means Three Rivers Timber Company, a [Washington]
49 corporation.
50
51 "TRT Agreement" means [COVENANT FROM TRT RE: NOT
52 LOOKING TO MESC TO SATISFY OBLIGATIONS UNDER THE 1984 TAXABLE
53 BONDS], substantially in the form of Exhibit L to the Asset
54 Purchase Agreement.
A-69
<PAGE>
1 "Truck Scales" means ____________________.
2
3 "Trustee", with respect to the Lease, has the meaning
4 given in Section 11.1(a) of the Lease, and with respect to the
5 Supplementary Lease, has the meaning given in Section 11.1(a) of
6 the Supplementary Lease.
7
8 "TSCA means the Toxic Substances Control Act, 15 U.S.C.
9 Section 2601 et seq.
10
11 "Twentieth Anniversary" has the meaning given in
12 Section 16.2 of the Lease.
13
14 "Underground Storage Tanks" means two underground fuel-
15 oil storage tanks, as well as pumps and piping related thereto
16 located on Lot 7 of the Scott Subdivision.
17
18 ["Unit" means .]
19
20 ["Unit Trip" means any sudden and immediate removal
21 from service or sudden and immediate interruption of service of
22 any boiler, turbine-generator or high voltage distribution
23 component such that (i) in the case of the boiler, either fuel
24 input shuts off, or super heater steam flows stop, (ii) in the
25 case of the turbine generator, either the generator circuit
26 breather opens, or the main steam stop valve closes or (iii) in
27 the case of the high voltage distribution system, the 13.8__
28 power supply to mills is interrupted; provided, however, that
29 Unit Trips shall not include: (i) Unit Trips caused by events
30 outside of the [Energy Complex] [Site] which could not have been
31 prevented by the exercise of Prudent Plant Operating Standards;
32 (ii) the scheduled Unit Trip of a Unit from service in the normal
33 course of operation; (iii) any Unit Trip after any Outage which
34 occurs prior to the time at which a Unit is first brought up to
35 [twenty-five percent (25%)] of its design load following such
36 Outage; or (iv) any Unit Trip which occurs after the Site
37 Operating Committee has requested MESC to delay the taking of any
38 Scheduled Outage or Major Maintenance Outage of a Unit, for the
39 duration of the delay, provided that the Unit Trip would not
40 likely have occurred but for the delay in taking the Scheduled
41 Outage or Major Maintenance Outage; provided further, that any
42 dispute regarding whether a Unit Trip meets the requirements of
43 clauses (i) through (iv) above shall be resolved by the Technical
44 Expert in accordance with Article 16 of the Master Operating
45 Agreement.]
46
47 "UPIU" has the meaning given in Section 6.1 of the
48 Employee Transition Agreement.
49
50 "Unscheduled Energy Complex Outage" means any Outage
51 with respect to the Energy Complex which is not a Scheduled
52 Energy Complex Outage or a Major Maintenance Outage, other than
53 any Outages caused by a Force Majeure Event with respect to the
54 Energy Complex or MESC.
A-70
<PAGE>
1 "Unscheduled Liquor Processing Outage Allowance" means
2 the outage allowance calculated in accordance with Section A of
3 Part 5 of Exhibit I to the Master Operating Agreement.
4
5 "Unscheduled Mill Outage" means _______________.
6
7 "Unscheduled Steam Processing Outage Allowance" means
8 the outage allowance calculated in accordance with Section B of
9 Part 5 of Exhibit I to the Master Operating Agreement.
10
11 "Unscheduled Mill Outage" means any outage at a Mill
12 which is not a Scheduled Mill Outage, other than any such outage
13 caused by a Force Majeure Event with respect to a Mill or a Mill
14 Owner.
15
16 "Unscheduled Outage" means an Unscheduled Energy
17 Complex Outage or an Unscheduled Mill Outage, as the context may
18 require.
19
20 "Usage Table" means the table set forth in Exhibit F to
21 the Master Operating Agreement, as such exhibit may be amended in
22 accordance with Section 3.5(d) of the Master Operating Agreement.
23
24 "Utilities Control Room Operator" means the on-shift
25 leader of Energy Complex Operations, to whom all Energy Complex
26 line-of-progression employees report, and to whom the Pulp Mill,
27 Tissue Mill and Paper Mill shall report in the event of a change
28 at any Mill which affects the _________________________.
29
30 "Virgin Dry Black Liquor Solids" means the amount of
31 solids in the Black Liquor flow-stream provided to MESC by the
32 Pulp Mill with all moisture removed.
33
34 "Waste Water" means waste water having the
35 characteristics set forth in Exhibit B to the Master Operating
36 Agreement.
37
38 "Waste Water Load-Shedding Plan" means the load-
39 shedding plan set forth in Exhibit P to the Master Operating
40 Agreement, as such exhibit may be revised from time to time by
41 the Site Operating Committee.
42
43 "Waste Water Measuring Devices" means those devices
44 described in Exhibit U of the Master Operating Agreement.
45
46 "Waste Water Treatment Plant" means the waste water
47 treatment plant located at the Pulp Mill, as more fully described
48 in Exhibit X to the Master Operating Agreement.
49
50 "Waste Water Treatment Services" means the waste water
51 treatment services provided by Pulp Mill Owner pursuant to
52 Article 3 of the Water Agreement.
53
A-71
<PAGE>
1 "Water Agreement" means the Water Procurement and
2 Effluent Service Agreement, dated as of December 12, 1994, among
3 MESC, Pulp Mill Owner, Paper Mill Owner and Tissue Mill Owner.
4
5 "Warranties" means all rights of Scott under or
6 pursuant to all warranties, representations and guarantees made
7 by manufacturers and suppliers in connection with the Purchased
8 Assets or services furnished to Scott pertaining to the Energy
9 Complex or affecting the Assets, as more particularly described
10 on Schedule 1.1(k) to the Asset Purchase Agreement.
11
12 "Weak Wash" means weak wash having the characteristics
13 set forth in Exhibit B to the Master Operating Agreement, to be
14 provided by Pulp Mill Owner to MESC pursuant to the Pulp Mill
15 Energy Services Agreement.
16
17 "Weak Wash Delivery Point" means the locations at which
18 Pulp Mill Owner shall deliver Weak Wash to MESC pursuant to the
19 Pulp Mill Energy Services Agreement, as more particularly
20 described in Exhibit T to the Master Operating Agreement.
21
22 "Week" means a seven (7) day period beginning at 0700
23 on Sunday and ending at 0700 the following Sunday.
24
25 "Weekly Liquor Processing Amount" means the aggregate
26 amount of Black Liquor which Pulp Mill Owner expects to deliver
27 to MESC during a Week.
28
29 "Weekly Site-Wide Shutdown Order" means the order to be
30 completed each week by the Site Operating Committee in accordance
31 with Section 3.6(c) of the Master Operating Agreement.
32
33 "Welfare Plan" means any Employee Benefit Plan which is
34 an "employee welfare benefit plan," as defined in Section 3(1) of
35 ERISA.
36
37 "Wet-lap Pulp" has the meaning given in the Pulp Supply
38 Agreement.
39
40 "Wood Pulp"' means _______________.
41
42 "Woodyard Biomass" means bark, fines, knots, and other
43 rejects from on- or off-site woodyards, chipyards, and debarking
44 facilities, which are used in creating pulp chips for the Pulp
45 Mill and which are owned by or under dedicated contract to supply
46 the Pulp Mill.
47
48 "Yearly Outages Schedule" has the meaning given in
49 Section 3.6(c) of the Master Operating Agreement.
A-72
<PAGE>
1 RULES OF INTERPRETATION
2
3
4 1. The singular includes the plural and the plural
5 includes the singular.
6
7 2. "or" is not exclusive.
8
9 3. A reference to a Governmental Rule includes any
10 amendment or modification to such Governmental Rule, and all
11 regulations, rulings and other Governmental Rules promulgated
12 under such Governmental Rule.
13
14 4. A reference to a Person includes its permitted
15 successors and permitted assigns.
16
17 5. Accounting terms have the meanings assigned to
18 them by GAAP, as consistently applied by the accounting entity to
19 which they refer.
20
21 6. The words "include," "includes" and "including"
22 are not limiting.
23
24 7. A reference in a document to an Article, Section,
25 Exhibit, Schedule, Annex or Appendix is to the Article, Section,
26 Exhibit, Schedule, Annex or Appendix of such document unless
27 otherwise indicated. Exhibits, Schedules, Annexes or Appendices
28 to any document shall be deemed incorporated by reference in such
29 document.
30
31 8. References to any document, instrument or
32 agreement (a) shall include all exhibits, schedules and other
33 attachments thereto, (b) shall include all documents, instruments
34 or agreements issued or executed in replacement thereof, and
35 (c) shall mean such document, instrument or agreement, or
36 replacement or predecessor thereto, as amended, modified and
37 supplemented from time to time and in effect at any given time.
38
39 9. The words "hereof," "herein" and "hereunder" and
40 words of similar import refer to the Agreement as a whole and not
41 to any particular provision, unless otherwise indicated.
42
43 10. References to "days" shall mean calendar days,
44 unless otherwise indicated. References to a time of day shall
45 mean such time in Mobile, Alabama unless otherwise indicated.
46
47 11. The Operative Documents are the result of
48 negotiations between, and have been reviewed by, Scott, MESC and
49 S.D. Warren Company and their respective counsel. Accordingly,
50 the Operative Documents shall be deemed to be the product of all
51 parties thereto, and there shall be no presumption that an
52 ambiguity should be construed in favor of or against Scott, MESC
53 or S.D. Warren Company solely as a result of such party's actual
54 or alleged role in the drafting of any Operative Document.
A-73
<PAGE>
1 12. Reference to a party's "knowledge," "actual
2 knowledge" or "current actual knowledge" shall mean the current
3 actual knowledge of employees of such party of a seniority level
4 no less than the managers of the Energy Complex and the
5 respective Mills.
A-74
<PAGE>
Exhibit B-3(e)
GUARANTY, dated as of _______ 1994 (this "Guaranty"),
made by The Southern Company, a Delaware corporation
("Guarantor"), in favor of Scott Paper Company, a Pennsylvania
corporation ("Scott").
RECITALS
A. Concurrently herewith, Scott and Mobile Energy
Services, Inc., an Alabama corporation and a subsidiary of
Guarantor ("MESC"), will enter into an Asset Purchase Agreement
(the "Asset Purchase Agreement"), pursuant to which, among other
things, Scott will sell to MESC certain assets constituting a
part of the Energy Complex (as defined in Exhibit A to the Asset
Purchase Agreement).
B. Concurrently herewith, and in connection with the
Asset Purchase Agreement, Scott and MESC will enter into the 1984
Tax-Exempt Lease Agreement (as defined in Exhibit A to the Asset
Purchase Agreement), pursuant to which, among other things, (i)
Scott will assign to MESC all of Scott's right, title and
interest in and to the Lease and Agreement and the Project (each
as defined in the 1984 Tax-Exempt Lease Agreement and MESC will
assume all of Scott's liabilities and obligations under the Lease
and Agreement arising after the date hereof and (ii) within the
time period specified in the 1984 Tax-Exempt Lease Agreement,
MESC will cause the Bonds (as defined in the 1984 Tax-Exempt
Lease Agreement to be (y) refunded or redeemed or otherwise fully
paid and discharged, or (z) remarketed in a manner whereby Scott
is fully released and discharged from all liability in relation
to the Bonds.
In consideration of the agreements herein and in the
other Operative Documents (as defined in Exhibit A to the Asset
Purchase Agreement) and in order to induce Scott to enter into
the 1984 Tax-Exempt Lease Agreement, Guarantor hereby agrees as
follows:
ARTICLE 1 - DEFINITIONS; INTERPRETATION
1.1 Definitions. Except as otherwise expressly
provided herein, capitalized terms used in this Guaranty shall
have the meanings given in Exhibit A to the Asset Purchase
Agreement.
1.2 Rules of Interpretation. Except as otherwise
expressly provided herein, the rules of interpretation set forth
in Exhibit A to the Asset Purchase Agreement shall apply to this
Guaranty.
<PAGE>
ARTICLE 2 - GUARANTY
2.1 Guaranty. Until the earlier of such time as (A)
the Bonds are (i) refunded or redeemed or otherwise fully paid
and discharged, or (ii) remarketed in a manner whereby Scott is
fully released and discharged from all liability in relation
thereto and (B), in either case, all amounts payable under
Section 4 of the Lease Agreement and Assumption Agreement shall
have been paid in full, Guarantor hereby irrevocably, absolutely
and unconditionally guarantees to Scott the prompt and full
payment and performance of all obligations of MESC under the 1984
Tax-Exempt Lease Agreement when due and payable or required in
accordance with the terms thereof (the "Guaranteed Obligations"),
without regard to any counterclaim, set-off, deduction or defense
of any kind which MESC or Guarantor may have or assert; provided,
however, that nothing contained herein shall be deemed a waiver
by, or limitation on, MESC of any claims or causes of action that
MESC may have against Scott. Without limiting the generality of
the foregoing, Guarantor's liability shall extend to all amounts
which constitute part of the Guaranteed Obligations and would be
owed by MESC pursuant to the 1984 Tax-Exempt Lease Agreement but
for the fact that such Guaranteed Obligations are unenforceable
or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving MESC.
