Exhibit B-2
NEW
TISSUE MILL ENERGY SERVICES AGREEMENT
Dated as of February 8, 2000
Between
Mobile Energy Services Company, L.L.C.
and
Kimberly-Clark Tissue Company
<PAGE>
NEW
TISSUE MILL ENERGY SERVICES AGREEMENT
THIS NEW TISSUE MILL ENERGY SERVICES AGREEMENT (this
"Agreement") dated as of February 8, 2000, between MOBILE ENERGY SERVICES
COMPANY, L.L.C., an Alabama limited liability company ("MESC"), and
KIMBERLY-CLARK TISSUE COMPANY, a Pennsylvania corporation ("KCTC") (MESC and
KCTC are sometimes referred to herein individually as a "Party" and collectively
as the "Parties");
W I T N E S S E T H:
WHEREAS, MESC owns certain energy facilities in Mobile,
Alabama and is engaged in the provision of steam processing services and power
processing services; and
WHEREAS, KCTC desires to receive and purchase, and MESC
desires to deliver and sell, steam processing services and power processing
services to meet the requirements of KCTC Facilities;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth, the Parties hereto agree as follows:
1. Definitions and Interpretation
(a) Definitions. As used in this Agreement, (i) the terms set forth
below in this Section 1(a) shall have the respective meanings so set forth, (ii)
the terms defined elsewhere in this Agreement shall have the meanings therein so
specified, and (iii) capitalized terms not defined herein shall have the meaning
ascribed to such terms by the MOA, including Exhibit A thereto.
"Acceptable Tolerance" shall have the meaning given to it in
Exhibit A, for any particular Applicable Measuring Device.
"Actual MESC KCTC Power Production Capacity" means the actual
capability (measured in KW) of MESC to deliver Power Processing
Services to the KCTC Facilities at any given time.
"Actual MESC KCTC Steam Production Capacity" means the actual
capability (measured in MMBTU/hour) of MESC to provide Steam Processing
Services to the KCTC Facilities at any given time.
"APC" means Alabama Power Company, an Alabama corporation.
"Applicable Delivery Point" means, with respect to Power
Processing Services, the point identified as the "KCTC Power Processing
Delivery Point" in Exhibit B, with respect to Steam Processing
Services, the point identified as the "KCTC Steam Processing Delivery
Point" in such Exhibit, and with respect to KCTC Return Condensate, the
point identified as the "KCTC Return Condensate Delivery Point" in such
Exhibit.
"Applicable Measuring Devices" means the measuring or metering
devices identified for Steam, KCTC Return Condensate or Electric Energy
in Exhibit A.
"Attributable to MESC" means any event or occurrence which
prevents the provision of Steam Processing Services or Power Processing
Services at the quality specifications as defined in Sections 4(a) or
4(b) except to the extent that the failure to provide such services
results from (i) any Force Majeure Event, (ii) KCTC's failure to
provide KCTC Make-Up Water, (iii) a Cold Shutdown, (iv) an outage of
MESC's facilities scheduled to coincide with a scheduled outage of
KCTC's equipment having an expected duration of 48 hours or more, or
(v) any act or omission of KCTC.
"Back-Up Power" means electricity purchased by KCTC from APC
or some source other than MESC to replace Power Processing Services
provided by MESC under this Agreement.
"Back-Up Power Cost Variance" means the difference between (i)
the variable or energy cost of all Back-Up Power, Short-Term
Maintenance Power and Long-Term Maintenance Power which KCTC obtains
pursuant to Section 4(c) for a Billing Period to replace Power
Processing Services to be supplied by MESC hereunder where MESC's
failure to supply such Power Processing Services is not excused
hereunder and (ii) the cost for such power if it had been obtained
under this Agreement.
"Bankruptcy" means with respect to a Person that such Person
(i) ceases doing business as a going concern, generally does not pay
its debts as they become due or admits in writing its inability to pay
its debts as they become due, files a voluntary petition in bankruptcy
or is adjudicated a bankrupt or insolvent, or files any petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy code or any other present or
future applicable federal, state or other Governmental Rule, or seeks
or consents to or acquiesces in the appointment of any trustee,
receiver, custodian or liquidator of said Person or of all or any
substantial part of its properties, or makes an assignment for the
benefit of creditors, or said Person takes any corporate action to
authorize or that is in contemplation of the actions set forth in this
clause (i); or (ii) a proceeding is initiated against the Person
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the present or any
future federal bankruptcy code or any other Governmental Rule and, such
proceeding is not dismissed within ninety (90) days after the
commencement, or any trustee, receiver, custodian or liquidator of said
Person or of all or any substantial part of its properties is appointed
without the consent or acquiescence of said Person, and such
appointment is not vacated or stayed on appeal or otherwise within
ninety (90) days after the appointment, or, within ninety (90) days
after the expiration of any such stay, has not been vacated, provided
that, notwithstanding the foregoing, the exercise of rights to take
over operation of a Person's assets, or to foreclose on any of a
Person's assets, by a secured creditor of such Person (including the
appointment of a receiver or other representative in connection with
the exercise of such rights) shall not constitute a Bankruptcy.
"Billing Period" means a Month in any Contract Year, except
that the first Billing Period shall begin on the Effective Date and
shall end on the last Day of the Month during which the Effective Date
occurred and the last Billing Period shall end on the last Day of the
last Contract Year.
"BTU" means one (1) British Thermal Unit.
"Business Day" means each weekday (Monday through Friday)
except the days on which the banks in Mobile, Alabama are closed.
"Change of Law" means the adoption, promulgation, modification
or reinterpretation of any law, rule, regulation, ordinance, order or
other Governmental Rule of any federal, state, county or local
government, governmental agency, court, commission, department or other
such entity which occurs subsequent to the date of execution of this
Agreement but excluding any change in law relating to taxation of net
income.
"Cold Shutdown" means a planned and scheduled outage of the
entire Energy Complex.
"Contract Year" means, in the case of the First Contract Year,
the period beginning on the Effective Date and ending on August 31,
2000; and, in the case of subsequent Contract Years, means the period
beginning on the day immediately following the end of the preceding
Contract Year and ending on the day prior to the first anniversary of
such beginning day. First Contract Year refers to the first such period
commencing on the Effective Date; Second Contract Year refers to the
second such period; and so on.
"Day" means a period of twenty-four consecutive hours
beginning and ending at 7 a.m. The reference date for any Day shall be
the calendar date on which the twenty-four hour period begins.
"Default Rate" means (i) the Prime Rate plus (ii) 1.0% (100
basis points) per annum.
"Down Time" means the period of time during which a tissue
machine is unable to engage in commercial production caused by
disruptions in Power Processing Services (complete interruptions or
power disturbances) to the KCTC Facilities Attributable to MESC, or
disruptions in Steam Processing Services (complete interruption or
steam pressure, temperature or contaminant excursion) Attributable to
MESC. Down Time shall be measured from the time of the initial loss of
production to the time production is or could have been (with the use
of the efforts specified by Section 7(f)) restored at the rates and
grades of paper being produced immediately prior to the loss of
production. Power Processing Service or Steam Processing Service
disruptions which result from a change by KCTC in an outage scheduled
for the Tissue Mill having a duration of forty-eight (48) hours or more
will not be considered Down Time. Down Time for a Contract Year shall
be the sum of the Down Time for each tissue machine experienced during
such Contract Year (i.e., if two tissue machines experience
simultaneous Down Time for a period of four hours as a result of a
disruption, then an aggregate of eight hours of Down Time shall be
deemed to have occurred as a result of such disruption).
"Effective Date" means the Interim Closing Date.
"Electric Energy" has the meaning specified in Section
4(a)(ii).
"Electric Energy Measuring Devices" means those devices
described on Exhibit A to this Agreement.
"Energy Complex" means the cogeneration power production and
recovery complex owned by MESC and located on the Site.
"Escalation Factor" means the Producer Price Index in effect
during a relevant Billing Period divided by the Producer Price Index in
effect on the Effective Date.
"Execution Date" means the date on which this Agreement is
executed by the Parties.
"First Pricing Period" means the period from the Effective
Date through August 31, 2009.
"Force Majeure Event" has the meaning specified in Section 12.
"Governmental Authority" means any national, state or local
government (whether domestic or foreign), and political subdivision
thereof or any other governmental, quasi-governmental, judicial, public
or statutory instrumentality, authority, body, agency, department,
bureau or entity, (including without limitation any zoning authority,
the United States Securities and Exchange Commission, the Federal
Energy Regulatory Commission, the Alabama Public Service Commission or
any comparable authority) or any arbitrator with authority to bind a
party at law.
"Governmental Rule" means any law, rule, regulation,
ordinance, order, code, Permit, judgment, decree, directive, policy or
similar form of decision of any Governmental Authority having the
effect and force of law.
"HLF Rate" means the APC rate designated as Rate HLF High Load
Factor Industrial Power (including all factors, adjustments or riders
applicable to electric service provided by APC under that rate) as that
rate may be revised or replaced from time to time; provided, that
another rate shall be treated as replacing APC HLF High Load Factor
Industrial Power Rate only where the HLF Rate is substantially modified
or eliminated and such other rate embodies a similar rate design and is
applicable to APC's customers having load characteristics similar to
those of the KCTC Facilities and being served at transmission voltages.
"Interim Closing Date" shall have the definition of such term
set forth in the Settlement Agreement.
"KCTC Event of Default" has the meaning specified in Section
11(b).
"KCTC Facilities" means all of the facilities and equipment
which KCTC or any affiliate of KCTC owns or operates now or in the
future on the Site, whether or not such facilities or equipment are
part of the Tissue Mill or part of the Pulp Mill.
"KCTC HLF Contract Capacity" means 39,750 kilowatts as long as
the HLF Rate is in effect.
"KCTC HLF Usage" means the total of all Electric Energy
delivered by MESC to KCTC during each hour of the relevant period up to
a maximum in such hour of the KCTC HLF Contract Capacity multiplied by
one (1) hour.
"KCTC Make-Up Water" means water to be provided to MESC from
KCTC in order to be processed into Steam.
"KCTC Maximum Power Processing Demand" means 53,000 KW.
"KCTC Maximum Steam Processing Demand" means 292 MMBTU/hour.
"KCTC Power Processing Delivery Points" means the points of
interconnection between the Energy Complex and the KCTC Facilities, as
more particularly described in Exhibit B to this Agreement.
"KCTC Return Condensate" means water derived from the Steam
used by the KCTC Facilities, having a conductivity limit (i) not to
exceed 25 micromhos if the most cost effective method of remedying
Tissue Mill condensate quality is located in the Energy Complex or (ii)
not to exceed 10 micromhos if the most cost effective method of
remedying Tissue Mill condensate quality is located in the Tissue Mill,
in either case with the Parties sharing equally the cost of such
remedy.
"KCTC Return Condensate Delivery Point" means the locations at
which KCTC shall deliver KCTC Return Condensate to MESC pursuant to
this Agreement, as more particularly described in Exhibit B.
"KCTC Steam Processing Delivery Point" means the locations at
which MESC shall deliver Steam to KCTC Facilities pursuant to this
Agreement, as more particularly described in Exhibit B.
"KCTC Steam Energy Flow" is the sum of the KCTC Steam 50 Flow
and the KCTC Steam 300 Flow.
"KCTC Steam 50 Flow" means the amount of Steam measured by
Steam Measuring Devices in MMBTU/hour from the applicable 50 psig
header(s) and delivered to the KCTC Facilities.
"KCTC Steam 300 Flow" means the amount of Steam measured by
Steam Measuring Devices in MMBTU/hour from the applicable 300 psig
header(s) and delivered to the KCTC Facilities.
"KCTC Steam Processing Requirement" means the KCTC Facilities'
requirement of Steam Processing Services at any given time, measured in
MMBTU per hour as measured by the Applicable Measuring Devices.
"KW" means one (1) kilowatt.
"kWh" means one (1) kilowatt-hour.
"Labor Dispute" means any national, regional or local labor
strikes, work stoppage, boycotts, walkouts and other labor difficulties
or shortages, including any of the foregoing which affects access to
the Energy Complex or the KCTC Facilities or the ability to ship or
receive goods, including fuel or spare parts; provided however, that a
"Labor Dispute" shall not include, in the case of MESC, any labor
dispute at the Energy Complex or involving the employees of MESC or the
Operator or, in the case of KCTC, any labor dispute at the Tissue Mill
or involving the employees of KCTC.
"Long-Term Maintenance Power" means the power purchased by
KCTC from APC or a source other than MESC that would be considered
long-term maintenance power under the historical practices of the
Parties during the three (3) years prior to the Effective Date.
"Losses" means any and all costs, expenses (including
reasonable attorneys" fees), claims, demands, losses, liabilities,
obligations, deficiencies, actions, lawsuits and other proceedings,
judgments and awards.
"Maintenance Power" means Long-Term Maintenance Power and
Short-Term Maintenance Power, collectively.
"MESC Event of Default" has the meaning specified in Section
11(a).
"MESH" means Mobile Energy Services Holdings, Inc.
"Minimum Steam Processing Services Volume" means 1,098,000
MMBTU for each of the first five Contract Years, 732,000 MMBTU for each
of the Sixth Contract Year through the Tenth Contract Year, and 457,500
MMBTU for each of the Eleventh Contract Year through the Twentieth
Contract Year, provided that the MMBTU amount for any Contract Year of
less than twelve months shall be prorated to reflect the shorter
duration of that Contract Year.
"MMBTU" means one million BTUs.
"MOA" means the Amended and Restated Master Operating
Agreement dated as of July 13, 1995 among KCTC (formerly Scott Paper
Company), KCTC in its capacity as Pulp Mill Owner, KCTC in its capacity
as Tissue Mill Owner, S. D. Warren Company in its capacity as Paper
Mill Owner, and MESC (as assignee of MESH), as that Agreement now
exists or as it may be amended in the future.
"Month" means a calendar month which begins at 7:00 a.m. on
the first calendar day of the month and ends at 7:00 a.m. on the first
day of the next succeeding month.
"Paper Mill Owner" means the owner of the paper mill located
on the Site that is purchasing from MESC Steam Processing Services or
Power Processing Services provided by the Energy Complex.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents, waivers, exemptions, variances or orders of,
or filings required by, or otherwise issued by any Governmental
Authority.
"Person" means any natural person, corporation, partnership,
firm, association, trust, unincorporated organization, limited
liability company, Governmental Authority or any other entity whether
acting in an individual, fiduciary or other capacity.
"Power Processing Services" means the processing of various
fuels and water into Electric Energy by MESC, or electricity purchased
by MESC and supplied to KCTC, pursuant to the provisions of this
Agreement.
"Prime Rate" means the "Prime Rate" as published from time to
time under "Money Rates" in the Wall Street Journal.
"Process Water Plant" means the process water plant located on
the Site with the Energy Complex and the Tissue Mill.
"Processing Services" means Steam Processing Services and
Power Processing Services.
"Prudent Plant Operating Standards" means a spectrum of
reasonable practices, methods and acts which (i) are commonly used to
operate steam generating or processing and electricity generating
equipment and associated facilities of the type that comprise the
Energy Complex safely, reliably and efficiently and having due regard
to all applicable Governmental Rules or (ii) in the exercise of
reasonable judgment considering the facts known (or that should have
been known) when such practices, methods or acts are engaged in, could
have been expected to achieve the desired result safely, reliably and
efficiently and having due regard to all applicable Governmental Rules,
including but not limited to reasonable practices, methods and acts to
(a) have available adequate materials and supplies to meet the Energy
Complex's needs under normal conditions and reasonably anticipated
abnormal conditions; (b) have available sufficient operating personnel
with appropriate experience and training to operate facilities of the
type that comprise the Energy Complex properly and efficiently and to
respond to reasonably anticipated abnormal conditions; (c) perform
preventative, routine and non-routine maintenance and repairs
appropriate for facilities of the type that comprise the Energy
Complex; (d) perform monitoring and testing appropriate for facilities
of the type that comprise the Energy Complex to ascertain whether the
equipment will function as expected under both normal and reasonably
expected abnormal conditions; and (e) operate equipment with
appropriate regard to safety and equipment limitations for facilities
of the type that comprise the Energy Complex.