2.2 Guaranty Absolute. (a) Guarantor guarantees that
the Guaranteed Obligations will be paid and preformed strictly in
accordance with the terms of the 1984 Tax-Exempt Lease Agreement,
regardless of any Governmental Rule now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of
Scott with respect thereto. The obligations of Guarantor under
this Guaranty are independent of the Guaranteed Obligations, and
a separate action or actions may be brought and prosecuted
against Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against MESC or whether MESC is
joined in any such action or actions. The liability of Guarantor
under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of:
(i) any change in the time, manner or place of payment
of, or in any other term of, all or any of the
Guaranteed Obligations, or any other amendment or
waiver of, or any consent to departure from, the
1984 Tax-Exempt Lease Agreement;
(ii) the existence of any claim, set-off, defense or
other right which MESC or Guarantor may have at
any time against Scott, whether in connection with
this Guaranty, the 1984 Tax-Exempt Lease
Agreement, or any unrelated transaction;
2
<PAGE>
(iii) any change, restructuring or termination of
the corporate structure or existence of MESC;
or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge
of, MESC or a guarantor.
This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be returned
by Scott upon the insolvency, bankruptcy or reorganization of
MESC or the Guarantor or otherwise, all as though such payment
had not been made.
(b) This Guaranty shall not confer upon Scott or any
other Person any right of payment or enforcement with respect to
MESC under the 1984 Tax-Exempt Lease Agreement that is in any
manner broader or more expansive than such Persons' rights of
payment and enforcement, if any, with respect to MESC under the
1984 Tax-Exempt Lease Agreement.
2.3 Waiver. Guarantor hereby waives promptness,
diligence, presentment, demand of payment, notice of acceptance
and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that Scott
exhaust any right or take any action against MESC or any other
person or entity.
2.4 Subrogation. Notwithstanding any payment or
payments made by Guarantor hereunder, Guarantor hereby
irrevocably waives any and all rights of subrogation to the
rights of Scott against MESC and any and all rights of
reimbursement, assignment, indemnification or implied contract or
any similar rights against MESC or against any endorser or other
guarantor of all or any part of the Guaranteed Obligations. If,
notwithstanding the foregoing, any amount shall be paid to
Guarantor on account of such subrogation rights at any time when
all of the Guaranteed Obligations shall not have been paid in
full, such amount shall be held by Guarantor in trust for Scott,
segregated from other funds of Guarantor, and shall, forthwith
upon receipt by Guarantor, be turned over to Scott in the exact
form received by Guarantor, to be applied against the Guaranteed
Obligations, whether matured or unmatured, in such order as Scott
may determine.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Guarantor hereby represents and warrants as follows:
3.1 Organization. Guarantor is a corporation duly
organized, validly existing and in good standing under the laws
of the state of its incorporation.
3
<PAGE>
3.2 Authorization; No Conflict. The execution and
delivery by Guarantor of this Guaranty, and the performance by
Guarantor of its obligations hereunder (i) are within Guarantor's
corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) do not contravene its articles of
incorporation or bylaws or any Governmental Rule applicable to or
binding on Guarantor or any of its properties and (iv) do not
require the consent or approval of any Person which has not
already been obtained.
3.3 Enforceability. This Guaranty constitutes the
legal, valid and binding obligation of Guarantor enforceable
against Guarantor in accordance with its terms, except to the
extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).
ARTICLE 4 - MISCELLANEOUS
4.1 Continuing Guaranty; Assignment. This Guaranty is
a continuing guaranty and shall (i) apply to all Guarantees
Obligations whenever arising, (ii) be binding upon Guarantor, its
successors and permitted assigns, and (iii) inure to the benefit
of, and be enforceable by, Scott and its successors and permitted
assigns. Guarantor may not assign its obligations under this
Guaranty without the prior written consent of Scott, which
consent may be withheld in Scott's sole discretion. Scott may
not assign its rights under this Guaranty without the prior
written consent of Guarantor, which consent may be withheld in
Guarantor's sole discretion.
4.2 Notices; Transfer of Funds. All notices,
requests, demands and other communications which are required or
may be given under this Guaranty shall be in writing and shall be
deemed to have been duly given when received if personally
delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method, subject to the
sender's facsimile machine receiving the correct answerback of
the addressee and confirmation of uninterrupted transmission by a
transmission report or the recipient confirming by telephone to
sender that he has received the facsimile message; the day after
it is sent, if sent for next day delivery to a domestic address
by recognized overnight delivery service (e.g., FedEx); and upon
receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent (i) if to Scott, to
its address set forth in Section 17.6 of the Master Operating
Agreement and (ii) if to Guarantor, to:
The Southern Company
4
<PAGE>
Attention:
Telecopy:
with a copy to:
Troutman Sanders
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308-2216
Attention: Hugh M. Davenport, Esq.
Telecopy: (404) 885-3525
and:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Tim Flato, Esq.
Telecopy: (415) 395-8095
or to such other place and with such other copies as Scott or
Guarantor may designate as to itself by written notice to the
others pursuant to this Section 4.3.
Payments to be made to Scott hereunder shall be made by
wire transfer of funds to Scott's account No. 055-60-196 at
Morgan Guaranty Trust Company of New York, ABA no. [_______] or
such other account as Scott may designate by notice hereunder.
4.3 Delay and Waiver. No failure on the part of Scott
to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
4.4 Entire Agreement; Amendments. This Guaranty and
any agreement, document or instrument attached hereto or referred
to herein integrate all the terms and conditions mentioned herein
or incidental hereto and supersede all oral negotiations and
prior writings in respect to the subject matter hereof. In the
event of any conflict between the terms, conditions and
provisions of this Guaranty and any such agreement, document or
instrument, the terms, conditions and provisions of this Guaranty
shall prevail. This Guaranty may only be amended or modified by
an instrument in writing signed by each of Guarantor and Scott.
4.5 Headings. The headings of the various Sections of
this Guaranty are for convenience of reference only and shall not
modify, define or limit any of the terms or provisions hereof.
4.6 Governing Law; Consent to Jurisdiction. (a) This
Guaranty shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of
New York without reference to the choice of law provisions of New
York law (except Section 5-1401 of the New York General
5
<PAGE>
Obligations Law), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity
which is a party to or the subject of this Guaranty, and as to
those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern.
(b) Each party hereto irrevocably and unconditionally
(i) agrees that any suit, action or other legal proceeding
arising out of this Guaranty may be brought in the United States
District Court for the Southern District of New York or, if such
court does not have jurisdiction or will not accept jurisdiction,
in any court of general jurisdiction in New York, New York; (ii)
consents to the jurisdiction of any such court in any such suit,
action or proceeding; and (iii) waives any objection which such
party may have to the laying of venue of any such suit, action or
proceeding in any such court.
4.7 WAIVER OF JURY TRIAL. EACH OF GUARANTOR AND SCOTT
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS GUARANTY OR ANY MATTER ARISING HEREUNDER.
4.8 Severability. Any provision of this Guaranty that
shall be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
4.9 No Recourse to Affiliates. Any obligations
created herein shall be the sole obligations of Guarantor, unless
and to the extent that such obligations are assigned or delegated
by Guarantor pursuant to Section 4.1. Scott shall not have
recourse to any parent, subsidiary, partner, joint venturer,
affiliate, director or officer of Guarantor (or of any Person to
whom Guarantor's obligations hereunder are assigned or delegated
pursuant to Section 4.1) for performance of said obligations
unless the obligations are assumed in writing by the Person
against whom recourse is sought.
4.10 Termination. Subject to Section 2.2 hereof, this
Guaranty shall immediately terminate and be of no further force
and effect upon completion of the actions set forth in Section 4
of the 1984 Tax-Exempt Lease Agreement and payment in full of all
amounts payable thereunder. Upon such termination, Scott shall
deliver to Guarantor written evidence in form and substance
reasonably satisfactory to Guarantor of such termination and of
the release of Guarantor from all of its obligations hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
IN WITNESS WHEREOF, Guarantor has by its duly
authorized officer caused this Guaranty to be executed as of the
date first above written.
THE SOUTHERN COMPANY,
a Delaware corporation
By:
Name:
Title:
7
<PAGE>
(Multicurrency-Cross Border) Exhibit B-7(a)
ISDA
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of ......................................
...............................................
and.............................................. have entered
and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master
Agreement, which includes the schedule (the "Schedule"), and the
documents and other confirming evidence (each a "Confirmation")
exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the
Schedule will have the meanings therein specified for the purpose
of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between
the provisions of the Schedule and the other provisions of this
Master Agreement, the Schedule will prevail. In the event of any
inconsistency between the provisions of any Confirmation and this
Master Agreement (including the Schedule), such Confirmation will
prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in
reliance on the fact that this Master Agreement and all
Confirmations form a single agreement between the parties
(collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified
in each Confirmation to be made by it, subject to the other
provisions of this Agreement.
(ii) Payments under this Agreement will be made on the due
date for value on that date in the place of the account
specified in the relevant Confirmation or otherwise pursuant
to this Agreement, in freely transferable funds and in the
manner customary for payments in the required currency.
Where settlement is by delivery (that is, other than by
payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation
<PAGE>
unless otherwise specified in the relevant Confirmation or
elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is
subject to (1) the condition precedent that no Event of
Default or Potential Event of Default with respect to the
other party has occurred and is continuing, (2) the
condition precedent that no Early Termination Date in
respect of the relevant Transaction has occurred or been
effectively designated and (3) each other applicable
condition precedent specified in this Agreement.
(b) Change of Account. Either party may change its account for
receiving a payment or delivery by giving notice to the other
party at least five Local Business Days prior to the scheduled
date for the payment or delivery to which such change applies
unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be
payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's
obligation to make payment of any such amount will be
automatically satisfied and discharged and, if the aggregate
amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been
payable by the other party, replaced by an obligation upon the
party by whom the larger aggregate amount would have been payable
to pay to the other party the excess of the larger aggregate
amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that
a net amount will be determined in respect of all amounts payable
on the same date in the same currency in respect of such
Transactions, regardless of whether such amounts are payable in
respect of the same Transaction. The election may be made in the
Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being
subject to the election, together with the starting date (in
which case subparagraph (ii) above will not, or will cease to,
apply to such Transactions from such date). This election may be
made separately for different groups of Transactions and will
apply separately to each pairing of Offices through which the
parties make and receive payments or deliveries.
(d) Deduction or Withholding for Tax.
2
<PAGE>
(i) Gross-Up. All payments under this Agreement will be
made without any deduction or withholding for or on account
of any Tax unless such deduction or withholding is required
by any applicable law, as modified by the practice of any
relevant governmental revenue authority, then in effect. If
a party is so required to deduct or withhold, then that
party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full
amount required to be deducted or withheld from any
additional amount paid by X to Y under this Section
2(d)) promptly upon the earlier of determining that
such deduction or withholding is required or receiving
notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably
acceptable to Y, evidencing such payment to such
authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise
entitled under this Agreement, such additional amount
as is necessary to ensure that the net amount actually
received by Y (free and clear of Indemnifiable Taxes,
whether assessed against X or Y) will equal the full
amount Y would have received had no such deduction or
withholding been required. However, X will not be
required to pay any additional amount to Y to the
extent that it would not be required to be paid but
for:-
(A) the failure by Y to comply with or perform
any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but
for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on
or after the date on which a Transaction is
entered into (regardless of whether such action is
taken or brought with respect to a party to this
Agreement or (II) a change in Tax Law.
(ii) Liability. If:--
3
<PAGE>
(1) X is required by any applicable law, as modified
by the practice of any relevant governmental revenue
authority, to make any deduction or withholding in
respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X,
then, except to the extent Y has satisfied or then satisfies
the liability resulting from such Tax, Y will promptly pay
to X the amount of such liability (including any related
liability for interest, but including any related liability
for penalties only if Y has failed to comply with or perform
any agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or
effective designation of an Early Termination Date in respect of
the relevant Transaction, a party that defaults in the
performance of any payment obligation will, to the extent
permitted by law and subject to Section 6(c), be required to pay
interest (before as well as after judgment) on the overdue amount
to the other party on demand in the same currency as such overdue
amount, for the period from (and including) the original due date
for payment to (but excluding) the date of actual payment, at the
Default Rate. Such interest will be calculated on the basis of
daily compounding and the actual number of days elapsed. If,
prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party
defaults in the performance of any obligation required to be
settled by delivery, it will compensate the other party on demand
if and to the extent provided for in the relevant Confirmation or
elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations
will be deemed to be repeated by each party on each date on which
a Transaction is entered into and, in the case of the
representations in Section 3(f), at all times until the
termination of this Agreement) that:-
(a) Basic Representations.