"psig" means pounds per square inch gauge.
"Pulp Mill" means the pulp mill formerly operated by KCTC in
Mobile, Alabama.
"Qualified Energy Complex Operator" means (a) MESC, (b) a
Person that has demonstrated that it operated steam and electricity
production facilities of similar size and complexity to the Energy
Complex in a manner consistent with Prudent Plant Operating Standards
(including liquor processing activities if MESC is at that time
contractually obligated to provide liquor processing services to
another party) for three of the last five years (or a direct or
indirect wholly-owned subsidiary of such a Person), or (c) any other
Person approved by KCTC, which approval shall not be unreasonably
withheld.
"RTPD Rate" means the APC rate designated as RTPD Real Time
Pricing - Day Ahead (Restricted) (including all factors, adjustments
or riders applicable to electric service provided by APC under that
rate) as that rate may be revised or replaced from time to time;
provided that another rate shall be treated as replacing APC's RTPD
Real Time Pricing - Day Ahead (Restricted) rate only where the RTPD
Real Time Pricing - Day Ahead (Restricted) rate is substantially
modified or eliminated and such other rate embodies a similar rate
design and is applicable to APC's customers having load
characteristics similar to those of the KCTC Facilities, and being
served at transmission voltages.
"Second Pricing Period" means the period from September 1,
2009 through August 31, 2014.
"Senior Management" means, with respect to a Party or the
Paper Mill Owner, a senior officer of such Party or Paper Mill Owner,
having responsibility for the business of the facility controlled by
such entity.
"Settlement Agreement" means that certain Settlement Agreement
dated as of February 8, 2000 among the Parties and Mobile Energy
Services Holdings, Inc.
"Short-Term Maintenance Power" means the power purchased by
KCTC from APC or a source other than MESC that would be considered
short-term maintenance power under the historical practices of the
Parties during the three (3) years prior to the Effective Date.
"Steam" means steam having the characteristics set forth in
Section 4(b)(ii).
"Steam Measuring Devices" means those devices described on
Exhibit A to this Agreement which are capable of measuring the quantity
and quality of Steam delivered by MESC to the Tissue Mill pursuant to
this Agreement.
"Steam Processing Services" means the processing of KCTC
Return Condensate and KCTC Make-Up Water into Steam by MESC pursuant to
the provisions of this Agreement.
"Steam Services Price Escalator" shall have the meaning given
to it in Section 9(a).
"Taxes" means all federal, state, local and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, withholding, payroll, employment, excise, property,
customs, duties or other taxes, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties,
additions to tax or additional amount with respect thereto.
"Term" has the meaning specified in Section 2.
"Third Pricing Period" means the period from September 1, 2014
through August 31, 2019.
"Tissue Mill" means KCTC's tissue mill located in Mobile,
Alabama.
"Waste Water Treatment Plant" means the waste water treatment
plant located on the Site with the Energy Complex and the Tissue Mill.
(b) Interpretation. In this Agreement, unless a clear contrary
intention appears: (i) the singular includes the plural and vice versa; (ii)
reference to any Person includes such Person's successors and assigns but, in
the case of a Party, only if such successors and assigns are permitted by this
Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity; (iii) reference to any gender includes each other
gender; (iv) reference to any agreement (including this Agreement), document,
instrument or tariff means such agreement, document, instrument or tariff as
amended or modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof; (v) reference to any Governmental
Rule means such Governmental Rule as amended, modified, codified or reenacted,
in whole or in part, and in effect from time to time, including, if applicable,
rules and regulations promulgated thereunder; (vi) reference to any Section
means such Section of this Agreement, and references in any Section or
definition to any clause means such clause of such Section or definition; (vii)
"hereunder", "hereof", "hereto" and words of similar import shall be deemed
references to this Agreement as a whole and not to any particular Section or
other provision hereof or thereof; (viii) "including" (and with correlative
meaning "include") means including without limiting the generality of any
description preceding such term; and (ix) relative to the determination of any
period of time, "from" means "from and including", "to" means "to but excluding"
and "through" means "through and including".
(c) Legal Representation of Parties. This Agreement was negotiated by
the Parties with the benefit of legal representation and any rule of
construction or interpretation requiring this Agreement to be construed or
interpreted against any Party shall not apply to any construction or
interpretation hereof or thereof.
(d) Titles and Headings. Section and Exhibit titles and headings in
this Agreement are inserted for convenience of reference only and are not
intended to be a part of, or to affect the meaning or interpretation of, this
Agreement.
2. Term
This Agreement will not be effective until MESC has been authorized to
enter into this Agreement by an order of the United States Bankruptcy Court for
the Southern District of Alabama in case No. 99-10168, or of another court of
competent jurisdiction. This Agreement shall have a term (the "Term") commencing
on the Effective Date and ending on August 31, 2019 unless terminated earlier in
accordance with the terms hereof. The Agreement may be extended for such further
periods as the Parties may mutually agree. Those provisions of this Agreement
which relate to the enforcement of rights and obligations accruing before
termination shall survive termination of this Agreement to the extent necessary
to enforce such rights and obligations.
3. Operation
(a) Operator. Southern Energy Resources, Inc. ("SERI") currently operates and
maintains the Energy Complex under a contract with MESC. MESC may replace SERI
with a Qualified Energy Complex Operator.
(b) Governmental Notices. MESC and KCTC shall each provide to the other any
written notice either sends to, or receives from, a Governmental Authority with
respect to the noncompliance or alleged noncompliance by MESC or the Energy
Complex or KCTC or the Tissue Mill with any Environmental Law.
4. Processing Services
(a) Power Processing Services.
(i) Subject to the terms and conditions of this Agreement and
subject to the provision by KCTC of KCTC Make-Up Water and gas as
required hereunder or under the MOA, MESC shall provide to KCTC on a
continuous, firm basis a quantity of Power Processing Services equal to
KCTC's Electric Energy requirements at the KCTC Facilities; provided
however, that MESC's obligation to provide such Power Processing
Services shall not exceed the KCTC Maximum Power Processing Demand. Any
electricity or Power Processing Services utilized by the KCTC
Facilities during the Term up to the KCTC Maximum Power Processing
Demand shall be purchased from MESC to the extent MESC can supply such
electricity or Power Processing Services.
(ii) All electric energy ("Electric Energy") provided hereunder
by MESC shall be in the form of three-phase alternating current, having
a nominal frequency of approximately sixty cycles per second, and
otherwise be consistent with standard electric utility power. Further,
that Electric Energy provided by MESC from its on-site generation shall
have a nominal voltage of 13,800 volts (13,200 minimum and 14,400
maximum) measured at all of the 13,800 volt MESC Buses; provided that
for billing purposes all Electric Energy shall be deemed to be
delivered at 115,000 volts.
(iii) The initial volume estimate for Power Processing
Services for the Tissue Mill during the First Contract Year is 385,000
megawatt-hours, and KCTC shall provide, on or before the commencement
of each subsequent Contract Year during the Term, a volume estimate for
Power Processing Services for such Contract Year.