(i) Status. It is duly organised and validly existing
under the laws of the jurisdiction of its organisation or
incorporation and, if relevant under such laws, in good
standing;
4
<PAGE>
(ii) Powers. It has the power to execute this Agreement and
any other documentation relating to this Agreement to which
it is a party, to deliver this Agreement and any other
documentation relating to this Agreement that it is required
by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery
and performance;
(iii) No Violation or Conflict. Such execution,
delivery and performance do not violate or conflict with any
law applicable to it, any provision of its constitutional
documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets
or any contractual restriction binding on or affecting it or
any of its assets;
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a
party have been obtained and are in full force and effect
and all conditions of any such consents have been complied
with; and
(v) Obligations Binding. Its obligations under this
Agreement and any Credit Support Document to which it is a
party constitute its legal, valid and binding obligations,
enforceable in accordance with their respective terms
(subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or
at law)).
(b) Absence of Certain Events. No Event of Default or Potential
Event of Default or, to its knowledge, Termination Event with
respect to it has occurred and is continuing and no such event or
circumstance would occur as a result of its entering into or
performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its
knowledge, threatened against it or any of its Affiliates any
action, suit or proceeding at law or in equity or before any
court, tribunal, governmental body, agency or official or any
arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support
Document to which it is a party or its ability to perform its
obligations under this Agreement or such Credit Support Document.
5
<PAGE>
(d) Accuracy of Specified Information. All applicable
information that is furnished in writing by or on behalf of it to
the other party and is identified for the purpose of this Section
3(d) in the Schedule is, as of the date of the information, true,
accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in
the Schedule as being made by it for the purpose of this Section
3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in
the Schedule as being made by it for the purpose of this Section
3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party
has or may have any obligation under this Agreement or under any
Credit Support Document to which it is a party:-
(a) Furnish Specified Information. It will deliver to the other
party or, in certain cases under subparagraph (iii) below, to
such government or taxing authority as the other party reasonably
directs:--
(i) any forms, documents or certificates relating to
taxation specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any
form or document that may be required or reasonably
requested in writing in order to allow such other party or
its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or
with such deduction or withholding at a reduced rate (so
long as the completion, execution or submission of such form
or document would not materially prejudice the legal or
commercial position of the party in receipt of such demand),
with any such form or document to be accurate and completed
in a manner reasonably satisfactory to such other party and
to be executed and to be delivered with any reasonably
required certification,
in each case by the date specified in the Schedule or such
Confirmation or, if none is specified, as soon as reasonably
practicable.
(b) Maintain Authorisations. It will use all reasonable
efforts to maintain in full force and effect all consents of any
6
<PAGE>
governmental or other authority that are required to be obtained
by it with respect to this Agreement or any Credit Support
Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects
with all applicable laws and orders to which it may be subject if
failure so to comply would materially impair its ability to
perform its obligations under this Agreement or any Credit
Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a
representation made by it under Section 3(f) to be accurate and
true promptly upon learning of such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay
any Stamp Tax levied or imposed upon it or in respect of its
execution or performance of this Agreement by a jurisdiction in
which it is incorporated, organised, managed and controlled, or
considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnity the other
party against any Stamp Tax levied or imposed upon the other
party or in respect of the other party's execution or performance
of this Agreement by any such Stamp Tax Jurisdiction which is not
also a Stamp Tax Jurisdiction with respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect
to a party or, if applicable, any Credit Support Provider of such
party or any Specified Entity of such party of any of the
following events constitutes an event of default (an "Event of
Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to
make, when due, any payment under this Agreement or delivery
under Section 2(a)(i) or 2(e) required to be made by it if
such failure is not remedied on or before the third Local
Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply
with or perform any agreement or obligation (other than an
obligation to make any payment under this Agreement or
delivery under Section 2(a)(i) or 2(e) or to give notice of
a Termination Event or any agreement or obligation under
Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day
after notice of such failure is given to the party;
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(iii) Credit Support Default.
(1) Failure by the party or any Credit Support
Provider of such party to comply with or perform any
agreement or obligation to be complied with or
performed by it in accordance with any Credit Support
Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit
Support Document or the failing or ceasing of such
Credit Support Document to be in full force and effect
for the purpose of this Agreement (in either case other
than in accordance with its terms) prior to the
satisfaction of all obligations of such party under
each Transaction to which such Credit Support Document
relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider
disaffirms, disclaims, repudiates or rejects, in whole
or in part, or challenges the validity of, such Credit
Support Document;
(iv) Misrepresentation. A representation (other than a
representation under Section 3(e) or (f)) made or repeated
or deemed to have been made or repeated by the party or any
Credit Support Provider of such party in this Agreement or
any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or
deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any
Credit Support Provider of such party or any applicable
Specified Entity of such party (1) defaults under a
Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs
a liquidation of, an acceleration of obligations under, or
an early termination of, that Specified Transaction, (2)
defaults, after giving effect to any applicable notice
requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date
of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three
Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims,
repudiates or rejects, in whole or in part, a Specified
Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the
Schedule as applying to the party, the occurrence or
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existence of (1) a default, event of default or other
similar condition or event (however described) in respect of
such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness
of any of them (individually or collectively) in an
aggregate amount of not less than the applicable Threshold
Amount (as specified in the Schedule) which has resulted in
such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such
Credit Support Provider or such Specified Entity
(individually or collectively) in making one or more
payments on the due date thereof in an aggregate amount of
not less than the applicable Threshold Amount under such
agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support
Provider of such party or any applicable Specified Entity of
such party:-
(1) is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) becomes
insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its
debts as they become due; (3) makes a general
assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment
of insolvency or bankruptcy or any other relief under
any bankruptcy or insolvency law or other similar law
affecting creditors' right's, or a petition is
presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted
or presented against it, such proceeding or petition
(A) results in a judgment of insolvency or bankruptcy
or the entry of an order for relief or the making of an
order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each
case within 30 days of the institution or presentation
thereof; (5) has a resolution passed for its winding-
up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger);
(6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official
for it or for all or substantially all its assets; (7)
has a secured party take possession of all or
substantially all its assets or has a distress,
execution, attachment, sequestration or other legal
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process levied, enforced or sued on or against all or
substantially all its assets and such secured party
maintains possession, or any such process is not
dismissed, discharged, stayed or restrained, in each
case within 30 days thereafter; (8) causes or is
subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in
clauses (1) to (7) (inclusive); or (9) takes any action
in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the foregoing
acts; or
(viii) Merger Without Assumption. The party or any
Credit Support Provider of such party consolidates or
amalgamates with, or merges with or into, or transfers all
or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity
fails to assume all the obligations of such party or
such Credit Support Provider under this Agreement or
any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant
to an agreement reasonably satisfactory to the other
party to this Agreement; or
(2) the benefits of any Credit Support Document fail
to extend (without the consent of the other party) to
the performance by such resulting, surviving or
transferee entity of its obligations under this
Agreement.
(b) Termination Events. The occurrence at any time with respect
to a party or, if applicable, any Credit Support Provider of such
party or any Specified Entity of such party of any event
specified below constitutes an Illegality if the event is
specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified
in (iii) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (iv)
below or an Additional Termination Event if the event is
specified pursuant to v) below:--
(i) Illegality. Due to the adoption of, or any change in,
any applicable law after the date on which a Transaction is
entered into, or due to the promulgation of, or any change
in, the interpretation by any court, tribunal or regulatory
authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result
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of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):-
(1) to perform any absolute or contingent obligation
to make a payment or delivery or to receive a payment
or delivery in respect of such Transaction or to comply
with any other material provision of this Agreement
relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of
such party to perform, any contingent or other
obligation which the party (or such Credit Support
Provider) has under any Credit Support Document
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing
authority, or brought in a court of competent jurisdiction,
on or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with
respect to a party to this Agreement) or (y) a Change in Tax
Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next
succeeding Scheduled Payment Date (1) be required to pay to
the other party an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or
(2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e))
and no additional amount is required to be paid in respect
of such Tax under Section 2(d)(i)(4) (other than by reason
of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened
Party") on the next succeeding Scheduled Payment Date will
either (1) be required to pay an additional amount in
respect of an Indemnifiable Tax under Section 2(d)(i)(4)
(except in respect of interest under Section 2(e), 6(d)(ii)
or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any
Indemnifiable Tax in respect of which the other party is not
required to pay an additional amount (other than by reason
of Section 2(d)(i)(4)(A) or (B)), in either case as a result
of a party consolidating or amalgamating with, or merging
with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party)
where such action does not constitute an event described in
Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon
Merger" is specified in the Schedule as applying to the
party, such party ("X"), any Credit Support Provider of X or
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any applicable Specified Entity of X consolidates or
amalgamates with, or merges with or into, or transfers all
or substantially all its assets to, another entity and such
action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting,
surviving or transferee entity is materially weaker than
that of X, such Credit Support Provider or such Specified
Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as
appropriate, will be the Affected Party); or
(v) Additional Termination Event. If any "Additional
Termination Event" is specified in the Schedule or any
Confirmation as applying, the occurrence of such event (and,
in such event, the Affected Party or Affected Parties shall
be as specified for such Additional Termination Event in the
Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or
circumstance which would otherwise constitute or give rise to an
Event of Default also constitutes an Illegality, it will be
treated as an Illegality and will not constitute an Event of
Default.
6. Early Termination.
(a) Right to Terminate Following Event of Default. If at any
time an Event of Default with respect to a party (the "Defaulting
Party") has occurred and is then continuing, the other party (the
"Non-defaulting Party") may, by not more than 20 days notice to
the Defaulting Party specifying the relevant Event of Default,
designate a day not earlier than the day such notice is effective
as an Early Termination Date in respect of all outstanding
Transactions. If, however, "Automatic Early Termination" is
specified in the Schedule as applying to a party, then an Early
Termination Date in respect of all outstanding Transactions will
occur immediately upon the occurrence with respect to such party
of an Event of Default specified in Section 5(a)(vii)(1), (3),
(5), (6) or, to the extent analogous thereto, (8), and as of the
time immediately preceding the institution of the relevant
proceeding or the presentation of the relevant petition upon the
occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous
thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected
Party will, promptly upon becoming aware of it, notify the
other party, specifying the nature of that Termination Event
and each Affected Transaction and will also give such other
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information about that Termination Event as the other party
may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an
Illegality under Section 5(b)(i)(1) or a Tax Event occurs
and there is only one Affected Party, or if a Tax Event Upon
Merger occurs and the Burdened Party is the Affected Party,
the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv),
use all reasonable efforts (which will not require such
party to incur a loss, excluding immaterial, incidental
expenses) to transfer within 20 days after it gives notice
under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to
another of its Offices or Affiliates so that such
Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it
will give notice to the other party to that effect within
such 20 day period, whereupon the other party may effect
such a transfer within 30 days after the notice is given
under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii)
will be subject to and conditional upon the prior written
consent of the other party, which consent will not be
withheld if such other party's policies in effect at such
time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section
5(b)(i)(1) or a Tax Event occurs and there are two Affected
Parties, each party will use all reasonable efforts to reach
agreement within 30 days after notice thereof is given under
Section 6(b)(i) on action to avoid that Termination Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not
been effected with respect to all Affected Transactions
within 30 days after an Affected Party gives notice
under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit
Event Upon Merger or an Additional Termination Event
occurs, or a Tax Event Upon Merger occurs and the
Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened
Party in the case of a Tax Event Upon Merger, any Affected
Party in the case of a Tax Event or an Additional
Termination Event if there is more than one Affected Party,
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or the party which is not the Affected Party in the case of
a Credit Event Upon Merger or an Additional Termination
Event if there is only one Affected Party may, by not more
than 20 days notice to the other party and provided that the
relevant Termination Event is then continuing, designate a
day not earlier than the day such notice is effective as an
Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is
given under Section 6(a) or (b), the Early Termination Date
will occur on the date so designated, whether or not the
relevant Event of Default or Termination Event is then
continuing.
(ii) Upon the occurrence or effective designation of an
Early Termination Date, no further payments or deliveries
under Section 2(a)(i) or 2(e) in respect of the Terminated
Transactions will be required to be made, but without
prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination
Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable
following the occurrence of an Early Termination Date, each
party will make the calculations on its part, if any,
contemplated by Section 6(e) and will provide to the other
party a statement (1) showing, in reasonable detail, such
calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2)
giving details of the relevant account to which any amount
payable to it is to be paid. In the absence of written
confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the
existence and ar-curacy of such quotation.
(ii) Payment Date. An amount calculated as being due in
respect of any Early Termination Date under Section 6(e)
will be payable on the day that notice of the amount payable
is effective (in the case of an Early Termination Date which
is designated or occurs as a result of an Event of Default)
and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in
the case of an Early Termination Date which is designated as
a result of a Termination Event). Such amount will be paid
together with (to the extent permitted under applicable law)
interest thereon (before as well as after judgment) in the
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Termination Currency, from (and including) the relevant
Early Termination Date to (but excluding) the date such
amount is paid, at the Applicable Rate. Such interest will
be calculated on the basis of daily compounding and the
actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date
occurs, the following provisions shall apply based on the
parties' election in the Schedule of a payment measure, either
"Market Quotation" or "Loss", and a payment method, either the
"First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it
will be deemed that "Market Quotation" or the "Second Method", as
the case may be, shall apply. The amount, if any, payable in
respect of an Early Termination Date and determined pursuant to
this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date
results from an Event of Default:-
(1) First Method and Market Quotation. If the First
Method and Market Quotation apply, the Defaulting Party
will pay to the Non-defaulting Party the excess, if a
positive number, of (A) the sum of the Settlement
Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and
Loss apply, the Defaulting Party will pay to the Non-
defaulting Party, if a positive number, the Non-
defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second
Method and Market Quotation apply, an amount will be
payable equal to (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of
the Terminated Transactions and the Termination
Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the
Defaulting Party. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the
Defaulting Party.
(4) Second Method and Loss. If the Second Method and
Loss apply, an amount will be payable equal to the Non-
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defaulting Party's Loss in respect of this Agreement.
If that amount is a positive number, the Defaulting
Party will pay it to the Non-defaulting Party; if it is
a negative number, the Non-defaulting Party will pay
the absolute value of that amount to the Defaulting
Party.
(ii) Termination Events. If the Early Termination Date
results from a Termination Event:-
(1) One Affected Party. If there is one Affected
Party, the amount payable will be determined in
accordance with Section 6(e)(i)(3), if Market Quotation
applies, or Section 6(e)(i)(4), if Loss applies, except
that, in either case, references to the Defaulting
Party and to the Non-defaulting Party will be deemed to
be references to the Affected Party and the party which
is not the Affected Party, respectively, and, if Loss
applies and fewer than all the Transactions are being
terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected
Parties:-
(A) if Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X")
and the Settlement Amount of the party with the
lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid
Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to
Y; and
(B) if Loss applies, each party will determine
its Loss in respect of this Agreement (or, if
fewer than all the Transactions are being
terminated, in respect of all Terminated
Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of
the party with the bigger Loss ("X") and the Loss
of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay
it to X; if it is a negative number, X will pay the
absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances
where an Early Termination Date occurs because "Automatic
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Early Termination" applies in respect of a party, the amount
determined under this Section 6(e) will be subject to such
adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other
party) during the period from the relevant Early Termination
Date to the date for payment determined under Section
6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market
Quotation applies an amount recoverable under this Section
6(e) is a reasonable pre-estimate of loss and not a penalty.
Such amount is payable for the loss of bargain and the loss
of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such
losses.
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any
interest or obligation in or under this Agreement may be
transferred (whether by way of security or otherwise) by either
party without the prior written consent of the other party,
except that:--
(a) a party may make such a transfer of this Agreement pursuant
to a consolidation or amalgamation with, or merger with or into,
or transfer of all or substantially all its assets to, another
entity (but without prejudice to any other right or remedy under
this Agreement); and
(b) a party may make such a transfer of all or any part of its
interest in any amount payable to it from a Defaulting Party
under Section 6(e).
Any purported transfer that is not in compliance with this
Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under
this Agreement will be made in the relevant currency specified in
this Agreement for that payment (the "Contractual Currency"). To
the extent permitted by applicable law, any obligation to make
payments under this Agreement in the Contractual Currency will
not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such
tender results in the actual receipt by the party to which
payment is owed, acting in a reasonable manner and in good faith
in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all
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amounts payable in respect of this Agreement. If for any reason
the amount in the Contractual Currency so received falls short of
the amount in the Contractual Currency payable in respect of this
Agreement, the party required to make the payment will, to the
extent permitted by applicable law, immediately pay such
additional amount in the Contractual Currency as may be necessary
to compensate for the shortfall. If for any reason the amount in
the Contractual Currency so received exceeds the amount in the
Contractual Currency payable in respect of this Agreement, the
party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if
any judgment or order expressed in a currency other than the
Contractual Currency is rendered (i) for the payment of any
amount owing in respect of this Agreement, (ii) for the payment
of any amount relating to any early termination in respect of
this Agreement or (iii) in respect of a judgment or order of
another court for the payment of any amount described in (i) or
(ii) above, the party seeking recovery, after recovery in full of
the aggregate amount to which such party is entitled pursuant to
the judgment or order, will be entitled to receive immediately
from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of
sums paid in such other currency and will refund promptly to the
other party any excess of the Contractual Currency received by
such party as a consequence of sums paid in such other currency
if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual
Currency is converted into the currency of the judgment or order
for the purposes of such judgment or order and the rate of
exchange at which such party is able, acting in a reasonable
manner and in good faith in converting the currency received into
the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually
received by such party. The term "rate of exchange" includes,
without limitation, any premiums and costs of exchange payable in
connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable
law, these indemnities constitute separate and independent
obligations from the other obligations in this Agreement, will be
enforceable as separate and independent causes of action, will
apply notwithstanding any indulgence granted by the party to
which any payment is owed and will not be affected by judgment
being obtained or claim or proof being inside for any other sums
payable in respect of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it
will be sufficient for a party to demonstrate that it would have
suffered a loss had an actual exchange or purchase been made.
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9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to its
subject matter and supersedes all oral communication and prior
writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect
of this Agreement will be effective unless in writing (including
a writing evidenced by a facsimile transmission) and executed by
each of the parties or confirmed by an exchange of telexes or
electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections
2(a)(iii) and 6(c)(ii), the obligations of the parties under this
Agreement will survive the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement,
the rights, powers, remedies and privileges provided in this
Agreement are cumulative and not exclusive of any rights, powers,
remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and
waiver in respect of it) may be executed and delivered in
counterparts (including by facsimile transmission), each of
which will be deemed an original.
(ii) The parties intend that they are legally bound by the
terms of each Transaction from the moment they agree to
those terms (whether orally or otherwise). A Confirmation
shall be entered into as soon as practicable and may be
executed and delivered in counterparts (including by
facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an
electronic messaging system, which in each case will be
sufficient for all purposes to evidence a binding supplement
to this Agreement. The parties will specify therein or
through another effective means that any such counterpart,
telex or electronic message constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any
right, power or privilege in respect of this Agreement will not
be presumed to operate as a waiver, and a single or partial
exercise of any right, power or privilege will not be presumed to
preclude any subsequent or further exercise, of that right, power
or privilege or the exercise of any other right, power or
privilege.
(g) Headings. The headings used in this Agreement are for
convenience of reference only and are not to affect the
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construction of or to be taken into consideration in interpreting
this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying,
each party that enters into a Transaction through an Office other
than its head or home office represents to the other party that,
notwithstanding the place of booking office or jurisdiction of
incorporation or organisation of such party, the obligations of
such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be
deemed to be repeated by such party on each date on which a
Transaction is entered into.
(b) Neither party may change the Office through which it makes
and receives payments or deliveries for the purpose of a
Transaction without the prior written consent of the other party.
(c) if a party is specified as a Multibranch Party in the
Schedule, such Multibranch Party may make and receive payments or
deliveries under any Transaction through any Office listed in the
Schedule, and the Office through which it makes and receives
payments or deliveries with respect to a Transaction will be
specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnity and hold harmless
the other party for and against all reasonable out-of-pocket
expenses, including legal fees and Stamp Tax, incurred by such
other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early
termination of any Transaction, including, but not limited to,
costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect
of this Agreement may be given in any manner set forth below
(except that a notice or other communication under Section 5 or 6
may not be given by facsimile transmission or electronic
messaging system) to the address or number or in accordance with
the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on
the date it is delivered;
(ii) if sent by telex, on the date the recipient's
answerback is received;
20
<PAGE>
(iii) if sent by facsimile transmission, on the date
that transmission is received by a responsible employee of
the recipient in legible form (it being agreed that the
burden of proving receipt will be on the sender and will not
be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if
overseas) or the equivalent (return receipt requested), on
the date that mail is delivered or its delivery is
attempted; or
(v) if sent by electronic messaging system, on the date
that electronic message is received, unless the date of that
delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that
communication is delivered (or attempted) or received, as
applicable, after the close of business on a Local Business
Day, in which case that communication shall be deemed given
and effective on the first following day that is a Local
Business Day.
(b) Change of Addresses. Either party may by notice to the
other change the address, telex or facsimile number or electronic
messaging system details at which notices or other communications
are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and
construed in accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or
proceedings relating to this Agreement ("Proceedings"), each
party irrevocably:--
(i) submits to the jurisdiction of the English courts, if
this Agreement is expressed to be governed by English law,
or to the non-exclusive jurisdiction of the courts of the
State of New York and the United States District Court
located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of
the State of New York; and
(ii) waives any objection which it may have at any time to
the laying of venue of any proceedings brought in any such
court, waives any claim that such Proceedings have been
brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
21
<PAGE>
Nothing in this Agreement precludes either party from bringing
Proceedings in any other jurisdiction (outside, if this Agreement
is expressed to be governed by English law, the Contracting
States, as defined in Section 1(3) of the Civil Jurisdiction and
Judgments Act 1982 or any modification, extension or re-enactment
thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the
bringing of Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the
Process Agent (if any) specified opposite its name in the
Schedule to receive, for it and on its behalf, service of process
in any Proceedings. If for any reason any party's Process Agent
is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent
acceptable to the other party. The parties irrevocably consent
to service of process given in the manner provided for notices in
Section 12. Nothing in this Agreement will affect the right of
either party to serve process in any other manner permitted by
law.
(d) Waiver of Immunities. Each party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to
itself and its revenues and assets (irrespective of their use or
intended use), all immunity on the grounds of sovereignty or
other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific
performance or for recovery of property, (iv) attachment of it's
assets (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or assets
might otherwise be entitled in any Proceedings in the courts of
any jurisdiction and irrevocably agrees, to the extent permitted
by applicable law, that it will not claim any such immunity in
any Proceedings.
14. Definitions
As used in this Agreement:-
"Additional Termination Event" has the meaning specified in
Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination
Event consisting of an Illegality, Tax Event or Tax Event Upon
Merger, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination
Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any
person, any entity controlled, directly or indirectly, by the
22
<PAGE>
person, any entity that controls, directly or indirectly, the
person or any entity directly or indirectly under common control
with the person. For this purpose, "control" of any entity or
person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:-
(a) in respect of obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Defaulting Party,
the Default Rate;
(b) in respect of an obligation to pay an amount under Section
6(e) of either party from and after the date (determined in
accordance with Section 6(d)(ii)) on which that amount is
payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable
(or which would have been but for Section 2(a)(iii)) by a Non-
defaulting Party, the Non-default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution
or ratification of, or any change in or amendment to, any law (or
in the application or official interpretation of any law) that
occurs on or after the date on which the relevant Transaction is
entered into.
"consent" includes a consent, approval, action, authorisation,
exemption, notice, filing, registration or exchange control
consent.
"Credit Event Upon Merger" has the meaning specified in Section
5(b).
"Credit Support Document" means any agreement or instrument that
is specified as such in this Agreement.
"Credit Support Provider" has the meaning specified in the
Schedule.
"Default Rate" means a rate per annum equal to the cost (without
proof or evidence of any actual cost) to the relevant payee (as
certified by it) if it were to fund or of funding the relevant
amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
23
<PAGE>
"Early Termination Date" means the date determined in accordance
with Section 6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and,
if applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not
be imposed in respect of a payment under this Agreement but for a
present or former connection between the jurisdiction of the
government or taxation authority imposing such Tax and the
recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or
resident of such jurisdiction, or being or having been organised,
present or engaged in a trade or business in such jurisdiction,
or having or having had a permanent establishment or fixed place
of business in such jurisdiction, but excluding a connection
arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a
payment under, or enforced, this Agreement or a Credit Support
Document).
"law" includes any treaty, law, rule or regulation (as modified,
in the case of tax matters, by the practice of any relevant
governmental revenue authority) and "lawful" and "unlawful" will
be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on
which commercial banks are open for business (including dealings
in foreign exchange and foreign currency deposits) (a) in
relation to any obligation under Section 2(a)(i), in the place(s)
specified in the relevant Confirmation or, if not so specified,
as otherwise agreed by the parties in writing or determined
pursuant to provisions contained, or incorporated by reference,
in this Agreement, (b) in relation to any other payment, in the
place where the relevant account is located and, if different, in
the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication,
including notice contemplated under Section 5(a)(i), in the city
specified in the address for notice provided by the recipient
and, in the case of a notice contemplated by Section 2(b), in the
place where the relevant new account is to be located and (d) in
relation to Section 5(a)(v)(2), in the relevant locations for
performance with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more
Terminated Transactions, as the case may be, and a party, the
Termination Currency Equivalent of an amount that party
reasonably determines in good faith to be its total losses and
costs (or gain, in which case expressed as a negative number) in
24
<PAGE>
connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including
any loss of bargain, cost of funding or, at the election of such
party but without duplication, loss or cost incurred as a result
of its terminating, liquidating, obtaining or reestablishing any
hedge or related trading position (or any gain resulting from any
of them). Loss includes losses and costs (or gains) in respect
of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before
the relevant Early Termination Date and not made, except, so as
to avoid duplication, if Section 6(e)(i)(1) or (3) or
6(e)(ii)(2)(A) applies. Loss does not include a party's legal
fees and out-of-pocket expenses referred to under Section 11. A
party will determine its Loss as of the relevant Early
Termination Date, or, if that is not reasonably practicable, as
of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to
quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated
Transactions and a party making the determination, an amount
determined on the basis of quotations from Reference Market-
makers. Each quotation will be for an amount, if any, that would
be paid to such party (expressed as a negative number) or by such
party (expressed as a positive number) in consideration of an
agreement between such party (taking into account any existing
Credit Support Document with respect to the obligations of such
party) and the quoting Reference Market-maker to enter into a
transaction (the "Replacement Transaction") that would have the
effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was
absolute or contingent and assuming the satisfaction of each
applicable condition precedent) by the parties under Section
2(a)(i) in respect of such Terminated Transaction or group of
Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that
date. For this purpose, Unpaid Amounts in respect of the
Terminated Transaction or group of Terminated Transactions are to
be excluded but, without limitation, any payment or delivery that
would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition
precedent) after that Early Termination Date is to be included.