(iv) In the event that KCTC's requirements for Power
Processing Services for the KCTC Facilities exceed or are anticipated
in the future to exceed the KCTC Maximum Power Processing Demand then
KCTC shall offer in writing to MESC the opportunity to meet the amount
of such requirements in excess or projected to be in excess of the KCTC
Maximum Power Processing Demand (such excess or projected excess, the
"KCTC Increased Power Processing Demand") under the terms and
conditions of this Agreement. Such an offer shall be made by KCTC to
MESC no later than ten days after the end of any month in which KCTC's
requirements for Power Processing Services or Electric Energy for the
KCTC Facilities exceeds the KCTC Maximum Power Processing Demand. If
MESC accepts such offer by notice to KCTC within thirty (30) days of
MESC's receipt of that offer, then effective as of the date specified
by MESC in its acceptance of KCTC's offer (which date may be no later
than one hundred twenty (120) days from the date MESC received KCTC's
offer), the KCTC Maximum Power Processing Demand shall be increased by
an amount equal to the KCTC Increased Power Processing Demand. If MESC
does not accept such offer from KCTC within thirty (30) days of its
receipt by MESC (with a failure to respond being deemed a failure to
accept), then KCTC may obtain Power Processing Services or Electric
Energy sufficient to meet the KCTC Increased Power Processing Demand
from an alternative source. MESC shall allow KCTC to utilize without
charge MESC's existing distribution facilities to deliver any Power
Processing Services or Electric Energy KCTC is permitted to obtain from
a source other than MESC, provided that MESC shall be under no
obligation to add additional facilities to accommodate Power Processing
Services or Electric Energy obtained by KCTC from a source other than
MESC.
(b) Steam Processing Services.
(i) Subject to the terms and conditions of this Agreement, and
subject to the provision by KCTC of KCTC Make-Up Water and gas as
required hereunder or under the MOA, MESC shall provide to KCTC on a
continuous, firm basis a quantity of Steam Processing Services equal to
KCTC's Steam requirements at the KCTC Facilities. KCTC shall purchase
all of its Steam requirements for the KCTC Facilities from MESC up to
the KCTC Maximum Steam Processing Demand.
(ii) All Steam provided by MESC as part of such Steam
Processing Services shall be in the form of turbine quality steam with
a contaminant level not to exceed one part per million of total
dissolved solids and a temperature of 330 (305 minimum to 380 maximum)
degrees Fahrenheit and minimum 8 degrees Fahrenheit superheat measured
after the final desuperheater for 50 psig Steam (47 psig minimum to 55
psig maximum) measured at the MESC header, and 445 (431 minimum to 465
maximum) degrees Fahrenheit and minimum 12 degrees Fahrenheit superheat
measured at the desuperheaters on the two lines that supply the Tissue
Mill for 300 psig Steam (290 psig minimum to 315 psig maximum) measured
at the MESC header.
(iii) The initial volume estimate for Steam Processing
Services for the Tissue Mill during the First Contract Year is
1,830,000 MMBTU, and KCTC shall provide, on or before the commencement
of each subsequent Contract Year during the Term, a volume estimate for
Steam Processing Services for such Contract Year.
(iv) In the event that KCTC's requirements for Steam
Processing Services or steam for the KCTC Facilities exceed or are
anticipated in the future to exceed the KCTC Maximum Steam Processing
Demand then KCTC shall offer in writing to MESC the opportunity to meet
the amount of such requirements in excess or projected to be in excess
of the KCTC Maximum Steam Processing Demand (such excess or projected
excess, the "KCTC Increased Steam Processing Demand") under the terms
and conditions of this Agreement. Such an offer shall be made by KCTC
to MESC no later than ten days after the end of any month in which
KCTC's requirements for Steam Processing Services or Steam for the KCTC
Facilities exceeds the KCTC Maximum Steam Processing Demand. If MESC
accepts such offer by notice to KCTC within thirty (30) days of MESC's
receipt of that offer, then effective as of the date specified by MESC
in its acceptance of KCTC's offer (which date may be no later than one
hundred twenty (120) days from the date MESC received KCTC's offer):
(x) the KCTC Maximum Steam Processing Demand shall be increased by an
amount equal to the KCTC Increased Steam Processing Demand, and (y) the
Minimum Steam Processing Services Volume for each full or partial
Contract Year remaining in the Term shall be increased by an amount
equal to (1) the KCTC Increased Steam Processing Demand multiplied by
(2) the fraction produced by dividing the Minimum Steam Processing
Services Volume for such Contract Year by the KCTC Maximum Steam
Processing Demand in each case as in effect on the day prior to such
acceptance, provided that for any partial Contract Year the amount of
the increase to the Minimum Steam Processing Services Volume for such
Contract Year shall be prorated. If MESC does not accept such offer
from KCTC within thirty (30) days of its receipt by MESC (with a
failure to respond being deemed a failure to accept), then KCTC may
obtain Steam Processing Services or Steam sufficient to meet the KCTC
Increased Steam Processing Demand from an alternative source. In such
event, MESC shall provide reasonable assistance to KCTC (at no cost to
MESC) in delivering such Steam Processing Services or steam to the KCTC
Facilities, including allowing KCTC to utilize without charge MESC's
existing steam delivery facilities to deliver any Steam Processing
Services or steam KCTC is permitted to obtain from a source other than
MESC under the preceding sentence, provided that MESC shall be under no
obligation to add additional facilities to accommodate Steam Processing
Services or steam obtained by KCTC from a source other than MESC; and
provided further that any loss of production by the Tissue Mill
resulting from the supply of Steam Processing Services or steam by KCTC
or a third party or the interconnection of such supplier to MESC's
steam distribution facilities shall not result in Down Time.
(c) Transition Rates for Power and Steam Processing Services. The
Electric Energy specifications described in Section 4(a)(ii) and Steam
specifications described in Section 4(b)(ii) shall apply, provided the rate of
change in KCTC's power and Steam demand levels comply with the following limit:
(1-hr rolling average change in {#/hr} Steam demand) + [(1-hr rolling average
change in {MW} power demand) * (60,000 #/hr) / (8 MW)] less than 120,000 #/hr
(d) Back-up Power. Throughout the Term, and subject to compensation
under Section 6(a)(ii), KCTC shall maintain maintenance and back-up Electric
Energy contracts that will provide Back-Up Power for the KCTC Facilities, MESC
and Paper Mill Owner. KCTC will not cause or permit the 1983 APC Contract or the
1986 APC Contract to be amended in any material manner without the consent of
both MESC and the Paper Mill Owner.
5. Delivery; Title; Metering
(a) Delivery and Title. Each item to be delivered from a Party to the
other Party under this Agreement shall be delivered at its Applicable Delivery
Point. KCTC shall at all times have and maintain title to the KCTC Make-Up Water
and KCTC Return Condensate. KCTC shall be deemed to have care, custody and
control of all KCTC Return Condensate and KCTC Make-Up Water until such items
are delivered to MESC at their Applicable Delivery Points, whereupon MESC shall
be deemed to have care, custody and control of such items. MESC shall be deemed
to have care, custody and control of all Steam and Electric Energy until such
items are delivered to KCTC at their Applicable Delivery Points, whereupon KCTC
shall be deemed to have care, custody and control of each such item.
(b) Measuring Devices.
(i) Reading and Testing. Readings of each of the Applicable
Measuring Devices shall be taken and recorded, and inspections, tests
and calibrations shall be performed, in accordance with generally
accepted engineering practices and standards applicable to utility
metering and the provisions set forth with respect to each such
Applicable Measuring Device in Exhibit A. MESC and KCTC shall each be
responsible for one-half of all costs of the third party contractor who
will perform such inspection and testing (the "Metering Contractor")
except under the circumstances indicated in Section 5(b)(ii). MESC
shall be responsible for reading all Applicable Measuring Devices, and
will, subject to KCTC approval (which shall not be unreasonably
withheld), contract with the Metering Contractor. MESC shall have the
right to conduct routine maintenance on, and to perform emergency
repairs with respect to, the Applicable Measuring Devices, provided it
shall notify KCTC that such maintenance or emergency repair will take
place. A Party shall be given access to all Applicable Measuring
Devices located on the property of the other Party upon reasonable
notice to such other Party, and each Party shall have the right to be
present during any readings, inspections or tests of the Applicable
Measuring Devices. Except with respect to the inspection and testing
functions carried out by the Metering Contractor and with respect to
the routine maintenance or emergency repairs carried out by MESC in
accordance with this Section 5(b)(i), the Parties shall not, and shall
not permit others to, adjust, modify or otherwise interfere with or
replace any component of the Applicable Measuring Devices unless each
of the Parties agrees in writing, such approval not to be unreasonably
withheld or delayed. If an Applicable Measuring Device is adjusted,
modified or interfered with contrary to this Section 5(b)(i), the
portion of the Applicable Measuring Device which the Parties agree may
have been affected shall be tested by the Metering Contractor, and the
cost of such test shall be borne by the Party which so adjusted,
modified or interfered with such Applicable Measuring Device. If the
Applicable Measuring Device so tested is determined to be accurate,
such Applicable Measuring Device shall be certified and sealed by the
Metering Contractor.