The Replacement Transaction would be subject to such
documentation as such party and the Reference Market-maker may,
in good faith, agree. The party making the determination (or its
agent) will request each Reference Market-maker to provide its
quotation to the extent reasonably practicable as of the same day
and time (without regard to different time zones) on or as soon
as reasonably practicable after the relevant Early Termination
Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to
25
<PAGE>
make a determination under Section 6(e), and, if each party is so
obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the
arithmetic mean of the quotations, without regard to the
quotations having the highest and lowest values. If exactly
three such quotations are provided, the Market Quotation will be
the quotation remaining after disregarding the highest and lowest
quotations. For this purpose, if more than one quotation has the
same biggest value or lowest value, then one of such quotations
shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect
of such Terminated Transaction or group of Terminated
Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost
(without proof or evidence of any actual cost) to the Non-
defaulting Party (as certified by it) if it were to fund the
relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such
party's head or home office.
"Potential Event of Default" means any event which, with the
giving of notice or the lapse of time or both, would constitute
an Event of Default.
"Reference Market-makers" means four leading dealers in the
relevant market selected by the party determining a Market
Quotation in good faith (a) from among dealers of the highest
credit standing which satisfy all the criteria that such party
applies generally at the time in deciding whether to offer or to
make an extension of credit and (b) to the extent practicable,
from among such dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the
jurisdictions (a) in which the party is incorporated, organised,
managed and controlled or considered to have its seat, (b) where
an Office through which the party is acting for purposes of this
Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through
which such payment is made.
"Scheduled Payment Date" means a date on which a payment or
delivery is to be made under Section 2(a)(i) with respect to a
Transaction.
"Set-off" means set-off, offset, combination of accounts, right
of retention or withholding or similar right or requirement to
which the payer of an amount under Section 6 is entitled or
subject (whether arising under this Agreement, another contract,
26
<PAGE>
applicable law or otherwise) that is exercised by, or imposed on,
such payer.
"Settlement Amount" means, with respect to a party and any Early
Termination Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations
(whether positive or negative) for each Terminated Transaction or
group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without
reference to any Unpaid Amounts) for each Terminated Transaction
or group of Terminated Transactions for which a Market Quotation
cannot be determined or would not (in the reasonable belief of
the party making the determination) produce a commercially
reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any
obligation (whether present or future, contingent or otherwise,
as principal or surety or otherwise) in respect of borrowed
money.
"Specified Transaction" means, subject to the Schedule, (a) any
transaction (including an agreement with respect thereto) now
existing or hereafter entered into between one party to this
Agreement (or any Credit Support Provider of such party or any
applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other
party or any applicable Specified Entity of such other party)
which is a rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to
any of these transactions), (b) any combination of these
transactions and (c) any other transaction identified as a
Specified Transaction in this Agreement or the relevant
confirmation.
"Stamp Tax" means any stamp, registration, documentation or
similar tax.
"Tax" means any present or future tax, levy, impost, duty,
charge, assessment or fee of any nature (including interest,
penalties and additions thereto) that is imposed by any
government or other taxing authority in respect of any payment
27
<PAGE>
under this Agreement other than a stamp, registration,
documentation or similar tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section
5(b).
"Terminated Transactions" means with respect to any Early
Termination Date (a) if resulting from a Termination Event, all
Affected Transactions and (b) if resulting from an Event of
Default, all Transactions (in either case) in effect immediately
before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies,
immediately before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount
denominated in the Termination Currency, such Termination
Currency amount and, in respect of any amount denominated in a
currency other than the Termination Currency (the "Other
Currency"), the amount in the Termination Currency determined by
the party making the relevant determination as being required to
purchase such amount of such Other Currency as at the relevant
Early Termination Date, or, if the relevant Market Quotation or
Loss (as the case may be), is determined as of a later date, that
later date, with the Termination Currency at the rate equal to
the spot exchange rate of the foreign exchange agent (selected as
provided below) for the purchase of such Other Currency with the
Termination Currency at or about 11:00 a.m. (in the city in which
such foreign exchange agent is located) on such date as would be
customary for the determination of such a rate for the purchase
of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent
will, if only one party is obliged to make a determination under
Section 6(e), be selected in good faith by that party and
otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax
Event Upon Merger or, if specified to be applicable, a Credit
Event Upon Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic
mean of the cost (without proof or evidence of any actual cost)
to each party (as certified by such party) if it were to fund or
of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an
Early Termination Date, the aggregate of (a) in respect of all
Terminated Transactions, the amounts that became payable (or that
would have become payable but for Section 2(a)(iii)) to such
28
<PAGE>
party under Section 2(a)(i) on or prior to such Early Termination
Date and which remain unpaid as at such Early Termination Date
and (b) in respect of each Terminated Transaction, for each
obligation under Section 2(a)(i) which was (or would have been
but for Section 2(a)(iii)) required to be settled by delivery to
such party on or prior to such Early Termination Date and which
has not been so settled as at such Early Termination Date, an
amount equal to the fair market value of that which was (or would
have been) required to be delivered as of the originally
scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency
of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or
performed to (but excluding) such Early Termination Date, at the
Applicable Rate. Such amounts of interest will be calculated on
the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in
clause (b) above shall be reasonably determined by the party
obliged to make the determination under Section 6(e) or, if each
party is so obliged, it shall be the average of the Termination
Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the
respective dates specified below with effect from the date
specified on the first page of this document.
___________________________________
___________________________________
(Name of Party) (Name of Party)
By: _______________________________ By
________________________________
Name: Name:
Title: Title:
Date: Date:
29
<PAGE>
(Multicurrency-Cross Border)
ISDA
International Swap Dealers Association, Inc.
SCHEDULE
to the
Master Agreement
dated as of .........................................
between......................... and.............................
("Party A") (Party B")
Part 1. Termination Provisions.
(a) "Specified Entity" means in relation to Party A for the
purpose of:-
Section 5(a)(v), . . . . . . . . . . . . . . . . . . . . . .
Section 5(a)(vi), . . . . . . . . . . . . . . . . . . . . .
Section 5(a)(vii), . . . . . . . . . . . . . . . . . . . . .
Section 5(b)(iv), . . . . . . . . . . . . . . . . . . . . .
and in relation to Party B for the purpose of:--
Section 5(a)(v), . . . . . . . . . . . . . . . . . . . . . .
Section 5(a)(vi), . . . . . . . . . . . . . . . . . . . . .
Section Section 5(a)(vii), . . . . . . . . . . . . . . . . .
Section 5(b)(iv), . . . . . . . . . . . . . . . . . . . . .
(b) "Specified Transaction" will have the meaning specified in
Section 14 of this Agreement unless another meaning is specified
here . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
<PAGE>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) The "Cross Default" provisions of Section 5(a)(vi)
will/will not* apply to Party A
will/will not* apply to Party
B
If such provisions apply:-
"Specified Indebtedness" will bave the meaning specified in
Section 14 of this Agreement unless another meaning is
specified bere . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Threshold Amount" means . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) The "Credit Event Upon Merger" provisions of Section
5(b)(iv)
will/will not * apply to Party A
will/will not apply to Party B
(e) The "Automatic Early Termination" provision of Section 6(a)
will/will not * apply to Party A
will/will not * apply to Party B
(f) Payments on Early Termination. For the purpose of Section
6(e) of this Agreement:-
(i) Market Quotation Loss * will apply.
(ii) The First Method/The Second Method * will apply.
(g) "Termination Currency" means................................
if such currency is specified and freely available, and otherwise
United States Dollars.
(h) Additional Termination Event will/will not apply*. The
following shall constitute an Additional Temination Event:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the purpose of the foregoing Termination Event, the
Affected Party or Affected Parties shall be:-- . . . . . .
* Delete as applicable. 31
<PAGE>
Part 2. Tax Representations.
(a) Payer Representations. For the purpose of Section 3(e) of
this Agreement, Party A will/will not* make the following
representation and Party B will/will not* make the
following representation:--
It is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of
any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d)(ii) or 6(e) of
this Agreement) to be made by it to the other party under
this Agreement. In making this representation, it may rely
on (i) the accuracy of any representations made by the other
party pursuant to Section 3(f) of this Agreement, (ii) the
satisfaction of the agreement contained in Section 4(a)(i)
or 4(a)(iii) of this Agreement and the accuracy and
effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement
and (iii) the satisfaction of the agreement of the other
party contained in Section 4(d) of this Agreement, provided
that it shall not be a breach of this representation where
reliance is placed on clause (ii) and the other party does
not deliver a form or document under Section 4(a)(iii) by
reason of material prejudice to its legal or commercial
position.
(b) Payee Representations. For the purpose of Section 3(f) of
this Agreement, Party A and Party B make the representations
specified below, if any:
(i) The following representation will/will not* apply to
Party A and will/will not* apply to Party B:-
It is fully eligible for the benefits of the "Business
Profits" or "Industrial and Commercial Profits" provision,
as the case may be, the "Interest" provision or the "Other
Income" provision (if any) of the Specified Treaty with
respect to any payment described in such provisions and
received or to be received by it in connection with this
Agreement and no such payment is attributable to a trade or
business carried on by it through a permanent establishment
in the Specified Jurisdiction.
If such representation applies, then:-
"Specified Treaty" means with respect to Party A . . . . . . . .
"Specified Jurisdiction" means with respect to Party A . . . .
* Delete as applicable. 32
<PAGE>
"Specified Treaty" means with respect to Party B . . . . . . . .
"Specified Jurisdiction" means with respect to Party B . . . .
(ii) The following representation will/will not* apply to
Party A and will/will not* apply to Party B:-
Each payment received or to be received by it in connection
with this Agreement will be effectively connected with its
conduct of a trade or business in the Specified
Jurisdiction.
If such representation applies, then:-
"Specified Jurisdiction" means with respect to Party A . . . . .
"Specified Jurisdiction" means with respect to Party B . . . .
(iii) The following representation will/will not* apply
to Party A and will/will not* apply to Party B:-
(A) It is entering in to each Transaction in the ordinary
course of its trade as, and is, either (l) a recognised U.K.
bank or (2) a recognised U.K. swaps dealer (in either case
(1) or (2), for purposes of the United Kingdom Inland
Revenue extra statutory concession C17 on interest and
currency swaps dated March 14, 1989), and (B) it will bring
into account payments made and received in respect of each
Transaction in computing its income for United Kingdom tax
purposes.
(iv) Other Payee Representations . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
N.B. The above representations may need modification if either
party is a Multibranch Party.
* Delete as applicable. 33
<PAGE>
Part 3. Agreement to Deliver Documents.
For the purpose of Sections 4(a)(i) and (ii) of this Agreement,
each party agrees to deliver the following documents, as
applicable:-
(a) Tax forms, documents or certificates to be delivered
are:-
Party required to Form/Document/ Date by which
deliver document Certificate to be
delivered
.................. ............. ..................
.................. ............. ..................
.................. ............. ...................
(b) Other documents to be delivered are:-
Party required to Form/Document/ Date by which Covered by
deliver document Certificate to be delivered Section 3(d)
Representation
............... ............ .............. Yes/No*
............... ............ .............. Yes/No*
............... ............ .............. Yes/No*
............... ............ .............. Yes/No*
Part 4. Miscellaneous.
(a) Addresses for Notices. For the purpose of Section 12(a) of
this Agreement:-
Address for notices or communications to Party A--
Address: . . . . . . . . . . . . . . . . . . . . . . . . . .
Attention: . . . . . . . . . . . . . . . . . . . . . . . . .
Telex No.:. . . . . . . . . . . . . . . . . . . .
Answerback: . . . . . . . . . . . . . . . . . . . . . . . . . . .
* Delete as applicable. 34
<PAGE>
Facsimile No.:. . . . . . . . . . . . . . . . . .
Telephone No.: . . . . . . . . . . . . . . . . . . . . . . . .
Electronic Messaging System Details: . . . . . . . . . . . .
Address for notices or communications to Party B--
Address: . . . . . . . . . . . . . . . . . . . . . . . . . .
Attention: . . . . . . . . . . . . . . . . . . . . . . . . .
Telex No.:. . . . . . . . . . . . . . . . . . . . .
Answerback: . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facsimile No.:. . . . . . . . . . . . . . . . . . .
Telephone No.: . . . . . . . . . . . . . . . . . . . . . . .
Electronic Messaging System Details: . . . . . . . . . . . .
(b) Process Agent. For the purpose of Section 13(c) of this
Agreement:-
Party A appoints as its Process Agent . . . . . . . . . . .
Party B appoints as its Process Agent . . . . . . . . . . .
(c) Offices. The provisions of Section 10(a) will/will not*
apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10(c) of this
Agreement:-
Party A is/is not* a Multibranch Party and, if so, may act
through the following Offices:
.............. ................... ...............
.............. ................... ...............
Party B is/is not* a Multibranch Party and, if so, may act
through the following Offices:
.............. ................... ...............
* Delete as applicable. 35
<PAGE>
(e) Calculation Agent. The Calculation Agent is . . . . . . . .
unless otherwise specified in a Confirmation in relation to
the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support
Document
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g) Credit Support Provider. Credit Support Provider means in
relation to Party A, . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit Support Provider means in relation to Party B, . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Governing Law. This Agreement will be governed by and
construed in accordance with
English law/the laws of the State of New York (without
reference to choice of law doctrine)*
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of
this Agreement will not apply to the following Transactions
or groups of Transactions (in each case starting from the
date of this Agreement in each case starting from. . . . . .
. . . . . . *) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(j) "Affiliate" will have the meaning specified in Section 14 of
this Agreement unless another meaning is specified here . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 5. Other Provisions.
* Delete as applicable. 36
<PAGE>
Exhibit B-7(b)
(Multicurrency -- Cross Border)
SCHEDULE
to the
Master Agreement
dated as of ...................
between
[________] Bank a Mobile Energy
Services Company,
Inc.
n an Alabama
corporation
("Party A") d ("Party B")
Part 1. Termination Provisions.
(a) "Specified Entity" means in relation to Party A for the
purpose of:
Section 5(a)(v),............................. None.
Section 5(a)(vi),............................ None.
Section 5(a)(vii),........................... None.
Section 5(b)(iv),............................ None.
and in relation to Party B for the purpose of:
Section 5(a)(v),............................. Material
Affiliates of Party B.
Section 5(a)(vi),............................ Material
Affiliates of Party B.
Section 5(a)(vii),........................... Material
Affiliates of Party B.
Section 5(b)(iv),............................ None.
"Material Affiliate" of Party B means each of (i) Georgia
Power Company, (ii) Alabama Power Company, (iii) Gulf Power
Company, (iv) Mississippi Power Company and (v) Savannah
Electric and Power Company, and their respective successors
and assigns.
(b) "Specified Transaction" will have the meaning specified in
<PAGE>
Section 14 of this Agreement. For purposes of clause (c) of
such definition, Specified Transaction includes, in the case
of Party B, any guaranty or other credit support provided by
the Credit Support Provider of Party B or any Material
Affiliate in connection with any transaction of the type
described in clauses (a) or (b) of such definition entered
into between Party A and any Affiliate of the Credit Support
Provider of Party B.
(c) The "Cross Default" provisions of Section 5(a)(vi) will
apply to Party A and to Party B.
(i) "Specified Indebtedness," with respect to any person,
means all obligations of that person identified as
Specified Indebtedness in Section 14, except that
indebtedness or obligations in respect of deposits
received in the ordinary course of the banking business
of such person shall not constitute Specified
Indebtedness.
(ii) "Threshold Amount" means, in relation to Party A,
an amount equal to 3 percent of such party's
shareholders' equity, or in relation to Party B,
an amount equal to 3 percent of such party's
Credit Support Provider's shareholders' equity (in
each case determined in accordance with generally
accepted accounting principles in such person's
jurisdiction of incorporation or organization) as
at the end of such person's most recently
completed fiscal year. For purposes of Section
5(a)(vi) of this Agreement, any Specified
Indebtedness with respect to a party denominated
in a currency other than the currency in which the
financial statements of such party are denominated
will be converted into the currency in which such
financial statements are denominated at the
exchange rate therefor as of the date of
conversion reasonably chosen by the other party.
(d) The "Credit Event Upon Merger" provisions of Section
5(b)(iv) will apply to Party A and Party B. Section
5(b)(iv) of the Agreement is replaced with the following:
If "Credit Event upon Merger" is specified in the
Schedule as applying to the party, (A) such party
("X"), any Credit Support Provider of X or any
applicable Specified Entity of X consolidates or
amalgamates with, or merges with or into, or
transfers all or substantially all its assets to,
or receives all or substantially all the business
or assets of, another entity, or (B) any person or
entity acquires directly or indirectly the
2
<PAGE>
beneficial ownership of equity securities or
interests having the power to elect a majority of
the board of directors (or other similar managing
authority) of, or otherwise acquires directly or
indirectly the power to control the policy making
decisions of, X, any Credit Support Provider of X
or any applicable Specified Entity of X, (C) X,
any Credit Support Provider of X or any Specified
Entity of X effects a leveraged recapitalization
or otherwise effects any substantial change in its
capital structure by means of the issuance,
incurrence or guaranty of debt, or the issuance of
preferred securities or interests or other
securities convertible into, or exchangeable for,
debt or preferred securities or interests, or (d)
X, any Credit Support Provider of X or any
Specified Entity of X enters into any agreement
providing for any of the foregoing, and such
action does not constitute an event described in
Section 5(a)(viii) but the creditworthiness of the
resulting, surviving or transferee entity is
materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the
case may be, immediately prior to such action
(and, in such event, X or its successor or
transferee, as appropriate, will be the Affected
Party); or
(e) The "Automatic Early Termination" provision of Section 6(a)
will not apply to Party A and will not apply to Party B;
provided, however, with respect to a party, where the Event
of Default specified in Section 5(a)(vii)(1), (3), (4), (5),
(6) or to the extent analogous thereto, (8), is governed by
a system of law which does not permit termination to take
place after the occurrence of the relevant Event of Default,
then the Automatic Early Termination provisions of Section
6(a) will apply to such party.
(f) Payments on Early Termination. For the purpose of Section
6(e) of this Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply and, notwithstanding the
provisions of Section 6(e)(i)(3), if the amount
referred to therein is a positive number, the
Defaulting Party will pay such amount to the Non-
defaulting Party, and if the amount referred to therein
is a negative number, the Non-defaulting Party's
obligation to pay any amount to the Defaulting Party
shall be conditioned upon and subject to the
satisfaction of the conditions precedent set forth in
3
<PAGE>
(A) and (B) below at which time there shall arise an
obligation of the Non-defaulting Party to pay to the
Defaulting Party an amount equal to the absolute value
of such negative number less any and all amounts which
the Defaulting Party may be obliged to pay under
Section 11:
(A) the Non-defaulting Party shall have received
confirmation satisfactoryto it in its sole
discretion (which may include an unqualified
opinion of its counsel) that (x) all
Transactions are terminated in accordance
with Section 6(c) and no further payments or
deliveries under Section 2(a)(i) or 2(e) in
respect of Terminated Transactions will be
required to be made in accordance with
Section 6(c)(ii), and (y) each Specified
Transaction shall have terminated pursuant to
its specified termination date or through the
exercise by a party of a right to terminate
and all amounts due under each Specified
Transaction shall have been fully and finally
paid and performed; and
(B) all obligations (contingent or absolute, matured
or unmatured) of the Defaulting Party and any
Affiliate of the Defaulting Party to make any
payment or delivery to the Non-defaulting Party or
any Affiliate of the Non-defaulting Party under
this Agreement or otherwise shall have been fully
and finally paid and performed.
(g) "Termination Currency" means a freely available
currency selected by the party which is not the
Defaulting Party or the Affected Party, as the case may
be, or, where there is more than one Affected Party, a
currency agreed upon by both parties; provided, that
the Termination Currency shall be one of the currencies
in which payments are required to be made in respect of
Transactions or the currency of the jurisdiction in
which the Defaulting Party or Affected Party is subject
to suit with respect to this Agreement or to insolvency
proceedings; and provided, further, that where there
are two Affected Parties and the parties are unable to
agree on a Termination Currency, the Termination
Currency shall be United States Dollars.
The definition of "Termination Currency Equivalent" in
Section 14 of this Agreement is amended by (i) adding the
phase "or as could be sold for such amount of such Other
Currency, as appropriate," after the word "Currency" in the
fifth line thereof, (ii) adding the phrase " or for the sale
4
<PAGE>
of such Other Currency for the Termination Currency, as
appropriate," after the phrase "Termination Currency" in the
eighth line thereof and (iii) adding the phrase "or sale"
after the word "purchase" in the tenth line thereof.
(h) Additional Termination Event will not apply.
Part 2. Tax Representations.
(a) Party A and Party B Payer Tax Representations. For the
purpose of Section 3(e),each of Party A and Party B makes
the following representation:
It is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of
any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d)(ii) or 6(e) of
this Agreement) to be made by it to the other party under
this Agreement. In making this representation, it may rely
on: (i) the accuracy of any representation made by the
other party pursuant to Section 3(f) of this Agreement; (ii)
the satisfaction of the agreement of the other party
contained in Section 4(a)(i) or 4(a)(iii) of this Agreement
and the accuracy and effectiveness of any document provided
by the other party pursuant to Section 4(a)(i) or 4(a)(iii)
of this Agreement; and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of
this Agreement, provided that it shall not be a breach of
this representation where reliance is placed on clause (ii)
and the other party does not deliver a form or document
under Section 4(a)(iii) by reason of material prejudice to
its legal or commercial position.
(b) Party A Payee Tax Representations. For the purpose of
Section 3(f), Party A makes the following representations:
(i) The following representation applies to Party A with
respect to that portion of its payments that are not
attributable to Party A's U.S. trade or business:
It is fully eligible for the benefits of the "Business
Profits" or "Industrial and Commercial Profits"
provision, as the case may be, the "Interest" provision
or the "Other Income" provision (if any) of the
Specified Treaty with respect to any payment described
in such provisions and received or to be received by it
in connection with this Agreement.
"Specified Treaty" means the income tax convention
between the United States and the United Kingdom.
5
<PAGE>
(ii) The following representation applies to Party A with
respect to that portion of its payments that are
attributable to Party A's U.S. trade or business:
Each payment received or to be received by it in
connection with this Agreement will be effectively
connected with its conduct of a trade or business in
the United States.
(c) Party B Payee Tax Representations. For the purpose of
Section 3(f), Party B makes the following representation:
It is fully eligible for the benefits of the "Business
Profits" or "Industrial and Commercial Profits"
provision, as the case may be, the "Interest" provision
or the "Other Income" provision (if any) of the
Specified Treaty with respect to any payment described
in such provisions and received or to be received by it
in connection with this Agreement and no such payment
is attributable to a trade or business carried on by it
through a permanent establishment in the Specified
Jurisdiction.
"Specified Treaty" means the income tax convention
between the United States and the United Kingdom.
"Specified Jurisdiction" means the United Kingdom.
Part 3. Agreement to Deliver Documents.
For the purpose of Section 4(a)(i) and (ii) of this Agreement,
each party agrees to deliver the following documents as
applicable:
6
<PAGE>
(a) Tax forms, documents or certificates to be delivered are:
Party required to Form/Douument/ Date by which to be
deliver document Certificate delivered
Party A An executed United (i) Before the first
States Internal Revenue Payment Date on which
Service Form 1001 (or any such payment is or
any successor thereto) may be so connected or
with respect to any attributable; (ii)
payments received or to promptly upon
be received by Party A reasonable demand by
that are not Party B; and (iii)
effectively connected promptly upon learning
or otherwise that any Form 1001 (or
attributable to Party any successor thereto)
A's conduct of a trade previously provided by
or business in the Party A has become
United States. obsolete or incorrect.
Party A An executed United (i) Before the first
States Internal Revenue Payment Date on which
Service Form 4224 (or any such payment is or
any successor thereto) may be so connected or
with respect to any attributable; (ii)
payments received or to promptly upon
be received by Party A reasonable demand by
that are effectively Party B; and (iii)
connected or otherwise promptly upon learning
attributable to Party that any Form 4224 (or
A's conduct of a trade any successor thereto)
or business in the previously provided by
United States. Party A has become
obsolete or incorrect.
7
<PAGE>
(b) Other documents to be delivered are:
Party required to Form/Document/ Date by which to Covered by
deliver document Certificate be delivered Section 3(d)
Representation
Party A Evidence Upon execution of Yes
reasonably this Agreement
satisfactory to and, if
Party B, as to requested, each
the incumbency Confirmation.
and true
signatures of the
signatories of
Party A for this
Agreement, each
Credit Support
Document to which
it is a party and
each
Confirmation.
Party B Evidence Upon execution of Yes
reasonably this Agreement
satisfactory to and, if
Party A, as to requested, each
the incumbency Confirmation.
and true
signatures of the
signatories of
Party B for, and
of the authority
of Party B to
execute, deliver
and perform, this
Agreement, each
Credit Support
Document to which
it is a party and
each
Confirmation.