(ii) Additional Tests. KCTC or MESC may at any time schedule
additional testing of any Applicable Measuring Device, upon reasonable
notice to the other Party. The Party conducting the additional test
shall permit the other Party to be present during such test and shall
promptly notify the other Party of the results of such test. All such
additional tests shall be conducted in accordance with generally
accepted engineering practices and standards applicable to utility
metering. The cost of any additional test scheduled by a Party shall be
borne by such Party, unless the test yields an error in readings which
is greater than the acceptable tolerance for such Applicable Measuring
Device set forth in Exhibit A (the "Acceptable Tolerance"), in which
case the cost of the test shall be borne by the Party that owns such
device.
(c) Adjustments for Inaccuracies.
(i) Adjustments to Applicable Measuring Devices. In the event
that an Applicable Measuring Device fails to register, or is discovered
upon testing to reveal an error in readings which is greater than the
Acceptable Tolerance for such Applicable Measuring Device, MESC shall,
upon notification to KCTC, adjust such Applicable Measuring Device as
soon as is practicable so as to read accurately. Consistent with
current practice, until such time as MESC or the Metering Contractor
can adjust an Applicable Measuring Device which has failed to register,
the measurement of such device shall be deemed to be the average of a
recent measuring period, not to exceed 24 hours, in which the Measuring
Device was registering accurately, and all calculations hereunder which
rely upon such measurement shall employ such average amount, subject to
adjustment pursuant to Section 5(c)(ii).
(ii) Adjustments to Records and Charges. In the event that the
tests conducted in accordance with Section 5(b) reveal an error in
readings with respect to an Applicable Measuring Device which is
greater than the Acceptable Tolerance for such Applicable Measuring
Device, (i) each Party shall retroactively adjust all billings and
records of readings related to such inaccurate device for the period of
the inaccuracy (which shall not exceed the period since the last
Applicable Measuring Device test or three (3) months, whichever is
smaller) by one-half of the amount of the variance and (ii) each Party
which benefited from such inaccuracy shall pay to the Party entitled to
such amount the amount by which such benefiting Party had underpaid or
over-collected for Services delivered hereunder due to such inaccuracy.
In the event that the tests conducted in accordance with Section 5(b)
reveal an error in readings with respect to an Applicable Measuring
Device which is less than or equal to the Acceptable Tolerance for such
Applicable Measuring Device, there shall be no adjustments in
accordance with this Section 5(c)(ii) and all previous records of and
billings related to the Applicable Measuring Device in question shall
be considered accurate.
(d) Back-Up Metering.
At KCTC's option and expense, back-up meters and associated
metering equipment independent of the Applicable Measuring Devices may
be installed at the KCTC Facilities; and such back-up meters and
metering equipment shall be used in accordance with the practices and
procedures established by the Parties for billing adjustments of
discovered billing meter inaccuracies.
6. Billing
(a) Billing.
(i) Within ten days after the end of each Billing Period, MESC
shall:
(1) render an invoice to KCTC setting forth (a) all
amounts due to MESC pursuant to this Agreement for the
immediately preceding Billing Period and all amounts remaining
unpaid from previous Billing Periods and (b) the amount, if
any, by which the amount set forth in clause (a) has been
reduced as a result of an offset calculated in accordance with
Section 6(c); and
(2) provide KCTC with a report for such Billing
Period substantially in the form of Exhibit C.
(ii) Within ten days after the end of each Billing Period,
KCTC shall render an invoice to MESC setting forth (a) all amounts due
to KCTC pursuant to this Agreement for the immediately preceding
Billing Period under Section 7(b) and for the Back-Up Power Cost
Variance, including copies of all Back-Up Power bills to KCTC, and all
amounts remaining unpaid from previous Billing Periods and (b) the
amount, if any, by which the amount set forth in clause (a) has been
reduced as a result of an offset calculated in accordance with Section
6(c).
(iii) Any balance set forth in an invoice rendered under
clause (i) or (ii) shall be paid by the Party receiving such invoice
within thirty days after receipt of the invoice. Any invoice not paid
within thirty days after receipt will bear interest at the Default Rate
from the due date to the date paid.
(iv) Failure by either Party to render an invoice to the other
Party for any amount due from the other Party within one year after the
end of the Billing Period in which such amount accrued shall preclude
that Party from subsequently rendering an invoice for that amount.
(b) Disputes. Within one year after receiving an invoice pursuant to
Section 6(a), the Party receiving such invoice may, by written notice to the
Party rendering the invoice, dispute, in good faith, any amount set forth in
such invoice, provided that the disputing Party shall pay all invoiced amounts
pursuant to Section 6(a)(iii). If any dispute under this Section 6(b) alleges
the inaccuracy of a charge for Power Processing Services or Steam Processing
Services due to the inaccuracy of an Applicable Measuring Device, either Party
may, pursuant to Section 5(b), request an additional test of such Applicable
Measuring Device, and the appropriate adjustment to such charge shall be made in
accordance with Section 5(c). Any dispute relating to any charge payable from a
Party to the other Party hereunder that is not resolved by the Parties within
fifteen days of the receipt of notice of such dispute shall be resolved as
provided in Section 15. If the dispute (or any portion thereof) is resolved in
favor of the disputing Party, the other Party shall within seven Business Days
of the date of such resolution pay to the disputing Party amounts corresponding
to such portion of the dispute which has been resolved in favor of the disputing
Party plus interest on such amounts from the date payable pursuant to Section
6(a) to the date paid at the Default Rate.
(c) Offsetting Charges. Each Party shall have the right to set-off
against sum certain amounts payable to the other Party (i) any sum certain
amounts paid by such Party for, or on behalf of, such other Party, (ii) any
undisputed sum certain amounts due such Party from such other Party under this
Agreement or any Project Document and (iii) any overpayment by such Party to
such other Party which is either undisputed by such other Party or which has
been determined to constitute an overpayment in accordance with Section 6(b).
(d) Records; Inspection. Each Party shall keep and maintain all records
as may be necessary or useful in performing or verifying any calculations or
charges made pursuant to this Agreement, or in verifying such Party's
performance hereunder. All such records shall be retained by each Party for at
least one calendar year following the calendar year in which such records were
created. Each Party shall make such records available to the other Party for
inspection and copying, at the other Party's expense, upon at least three
Business Days prior notice during such Party's regular business hours. Each
Party and its agents, including auditors, shall have the right (upon thirty days
notice prior to the end of an applicable one calendar year period) to request
copies of such records. Each Party shall provide such copies, at the other
Party's expense, within thirty days of receipt of such notice or shall make such
records available to the other Party and its agents, including auditors, in
accordance with the foregoing provisions of this Section.
7. Outages
(a) Outages.
(i) Cold Shutdown Shortfall Allowance. "Cold Shutdown Shortfall Allowance"
shall mean the number of hours that Processing Services to KCTC may be
interrupted in whole or in part because of a Cold Shutdown without
resulting in any Down Time. The Cold Shutdown Shortfall Allowance for
each planned outage shall be equal to the number of hours in the Cold
Shutdown Shortfall Allowance Account at the start of such planned
outage. Thirty-two (32) hours shall be added to the Cold Shutdown
Shortfall Allowance Account January 1st of each calendar year beginning
with 2000. An additional twenty-four (24) hours shall be added to the
Cold Shutdown Shortfall Allowance Account on the Effective Date. After
each Cold Shutdown, MESC and KCTC shall jointly determine the hours
during such outage that shall count against the Cold Shutdown Shortfall
Allowance for that outage, and no partial or complete interruptions in
Processing Services to KCTC during such hours shall constitute Down
Time. MESC may retain up to twenty-four (24) hours in the Cold Shutdown
Shortfall Allowance Account following a Cold Shutdown.