8
<PAGE>
Party A and Most recently Promptly upon Yes
Party B published annual request.
audited
consolidated
financial
statements of
Barclays PLC or
any successor (in
the case of Party
A) or Party B (in
the case of Party
B), prepared in
accordance with
generally
accepted
accounting
principles in the
country in which
such entity is
organized,
certified by an
independent
certified public
accountant or
chartered
accountant.
Party A and Such other Promptly upon Yes
Party B documents as the request.
other party may
reasonably
request in
connection with
each Transaction
so long as
providing such
documents would
not materially
prejudice the
legal or
commercial
position of the
party in receipt
of the request as
determined in
good faith by
such party.
9
<PAGE>
Part 4. Miscellaneous.
(a) Addresses for Notices. For the purpose of Section 12(a) of
this Agreement:
Address for notices or communications to Party A:
Address:
[___________]
[___________]
[___________]
Attention: Operations - Swaps and Options
Telephone No.: [______] Facsimile No.: [____________]
Telex No.: [______] Answerback: [_________]
Address for notices or communications to Party A for U.S.
Dollar and Canadian Dollar Transactions:
Address:
[___________________]
[___________________]
Attention: Swap Operations
Telephone No.: [___________] Facsimile No.: [_____________]
Address for notices or communications to Party B:
Address: [__________________]
Attention: [________________]
Telephone No.: [_________] Facsimile No.: [__________]
Telex No.: [__________] Answerback: [_________]
(b) Process Agent. For the purpose of Section 13(c) of this
Agreement:
Party A appoints as its Process Agent: Not applicable.
Party B appoints as its Process Agent: Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this
Agreement.
10
<PAGE>
(d) Multibranch Party. For the purpose of Section 10(c) of this
Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent will be Party A
unless otherwise specified in a Confirmation in relation to
the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support
Document:
Guaranty of The Southern Company in favor of Party A.
(g) Credit Support Provider means in relation to Party A, none.
Credit Support Provider means in relation to Party B, The
Southern Company.
(h) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New
York (without reference to choice of law doctrine).
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of
this Agreement will apply to all Transactions under this
Agreement with effect from the date of this Agreement.
(j) "Affiliate" will have the meaning specified in Section 14 of
this Agreement.
Part 5. Other Provisions.
(a) Right of Set-off. If any amount payable under this
Agreement is not paid as and when due, the party ("Party X")
obligated to make that payment hereby authorizes the other
party ("Party Y") and each Affiliate of Party Y to proceed,
to the fullest extent permitted by applicable law, without
prior notice, by right of set-off, banker's lien,
counterclaim or otherwise, against any assets of Party X in
any currency that may at any time be in the possession of
Party Y or any Affiliate of Party Y, at any branch or
office, to the full extent of all amounts payable to Party Y
under this Agreement. For purposes of this paragraph, Party
X hereby agrees that, if necessary to enable Party Y to
exercise the rights of Set-off contemplated in this
paragraph with respect to an amount payable by it under this
Agreement in a particular currency, that amount shall be
deemed converted to (and constitute an obligation under this
Agreement in an amount equal to) its equivalent in the
currency in which such assets of Party X are denominated ,
11
<PAGE>
at a rate of exchange and otherwise in the manner applicable
under this Agreement for conversion of any amount to its
Termination Currency Equivalent (as if the date of the
Set-off were an Early Termination Date, and with Party Y
being entitled to make the determinations required for such
conversion).
In addition, if a party ("Party 1") would, but for this
paragraph, have an obligation to pay the other
party ("Party 2") any amount calculated pursuant to
Section 6(e) in connection with (i) a Termination Event
where Party 2 is the only Affected Party or (ii) an
Event of Default where Party 2 is the Defaulting Party
at a time when any amount is or may become payable
(whether at such time or in the future or upon the
occurrence of a contingency) to Party 1 or any of
Affiliate of Party 1 by Party 2 under any other
agreement, instrument or undertaking of Party 2
(irrespective of the currency, place of payment or
booking office of the obligation) (each such amount, an
"Other Obligation"), then Party 2 hereby authorizes
Party 1, to the fullest extent permitted by applicable
law, to set off that obligation under this Agreement
against any Other Obligation, without prior notice.
For purposes of this paragraph, Party 2 hereby agrees
that, if necessary to enable Party 1 to exercise the
rights of Set-off contemplated in this paragraph with
respect to an amount payable by it under this Agreement
in a particular currency, that amount shall be deemed
converted to (and constitute an obligation under this
Agreement in an amount equal to) its equivalent in the
currency in which any Other Obligation is denominated ,
at a rate of exchange and otherwise in the manner
applicable under this Agreement for conversion of any
amount to its Termination Currency Equivalent (as if
the date of the Set-off were an Early Termination Date,
and with Party 1 being entitled to make the
determinations required for such conversion).
If an obligation is unascertained, the party exercising a
right of Set-off under this Part 5(a) may in good faith
estimate that obligation and set off in respect of the
estimate, subject to the relevant party accounting to the
other when the obligation is ascertained.
If a party exercises a right of Set-off under this Part
5(a), it shall give the other party notice of the amounts of
the obligations under this Agreement and the assets of the
other party and/or the Other Obligations reduced and/or
discharged by the Set-off, as soon as practicable after the
Set-off is effected.
12
<PAGE>
Nothing in this Part 5(a) shall be effective to create a
charge or other security interest. This Part 5(a) shall be
without prejudice and in addition to any right of setoff,
combination of accounts, lien or other right to which any
party is at any time otherwise entitled (whether by
operation of law, contract or otherwise).
(b) Waiver of Right to Trial by Jury. Each of the parties
hereby irrevocably waives any and all right to a trial by
jury with respect to any legal proceeding arising out of or
relating to this Agreement or any Transaction.
(c) Severability. In the event any one or more of the
provisions contained in this Agreement should be held
invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be
affected or impaired thereby. The parties shall endeavor,
in good faith negotiations, to replace the invalid, illegal
or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
(d) Additional Condition Precedent. Notwithstanding anything to
the contrary included in this Agreement, the obligations of
a party under this Agreement, including those set forth
under Section 2(a)(i) with respect to each Transaction
entered into pursuant to this Agreement, are, in the event
that any Credit Support Document is specified for such
party's benefit in this Agreement or in any Confirmation,
subject to the condition precedent that such party shall
have received all Credit Support Documents so specified, in
form and substance satisfactory to it.
(e) Inconsistency. In the event of any inconsistency between
any of the following documents, the relevant document first
listed shall govern: (i) a Confirmation, (ii) this Schedule,
(iii) the definitions incorporated by reference in a
Confirmation or in this Agreement, and (iv) the printed form
of ISDA Master Agreement.
(f) Consent to Recording. Each party (i) consents to the
monitoring or recording, at any time and from time to time,
by the other party of any and all communications between
officers or employees of the parties, (ii) waives any
further notice of such monitoring or recording, and (iii)
agrees to notify (and, if required by law, obtain the
consent of) its officers and employees with respect to such
monitoring or recording.
(g) Modified Representation. For purposes of Section 3(d) of
this Agreement, the following shall be added, immediately
13
<PAGE>
prior to the period at the end thereof:
";provided that, in the case of financial statements
delivered by Party A, such financial statements give a
fair view of the state of affairs of the relevant
entity to which they relate as at the date of such
financial statements, and in the case of financial
statements delivered by Party B, such financial
statements fairly present the financial position of the
relevant entity to which they relate as at the date of
such financial statements".
(h) Additional Representations. For purposes of Section 3 of
this Agreement, the following shall be added, immediately
following paragraph (f) thereof:
(g) This Agreement and each Transaction constitutes a
"swap agreement" within the meaning of Commodity
Futures Trading Commission ("CFTC") Regulations Section
35.1(b)(1). It is an "eligible swap participant"
within the meaning of CFTC Regulations Section
35.1(b)(2). Neither this Agreement nor any Transaction
is one of a fungible class of agreements that are
standardized as to their material economic terms,
within the meaning of CFTC Regulations Section 35.2(b).
The creditworthiness of the other party was or will be
a material consideration in entering into or
determining the terms of this Agreement and each
Transaction, including pricing, cost or credit
enhancement terms of the Agreement or Transaction,
within the meaning of CFTC Regulations Section 35.2(c).
It has entered into this Agreement (including each
Transaction) in conjunction with its line of business
(including financial intermediation services) or the
financing of its business.
(h) It engages, will engage and holds itself out as engaging
in "financial contracts", as defined in Regulation EE of the
Board of Governors of the Federal Reserve System, as a
counterparty on both sides of one or more "financial
markets" (as defined in such regulation) and it fulfills at
least one of the quantitative tests contained in such
regulation.
(i) It is entering into this Agreement and each Transaction
as principal and not agent of any person or entity.
(j) In the case of Party B only, (i) it has had sufficient
opportunity to learn all the material facts and has entered
into this Agreement and each Transaction based upon its own
independent review and judgment, or the advice of its own
advisors, and has not relied upon advice from the other
14
<PAGE>
party or any of the other party's Affiliates, concerning the
investment suitability, liquidity, financial, legal,
regulatory, tax or other considerations material to this
Agreement or any Transaction and (ii) it possesses adequate
knowledge and experience to assess independently, or with
the assistance of its own advisors, the merits and risks of
this Agreement and each Transaction.
i) Forms. For purposes of Section 4(a)(iii) of this Agreement,
the following shall be added immediately prior to the
existing text: "upon learning that such form or document is
required or".
(j) Additional Covenant. For purposes of Section 4 of this
Agreement, the following shall be added, immediately
following paragraph (e) thereof:
(f) It will, upon learning of the occurrence or
existence of any event or condition that constitutes
(or that, with the giving of notice or passage of time
(or both) would constitute) an Event of Default or
Termination Event with respect to it, promptly give the
other party notice of such event or condition.
(k) 1991 ISDA Definitions. The definitions and provisions
contained in the 1991 ISDA Definitions (the "1991 ISDA
Definitions") as published by the International Swaps and
Derivatives Association, Inc. are incorporated into this
Agreement by reference. For these purposes, all references
in the 1991 ISDA Definitions to a "Swap Transaction" shall
be deemed to apply to each Transaction under this Agreement.
(l) Confirmations. For each Transaction Party A and Party B
agree to enter into under this Agreement, Party A shall use
reasonable efforts to promptly send to Party B a
Confirmation setting forth the terms of such Transaction.
Party B shall execute and return the Confirmation to Party
A, or request correction in writing of any error, within
seven Business Days of receipt.
(m) Escrow. If either party in its reasonable judgment
determines at any time that there has been a material
adverse change that is likely to affect the other party's
ability to perform its ensuing payment obligation in
connection with a Transaction or Transactions involving
payments due from each of the parties on the same day, the
party that has formed that judgment may notify the other
that the payments due on that day in connection with that
Transaction or those Transactions are to be made in escrow,
to a major commercial bank selected by that party in good
faith and that has offices in the cities in which both
15
<PAGE>
payments are to be made. If such an election is made, each
party shall make the payment due from it on that day by
deposit into escrow to that escrow agent, for value on that
day, with irrevocable instructions (i) to release the
payment to the intended payee upon receipt by the escrow
agent of the required counter payment due from that payee on
the same day in connection with that Transaction accompanied
by irrevocable instructions to the same effect, or (ii) if
the required deposit in escrow of the counter payment due is
not so made on the same day, for value on that day, to
return the payment deposited in escrow to the party that
made the escrow deposit. The party that elects to have
payments made in escrow shall pay the costs of the escrow
arrangements and cause those arrangements to provide that
the escrow agent will pay interest on each amount deposited
in escrow with it in either of the relevant cities, for each
day such amount remains in escrow past 5:00 p.m. local time
in the city, at the same rate per annum, and calculated in
the same way, as it would pay on overnight deposits placed
with it in the relevant currency and city for value on such
day. The escrow arrangements shall also provide that such
interest on any amount in escrow shall be payable to the
intended payee of that amount, provided that it has
deposited the counter payment due from it into escrow as
contemplated in this paragraph, and that, if it has not done
so, such interest shall be payable to the other party.
16
<PAGE>
Exhibit B-7(c)
GUARANTY, dated as of __________________ made by The
Southern Company (the "Guarantor"), a Delaware corporation,
in favor of [________] Bank ("Bank"), a corporation
organized under the laws of the [___________________].
WHEREAS Bank and Mobile Energy Services Company, Inc.
(the "Company"), an Alabama corporation, have entered into a
Master Agreement dated as of the date of this Guaranty (that
agreement, as amended, modified or supplemented by any
Confirmation contemplated therein or otherwise being
referred to herein as the "Agreement") and it is a
requirement of the Agreement that the Company cause this
Guaranty to be delivered;
NOW, THEREFORE, the Guarantor agrees as follows.
1. Certain Defined Terms. Terms defined in the
Agreement that are used but not otherwise defined herein
shall have the meanings given to them in the Agreement,
except that references to "this Agreement" in the definition
of any such term shall also be deemed for purposes of this
Guaranty to be references to this Guaranty.