(ii) MESC and KCTC will meet in July of each year during the Term
(commencing July 2000) to discuss and plan tissue machine and boiler
and turbine unit outages for the coming Contract Year. MESC and KCTC
will coordinate planned equipment outages to the extent reasonably
possible to permit MESC to accomplish its scheduled maintenance to be
performed outside of Cold Shutdowns without causing Down Time. KCTC
will schedule outages for its equipment for a time and duration
reasonably consistent with its historical practices. Once a schedule
has been set for outages of KCTC equipment for a Contract Year, MESC's
obligations to provide Power Processing Services up to the KCTC Maximum
Power Processing Demand and Steam Processing Services up to the KCTC
Maximum Steam Processing Demand shall be reduced during every scheduled
outage of KCTC equipment having an expected duration of 48 hours or
more shown in such schedule by the load imposed by such equipment for
the scheduled period of the outage. KCTC may change the timing or
duration of any such outage in its sole discretion, but unless MESC has
consented to the change, MESC shall continue to be entitled to the
reductions in its obligations to provide Power Processing Services and
Steam Processing Services of an amount and duration based upon, and at
the time set by, the outage schedule prior to any such change.
(iii) Notice. MESC shall provide notice in advance of any outage commencement
period (it being understood that notice of forced outages may be given
orally as soon as is reasonably practical following the commencement of
such forced outage). Notice of an outage shall include the expected
start date of the outage, the estimated amount of unavailable steam
processing and electric generating capacity of the Energy Complex and
the expected completion date of the outage.
(b) Down Time/Up Time Compensation. MESC will compensate KCTC for each
hour of Down Time in excess of fifty hours per Contract Year at the rate of
$10,000 (multiplied by the Escalation Factor) per hour of Down Time, up to a
maximum of $1,500,000 per Contract Year. For each Contract Year in which fewer
than fifty hours of Down Time occur, KCTC will compensate MESC at the rate of
$5,000 (multiplied by the Escalation Factor) per hour for the difference between
fifty hours and the actual number of hours of Down Time. The fifty hours and
$1.5 million referred to in this subsection shall be prorated for any Contract
Year of less than 12 months. KCTC waives any rights it has under Section 7.3(c)
of the MOA to reductions in charges or payments from MESC or Liquidated Damages
because of Down Time.
(c) Determination of Down Time. Upon the occurrence of any loss of
production by the Tissue Mill caused by a failure of MESC to provide Steam
Processing Services or Power Processing Services as required under this
Agreement, KCTC shall within a reasonable time make a preliminary determination
of the causes of such loss of production and calculate any resulting Down Time.
KCTC shall provide such preliminary determination and its calculations to MESC
for its review and comment. In evaluating KCTC's preliminary determination and
its calculation of Down Time, MESC shall have reasonable access to the records
specified in Section 7(d) of this Agreement. MESC shall provide its comments
within five (5) Business Days to KCTC. KCTC will then provide to MESC its final
calculation of such Down Time. Any dispute between MESC and KCTC regarding the
amount of Down Time calculated by KCTC shall be resolved in accordance with
Section 15 of this Agreement, but the existence of such dispute shall not excuse
payment of the compensation required by Section 7(b), or prevent resort to the
remedies set forth in Section 7(e).
(d) Maintenance of Records Related to Down Time. KCTC shall maintain
and allow MESC reasonable access to records related to each tissue machine
adequate to allow MESC to verify when disruptions in Electric Energy or Steam
supply caused interruptions in commercial production by that machine, the causal
relationship between the disruption in supply and the interruption in commercial
production, when commercial production by that tissue machine was restored, and
the factors that determine when commercial production could be restored.
(e) KCTC Remedies Following 200 Hours of Down Time in a Year. If MESC
incurs more than two hundred (200) hours of Down Time in a Contract Year, then
(i) MESC must as promptly as practical and in any event within six (6) days
(A) restore Steam Processing Services and Power Processing
Services to the KCTC Facilities and
(B) after consultation with KCTC, place into service additional
temporary Steam production capacity sufficient to provide
Steam Processing Services up to the KCTC Maximum Steam
Processing Demand at the Steam quality specified in Section
4(b)(ii) (or as may be otherwise agreed by the Parties) to the
KCTC Facilities by either activating an existing boiler or
putting into service one or more package boilers, and
(ii) MESC will as soon as reasonably possible thereafter prepare and provide
to KCTC a cure plan that addresses the underlying causes of the two
hundred (200) hours of Down Time not previously remediated and will
within sixty (60) days of restoring service under Section 7(e)(i)(A)
implement the cure plan, provided that if MESC initiates and pursues
such cure plan expeditiously and cannot complete it within such sixty
(60) day period, it may have an additional thirty (30) days to complete
implementation of such cure plan. Pending preparation and
implementation of the cure plan, MESC shall continue to have available
and operate as necessary the additional Steam production capacity
described in Section 7(e)(i)(B).
(iii) If MESC fails to meet its obligations under Section 7(e)(i) or Section
7(e)(ii), then KCTC may terminate this Agreement on ten (10) days
notice to MESC. If, within three (3) Business Days of receipt of such
notice, MESC notifies KCTC that it will pay the amount prescribed in
Section 7(b) for any additional hours of Down Time incurred from the
date of delivery of the notice of termination until the end of the
Contract Year in which such notice is given, the notice of termination
will be deemed withdrawn, and KCTC will have no right to terminate this
Agreement based on the occurrence of Down Time in such Contract Year.
(iv) If MESC meets its obligations under Section 7(e)(i) and Section
7(e)(ii), but an additional fifteen (15) hours of Down Time occur after
restoration of service under Section 7(e)(i)(A) and within the same
Contract Year in which the 200 hours of Down Time have occurred, then
KCTC shall have the right, on twenty-four hours notice to MESC, to
operate the temporary Steam production capacity placed into service
under Section 7(e)(i)(B). At any time KCTC is operating the Steam
production capacity as permitted under this Section 7(e)(iv), or is
exercising its "Step-In-Rights" under Section 11.4(a)(ii) of the MOA,
no Down Time shall occur as a result of any loss of commercial
production by a tissue machine.
(v) This Section 7 sets forth KCTC's exclusive remedies for a failure by
MESC to provide Steam Processing Services or Power Processing Services
that results in Down Time, except for any applicable Back-Up Power Cost
Variance for Back-Up Power at times when MESC is not paying the
compensation set forth in Section 7(b).
(f) KCTC Response to Down Time Events. Upon the occurrence of a
shortfall in Steam Processing Services or Power Processing Services by MESC that
could cause one or more tissue machines to cease commercial production, KCTC
will act reasonably to maintain as many tissue machines engaged in commercial
production as is practicable under the circumstances. Upon the occurrence of
Down Time, KCTC will act with reasonable expediency under the circumstances to
restore commercial production by all its tissue machines.
8. KCTC Power Processing Charge
For each Billing Period during the Term, KCTC shall pay MESC a charge
for Power Processing Services (the "KCTC Power Processing Charge") calculated as
set forth in subsections 8(a), 8(b) and 8(c).
(a) First Pricing Period. For each Billing Period during the First
Pricing Period, the KCTC Power Processing Charge will be equal to the sum of HLF
Revenue and RTPD Revenue.
(i) HLF Revenue. The "HLF Revenue" for a Billing Period shall
mean the amount that KCTC would have been charged under the HLF Rate
for the KCTC HLF Usage during such Billing Period and assuming that the
contractual capacity for purposes of applying the HLF Rate is the KCTC
HLF Contract Capacity and assuming that all such contract capacity is
delivered at 115,000 volts. The HLF Rate in effect as of the Effective
Date is attached to this Agreement as Exhibit D. If the HLF Rate is
eliminated by APC and not replaced, the HLF Revenue for a Billing
Period that falls in whole or in part after the date on which the HLF
Rate was eliminated shall be equal to (A) the amount calculated under
the first sentence of this Section 8(a)(i) using the HLF Rate as it
existed immediately prior to its elimination multiplied by (B) the HLF
Escalation Factor. The "HLF Escalation Factor" for a Billing Period
shall be equal to (A) the price for electricity shown by the HLF Market
Index for such Billing Period divided by (B) the price for electricity
shown by the HLF Market Index for the Billing Period during which the
HLF Rate was eliminated. The "HLF Market Index" shall mean an index or
combination of indices agreed to by the Parties that reflects the
market price for electricity sold at wholesale on a firm basis in the
Southeastern United States. The Parties intend that such index or
indices be publicly available, liquid and generally recognized in the
power industry as reflecting actual pricing for electricity purchases
and sales in the Southeastern United States. In the event that the
Parties are unable to agree upon the index or combination of indices to
be used by the start of the Billing Period in which the HLF Tariff is
eliminated, then the appropriate index or combination of indices will
be determined through binding arbitration conducted in accordance with
the dispute resolution process provided in Section 15. If the failure
of the Parties to agree upon the appropriate index or combination of
indices to be used as the HLF Market Index would delay determination of
the amount of the KCTC Power Processing Charge, then MESC shall
calculate the HLF Revenue on an interim basis using an HLF Escalation
Factor of one (1.0). Once the appropriate index or combination of
indices has been determined, MESC will recalculate the HLF Revenue for
any affected Billing Periods and will adjust the KCTC Power Processing
Charge for those affected Billing Periods. Within ten (10) days after
MESC notifies KCTC of the net amount of such adjustments KCTC shall pay
to MESC any positive net amount, or MESC shall pay to KCTC any negative
net amount, of such adjustments with interest (calculated on the
individual balances for the affected Billing Periods) at the Prime Rate
through the day immediately prior to the date on which such payment is
made. If the HLF Rate is replaced by another rate which embodies a
similar rate design and which is applicable to APC's customers having
load characteristics similar to those of the KCTC Facilities and being
served at transmission voltages, then that replacement rate shall be
used to calculate HLF Revenue.
(ii) RTPD Revenue. The "RTPD Revenue" for a Billing Period
shall mean the amount that KCTC would have been charged under the RTPD
Rate, assuming delivery at 115,000 volts to the KCTC Facilities during
such Billing Period, for the hourly sum of metered energy (kWh) usage
in each hour of the Billing Period in excess of the KCTC HLF Contract
Capacity multiplied by one hour (the "KCTC RTPD Usage"). The RTPD Rate
in effect as of the Effective Date is attached to this Agreement as
Exhibit E. If the RTPD Rate is eliminated by APC and not replaced, then
the RTPD Revenue for a Billing Period that falls in whole or in part
after the date on which the RTPD Rate was eliminated shall be equal to
the RTPD Index Price Revenues, plus appropriate adjustments to reflect
the cost of transmission services from the pricing point reflected in
the RTPD Index, losses from that pricing point to the Applicable
Measuring Devices (to the extent not included in the transmission
charge), any required ancillary services not reflected in the RTPD
Index, any taxes applicable to the provision of Power Processing
Services to KCTC, and any other factors that should be taken into
account to cause the resulting amount to reflect accurately the market
price for the Power Processing Services provided by MESC to KCTC to
meet the KCTC RTPD Usage. The "RTPD Index Price Revenues" for a Billing
Period shall mean the sum of the amounts produced by multiplying for
each hour during the Billing Period the KCTC RTPD Usage in that hour by
the price reflected in the RTPD Index for such hour. The "RTPD Index"
shall mean an index or combination of indices agreed to by the Parties
that reflects the market price in each hour on a day ahead basis for
electricity sold at wholesale on a firm basis in the Southeastern
United States. The Parties intend that such index or indices be
publicly available, liquid and generally recognized in the power
industry as reflecting actual hourly prices for electricity purchases
and sales in the Southeastern United States. In the event that the
parties are unable to agree upon the index or combination of indices to
be used by the start of the Billing Period in which the RTPD Rate is
eliminated, then the appropriate index or combination of indices will
be determined through binding arbitration conducted in accordance with
the dispute resolution process provided in Section 15. If the failure
of the Parties to agree on the appropriate index or combination of
indices to be used as the RTPD Index would delay determination of the
KCTC Power Processing Charge, then MESC shall calculate any RTPD
Revenue necessary to determine such KCTC Power Processing Charge on an
interim basis using the index or combination of indices that it
believes should be adopted as the RTPD Index. Once the appropriate
index or combination of indices has been determined through the dispute
resolution process, MESC shall recalculate the RTPD Revenue for any
affected Billing Periods and shall adjust the Power Processing Charge
for those affected Billing Periods. Within ten (10) days after MESC
notifies KCTC of the net amount of such adjustments KCTC shall pay to
MESC or MESC shall pay to KCTC, as applicable, the net amount of such
adjustments with interest (calculated on the individual balances for
the affected Billing Periods) at the Prime Rate through the day
immediately prior to the date on which such payment is made. If the
RTPD Rate is replaced by another rate which embodies a similar rate
design and which is applicable to APC's customers having load
characteristics similar to those of the KCTC Facilities and being
served at transmission voltages, then that replacement rate shall be
used to calculate RTPD Revenue.
(b) Second Pricing Period.
(i) HLF Rate and RTPD Rate Are Available. If at the beginning
of the Second Pricing Period the HLF Rate and RTPD Rate are both still
in effect, and KCTC has not elected to exercise the Second Pricing
Period Market Price Option pursuant to Section 8(b)(ii), then for each
Billing Period during the Second Pricing Period, KCTC shall pay MESC a
KCTC Power Processing Charge equal to the sum of (1) the HLF Revenue
for such Billing Period and (2) the RTPD Revenue for such Billing
Period; provided that if the HLF Rate is eliminated and not replaced
during the Second Pricing Period, then the HLF Revenue shall be
calculated using an HLF Escalation Factor equal to one (1.0); and
provided further that if the HLF Rate and the RTPD Rate are both
eliminated and not replaced during the Second Pricing Period, then the
KCTC Power Processing Charge for the first Billing Period in which both
the HLF Rate and the RTPD Rate are no longer in effect and for each
Billing Period thereafter in the Second Pricing Period will be
determined in accordance with Section 8(b)(ii).
(ii) Second Pricing Period Market Price Option. By written
notice provided to MESC at least ten (10) days in advance of the Second
Pricing Period, KCTC may elect (such right to elect, the "Second
Pricing Period Market Price Option") to have the KCTC Power Processing
Charge determined during the Second Pricing Period by reference to an
index or combination of indices agreed upon by the Parties as
reflecting market prices for electricity in the Southeastern United
States instead of being determined in accordance with Section 8(b)(i).
If KCTC elects to exercise the Second Pricing Period Market Price
Option, then for each Billing Period during the Second Pricing Period
KCTC shall pay MESC a charge based upon the price determined by such
index or combination of indices (adjusted as described below) applied
to the billing determinants established by the Power Processing
Services delivered to KCTC in such Billing Period (assuming delivery at
115,000 volts). The index or combination of indices shall be publicly
available, liquid and generally recognized in the power industry as
reflecting actual prices for power purchased and sold in the
Southeastern United States. The index price shall reflect the nature of
the Power Processing Services provided by MESC to KCTC, including
whether such services are to be provided on a firm or non-firm basis,
any take or pay requirements, the capacity required to meet KCTC's
load, load following requirements, and any other terms and conditions
of service that would typically affect price. The price determined by
the index or combination of indices will be adjusted to reflect the
cost of transmission service from the pricing point or points used by
such index or indices to the KCTC Facilities, losses to the Applicable
Measuring Devices (to the extent not included in the transmission
charge), any ancillary services required by KCTC not reflected in the
index pricing, any taxes applicable to MESC's provision of Power
Processing Services to KCTC and any other factors appropriate to cause
the price to be comparable to a market price for electricity service
delivered to the KCTC Facilities at transmission voltage levels.