2 Guaranty. (a) The Guarantor irrevocably guarantees
(as primary obligor and not merely as surety) (i) payment in
full as provided in the Agreement of all amounts payable by
the Company under the Agreement, as and when those amounts
become payable (whether at their scheduled due dates, upon
early termination or otherwise), strictly in accordance with
the provisions of the Agreement and (ii) the due and
punctual performance of all other obligations of the Company
under the Agreement.
(b) The Guarantor's obligations under this Guaranty
shall be unconditional, irrespective of any lack of capacity
of the Company or any lack of validity or enforceability of
any provision of the Agreement, and this Guaranty shall not
be affected in any way by any variation, extension, waiver,
compromise or release of any or all of the obligations of
the Company under the Agreement or of any security from time
to time therefor.
(c) This is a continuing Guaranty and a guaranty of
payment (not merely of collection), and it shall remain in
full force and effect until all amounts payable by the
Company under the Agreement have been validly, finally and
irrevocably paid in full and shall not be affected in any
way by the absence of any action to obtain those amounts
from the Company.
(d) This Guaranty shall not be affected by the
<PAGE>
2
occurrence of any Event of Default, Potential Event of
Default or Termination Event, by the existence of any
bankruptcy, insolvency, reorganization or similar
proceedings involving the Company, by any change in the
laws, rules or regulations of any jurisdiction or by any
present or future action of any governmental authority or
court or other person or entity amending, varying, reducing
or otherwise affecting, or purporting to amend, vary, reduce
or otherwise affect, any of the obligations of the Company
under the Agreement or of the Guarantor under this Guaranty
or by any other circumstance (other than complete,
irrevocable payment) that might vary the risk of or
otherwise constitute a legal or equitable discharge or
defense of the Company or the Guarantor or of a surety or a
guarantor.
(e) This Guaranty shall be reinstated if at any time
(including any time after its termination or expiration) any
payment by the Company, in whole or in part, is rescinded or
is otherwise returned by Bank, whether voluntarily or
involuntarily, upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though
that payment had not been made.
(f) So long as any amount payable by the Company under
the Agreement is overdue and unpaid, the Guarantor shall not
(i) exercise any right of subrogation or indemnity, or
similar right or remedy, against the Company or any other
assets or property in respect of any amount paid by the
Guarantor under this Guaranty or (ii) file a proof of claim
in competition with Bank for any amount owing to the
Guarantor by the Company on any account whatsoever in the
event of bankruptcy, insolvency or liquidation of the
Company. If at any time when any such amount is overdue and
unpaid the Guarantor receives any amount as a result of any
action against the Company or any of its property or assets
or otherwise for or on account of any payment made by the
Guarantor under this Guaranty, the Guarantor shall forthwith
pay that amount received by it to Bank, to be credited and
applied against the amount so payable by the Company.
(g) If the Company merges or consolidates with or into
another entity, loses its separate legal identity or ceases
to exist, the Guarantor shall nonetheless continue to be
liable for the payment of all amounts payable by the Company
under the Agreement.
(h) The Guarantor waives (i) all requirements as to
promptness, diligence, presentment, demand, protest and
notice of any kind with respect to this Guaranty or the
Agreement, except for notices or demands referred to in
Section 3(b), and (ii) any requirement that Bank exhaust any
right or take any action against the Company, any collateral
<PAGE>
3
security or any other guarantor or surety.
3. Payments Free and Clear. (a) All payments under
this Guaranty shall be made without any deduction or
withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law,
as modified by the practice of any relevant governmental
revenue authority, then in effect. If the Guarantor is so
required to deduct or withhold, then the Guarantor will (i)
pay to the relevant authorities the full amount required to
be deducted or withheld (including the full amount required
to be deducted or withheld from any additional amount paid
by the Guarantor to Bank under this Section 3 promptly upon
the earlier of determining that such deduction or
withholding is required or receiving notice that such amount
has been assessed against Bank, and in any event before
penalties attach thereto or interest accrues thereon, (ii)
promptly forward to Bank an official receipt (or a certified
copy), or other documentation reasonably acceptable to Bank,
evidencing such payment to such authorities and, (iii) if
such Tax is an Indemnifiable Tax, in addition to the payment
to which Bank is otherwise entitled under this Guaranty, pay
to Bank such additional amount as is necessary to ensure
that the net amount actually received by Bank (free and
clear of Indemnifiable Taxes, whether assessed against Bank
or the Guarantor) will equal the full amount Bank would have
received had no such deduction or withholding been required;
provided, however, Guarantor shall not be required to pay
any additional amount to Bank to the extent it would not be
required to be paid but for:
(A) the failure by Bank to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d) of the Agreement; or
(B) the failure of a representation made by Bank
pursuant to Section 3(f) of the Agreement to be
accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing
authority, or brought in a court of competent
jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to
this Agreement) or (II) a Change in Tax Law.
(b) If (i) the Guarantor is required to make any
deduction or withholding on account of any Tax from any
payment made by it under this Guaranty, (ii) the Guarantor
does not make the deduction or withholding and (iii) a
liability for or on account of the Tax is therefore assessed
directly against Bank, the Guarantor shall pay to Bank,
promptly after demand, the amount of the liability
(including any related liability for interest or penalties).
<PAGE>
4
4. Contractual Currency. The provisions of Section 8
of the Agreement shall apply to amounts payable under this
Guaranty as full as if they were set forth in an referred to
this Guaranty.
5. Remedies. (a) The rights and remedies provided for
herein are in addition to and not exclusive of any rights
and remedies available to Bank by law in respect of this
Guaranty. The provisions of Section 9(f) of the Agreement
shall apply to this Guaranty as fully as if set forth
herein. If any amount payable by the Guarantor under this
Guaranty is not paid when due, Bank may, without notice or
demand of any kind, appropriate and apply toward the payment
of any such amount any property, balance, credit, deposit
account or money of the Guarantor (in any currency) that for
any purpose is in the possession or control of Bank (or any
of its branches or offices). Bank shall be entitled to
apply any amount received by it from any source, including
the Guarantor, in respect of the Company's obligations under
the Agreement to the discharge of those obligations in such
order as Bank may from time to time elect in its sole
discretion.
(b) The Guarantor shall pay or reimburse Bank on demand
for all costs and expenses (including fees and expenses of
counsel) incurred in connection with the enforcement of
Bank' rights under this Guaranty.
6. Representations and Warranties. The Guarantor
makes the representations and warranties set forth in
subsections (a) through (c) and (e) of Section 3 of the
Agreement to Bank as if the references therein to the
Agreement were references to this Guaranty. The Guarantor
also represents and warrants to Bank that the certificates
relating to the Guarantor or this Guaranty to be delivered
pursuant to Section 4 of the Agreement are true, accurate
and complete in every material respect as of the dates of
the certificates, and that the financial information to be
provided pursuant to that Section fairly presents the
financial condition of the Guarantor as at the dates at
which the financial information is stated to apply and the
results of the operations of the Guarantor for the
applicable periods. This representation shall be deemed
repeated each time such financial information is delivered
pursuant to the Agreement.
7. Agreements. The Guarantor agrees that, so long as
it has or may have any obligation under this Guaranty, it
will perform the agreements set forth in Section 4 of the
Agreement for the benefit of Bank as if the Guarantor were a
party to the Agreement and references therein to the
Agreement were references to this Guaranty.
<PAGE>
5
8. Amendments, Waivers, Notices. All amendments,
waivers and modifications of or to any provision of this
Guaranty and any consent to departure by the Guarantor from
the terms hereof shall be in writing and signed and
delivered by Bank and, in the case of any such amendment or
modification, by the Guarantor, and shall not otherwise be
effective. Any such waiver or consent shall be effective
only in the specific instance and for the purpose for which
it is given. Any notice or communication to Bank or the
Guarantor in connection with this Guaranty shall be
addressed to it at the address specified in Part 4(a) of the
Schedule to the Agreement, or such other address as may be
specified by notice to the intended recipient. The giving
of notice to the Guarantor in any instance shall not entitle
the Guarantor to any other or further notice in similar or
other circumstances.
9. Binding Effect. This Guaranty shall be binding on
the Guarantor and its successors and assigns. However, the
Guarantor shall not transfer any of its obligations
hereunder without the prior written consent of Bank, and any
purported transfer without that consent shall be void. This
Guaranty shall inure to the benefit of Bank and its
successors and assigns.
10. Governing Law; Jurisdiction. This Guaranty shall
be governed by and construed and interpreted in accordance
with the law of the State of New York (without reference to
the choice of law doctrine). The Guarantor hereby
irrevocably waives any and all right to a trial by jury with
respect to any legal proceeding arising out of or relating
to this Guaranty. The Guarantor irrevocably summits to the
jurisdiction of the courts specified in Section 13 of the
Agreement for purposes of any action or proceeding relating
to this Guaranty and irrevocably appoints the Process Agent,
if any, identified in Part 4(b) of the Schedule to the
Agreement as its agent to receive service of summons or any
other legal process in connection with any action or
proceeding relating to this Guaranty brought in any such
court. The Guarantor irrevocably waives, to the fullest
extent permitted by law, any defense or objection it may
have that any such action or proceeding in any such court
has been brought in an inconvenient forum. Nothing herein
contained shall preclude Bank form bringing an action or
proceeding relating to this Guaranty in any other place
where the Guarantor or any of its assets or revenues may be
found or located.
11. Headings. The section headings in this Guaranty
are for convenience of reference only and shall not affect
the meaning or construction of any provision hereof.
<PAGE>
6
IN WITNESS WHEREOF the Guarantor has duly executed this
Guaranty with effect from the date first written above, on
the date specified below.
THE SOUTHERN COMPANY
By:_____________________________
Title:____________________________
Date:____________________________
[Corporate Seal]
<PAGE>
Exhibit F
TROUTMAN SANDERS
600 PEACHTREE STREET
ATLANTA, GEORGIA 30308
404-885-3000
December 9, 1994
Securities and Exchange Commission
Washington, D.C. 20549
Re: The Southern Company - Form U-1 Application or
Declaration (File No. 70-8505)
Ladies and Gentlemen:
We are familiar with the statement on Form U-1 referred to
above, as amended, and are furnishing this opinion with respect
to the transactions proposed therein, which include, among other
proposals, (i) the acquisition by The Southern Company, a
Delaware corporation ("Southern"), of all of the issued and
outstanding common stock, $1 par value (the "Stock"), of Mobile
Energy Services Company, Inc., an Alabama corporation ("Mobile
Energy") for consideration not to exceed $105 million; (ii) the
making of an interim loan by Southern to Mobile Energy in an
amount not to exceed $190 million, such interim loan to mature
not later than June 30, 1995; (iii) the acquisition by Mobile
Energy of certain facilities and equipment constituting the
energy and recovery complex ("Energy Complex") at Scott Paper
Company's pulp and paper mill in Mobile, Alabama; (iv)
Southern's guaranty of Mobile Energy's obligations under an
environmental indemnity agreement with Scott Paper Company; (v)
the assumption by Mobile Energy of Scott Paper Company's
obligations under a facility lease and other instruments relating
to $85 million principal amount of outstanding industrial revenue
development bonds, and Southern's guaranty of Mobile Energy's
obligations under the assumption documents; and (vi) Mobile
Energy's issuance of notes (the "Notes") in an aggregate
principal amount not to exceed $230 million, and, in connection
therewith, Southern's guaranty in lieu of cash reserves that may
be required by the purchasers of such Notes.
We are of the opinion that Southern and Mobile Energy are
each a validly organized and duly existing corporation under the
laws of the State of its incorporation and that, upon the
issuance of your order or orders herein, and in the event that
the proposed transactions are consummated in accordance with such
statement on Form U-1 and your order or orders:
<PAGE>
Securities and Exchange Commission
December 9, 1994
Page 2
(a) all state laws applicable to the proposed
transactions will have been complied with;
(b) when certificates for the Stock have been executed
by Mobile Energy, countersigned and registered by the
transfer agent and registrar and delivered for a
consideration in cash equal to or greater than the par value
of said Stock in accordance with resolutions duly adopted by
the board of directors of Mobile Energy, said Stock will be
validly issued, fully paid and nonassessable shares of
Mobile Energy and Southern, as the holder thereof, will be
entitled to the rights and privileges appertaining thereto
set forth in the Certificate of Incorporation of Mobile
Energy defining such rights and privileges;
(c) the Notes will be valid and binding obligations of
Mobile Energy in accordance with the terms thereof;
(d) the guaranties of Southern in respect of (i) the
Tax Exempt Bonds, (ii) Mobile Energy's obligations under the
environmental indemnity, and (iii) reserves created in favor
of the purchasers of the Notes, are each legal, valid and
binding obligations of Southern; and
(e) the consummation of the transactions described
above and of the other transactions described in the
Application or Declaration, as amended, will not violate the
legal rights of the holders of any securities issued by
Southern, Mobile Energy, or any associate company thereof.
We hereby consent to the use of this opinion in connection
with the filing of such statement on Form U-1.
Very truly yours,
/s/Troutman Sanders
Troutman Sanders
<PAGE>