Whatever characteristics of electric service are reflected in the
pricing developed using the above described methodology will also
establish the characteristics of the Power Processing Services to be
provided by MESC. If the failure of the Parties to agree upon the index
or combination of indices to be used or what adjustments should be made
to the price would delay the preparation and delivery by MESC of an
invoice to KCTC, then MESC shall prepare such invoice based upon the
index or combination of indices and price adjustments it believes
should be adopted. Once the appropriate index or combination of indices
and pricing adjustments have been determined through the dispute
resolution process, MESC shall recalculate the amounts owed for any
affected Billing Period and any over or under-collection for such
Billing Period shall be refunded by MESC or paid by KCTC as applicable
with interest (calculated on the individual balances for the affected
Billing Periods) at the Prime Rate from the date the MESC invoice for
such Billing Period was due through the day immediately prior to the
date on which such payment is made.
(c) Third Pricing Period.
(i) HLF Rate and RTPD Rate Are Available. If at the beginning
of the Third Pricing Period the HLF Rate and RTPD Rate are both still
in effect, and KCTC has not elected to exercise the Third Pricing
Period Market Price Option pursuant to Section 8(c)(ii), then for each
Billing Period during the Third Pricing Period, KCTC shall pay MESC a
charge equal to the sum of (1) the HLF Revenue for such Billing Period
and (2) the RTPD Revenue for such Billing Period; provided that if the
HLF Rate is eliminated and not replaced during the Third Pricing
Period, then the HLF Revenue shall be calculated using an HLF
Escalation Factor equal to one (1.0); and provided further that if the
HLF Rate and the RTPD Rate are both eliminated and not replaced during
the Third Pricing Period, then the KCTC Power Processing Charge for the
first Billing Period in which both the HLF Rate and the RTPD Rate are
no longer in effect and for each Billing Period thereafter in the Third
Pricing Period will be determined in accordance with Section 8(c)(ii).
(ii) Third Pricing Period Market Price Option. By written
notice provided to MESC at least ten (10) days in advance of the Third
Pricing Period, KCTC may elect (such right to elect, the "Third Pricing
Period Market Price Option") to have the KCTC Power Processing Charge
determined during the Third Pricing Period by reference to an index or
combination of indices agreed upon by the Parties as reflecting market
prices for electricity in the Southeastern United States instead of
being determined in accordance with Section 8(c)(i). If KCTC elects to
exercise the Third Pricing Period Market Price Option, then for each
Billing Period during the Third Pricing Period KCTC shall pay MESC a
charge based upon the price determined by such index or combination of
indices (adjusted as described below) applied to the billing
determinants established by the Power Processing Services delivered to
KCTC in such Billing Period (assuming delivery at 115,000 volts). The
index or combination of indices shall be publicly available, liquid and
generally recognized in the power industry as reflecting actual prices
for power purchased and sold in the Southeastern United States. The
index price shall reflect the nature of the Power Processing Services
provided by MESC to KCTC, including whether such services are to be
provided on a firm or non-firm basis, any take or pay requirements, the
capacity required to meet KCTC's load, load following requirements, and
any other terms and conditions of service that would typically affect
price. The price determined by the index or combination of indices will
be adjusted to reflect the cost of transmission service from the
pricing point or points used by such index or indices to the KCTC
Facilities, losses to the Applicable Measuring Devices (to the extent
not included in the transmission charge), any ancillary services
required by KCTC not reflected in the index pricing, any taxes
applicable to MESC's provision of Power Processing Services to KCTC and
any other factors appropriate to cause the price to be comparable to a
market price for electricity service delivered to the KCTC Facilities
at transmission voltage levels. Whatever characteristics of electric
service are reflected in the pricing developed using the above
described methodology will also establish the characteristics of the
Power Processing Services to be provided by MESC. If the failure of the
Parties to agree upon the index or combination of indices to be used or
what adjustments should be made to the price would delay the
preparation and delivery by MESC of an invoice to KCTC, then MESC shall
prepare such invoice based upon the index or combination of indices and
price adjustments it believes should be adopted. Once the appropriate
index or combination of indices and pricing adjustments have been
determined through the dispute resolution process, MESC shall
recalculate the amounts owed for any affected Billing Period and any
over or under-collection for such Billing Period shall be refunded by
MESC or paid by KCTC as applicable with interest (calculated on the
individual balances for the affected Billing Periods) at the Prime Rate
from the date the MESC invoice for such Billing Period was due through
the day immediately prior to the date on which such payment is made.
(d) Taxes. The amount of the KCTC Power Processing Charge calculated
under subsections 8(a), 8(b), or 8(c) shall be increased by an amount equal to
the amount of any tax imposed upon MESC under Alabama Code Section 40-21-80, et
seq. (as a utility gross receipts tax) or under the City of Mobile's business
license tax (or any similar tax that may replace either such tax during the term
of this Agreement) with respect to sales of Power Processing Services to KCTC.
9. KCTC Steam Processing Charge
(a) KCTC Steam Processing Charge. For each Billing Period during the
Term, KCTC shall pay MESC a charge for Steam Processing Services (the "KCTC
Steam Processing Charge") equal to (1) the total amount of Steam Processing
Services (expressed in MMBTUs) delivered by MESC to KCTC during such Billing
Period (as determined by the MMBTUs of the steam delivered by MESC to KCTC minus
the MMBTUs of the condensate provided by KCTC to MESC as measured by the Steam
Measuring Devices) multiplied by (2) four dollars and fifty cents ($4.50) per
MMBTU with the resulting product multiplied (for the five Contract Years
beginning with the Contract Year beginning on September 1, 2000) by (3) the
"Steam Services Price Escalator", which shall be calculated pursuant to the
following formula:
(NYMEX, Henry Hub, Average of last three
trading days of the month for the previous 12 Mo. x .50)
-------------------------------------------------------- plus
(NYMEX, Henry Hub, Average of last three
trading days of the month, 9/98 - 8/99)
(Market Index, Coal, Previous 12 Mo. x .50)
-------------------------------------------
(Market Index, Coal, 9/98-8/99)
"Market Index, Coal" shall mean "Central Appalachia 12,000 Btu/lb., 1.5 lb. SO2
per MMBTU within 90 days, barge average monthly price" as reported in Coal Daily
for each calendar month published by Fieldston Publication, Inc.
(b) Minimum Annual Payment for Steam Processing Services. If in any
Contract Year the total amount of Steam Processing Services delivered by MESC to
KCTC (net of the MMBTUs of the condensate provided by KCTC to MESC) is less than
the Minimum Steam Processing Services Volume, then KCTC shall pay MESC an amount
(such amount, the "Minimum Annual Payment Charge") equal to (1) the difference
between the Minimum Steam Processing Services Volume for such Contract Year and
the actual volume of Steam Processing Services delivered by MESC to KCTC (net of
the MMBTUs of the condensate provided by KCTC to MESC) multiplied by (2) four
dollars and fifty cents ($4.50) per MMBTU, with (in the five Contract Years
beginning with the Contract Year beginning on September 1, 2000) the resulting
product multiplied by (3) the Steam Services Price Escalator. The Minimum Annual
Payment Charge for a Contract Year (if any) shall be due at the same time the
KCTC Steam Processing Charge for the last Billing Period in such Contract Year
is due.
(c) Taxes. The amount of the KCTC Steam Processing Charge calculated
under Section 9(a) or of the Minimum Annual Payment Charge calculated under
Section 9(b) shall be increased by an amount equal to the amount of any tax
imposed upon MESC under the City of Mobile's business license tax (or any
similar tax that may replace such tax during the term of this Agreement).
10. Indemnification; Limitation of Liability
(a) MESC Indemnification. MESC hereby agrees to indemnify, defend and
hold harmless KCTC and its directors, officers, employees and agents
(collectively, the "KCTC Indemnified Parties") from and against any and all
Losses arising directly or indirectly, in whole or in part, out of the
negligence or willful misconduct of MESC or any of its directors, officers,
employees or agents in connection with this Agreement or MESC's services or work
hereunder, whether within or beyond the scope of its duties or authority under
this Agreement. The indemnity provided herein shall not include any Losses on
account of events, acts, or omissions as to which the KCTC Indemnified Parties
(or any of them) are (or is) entitled to indemnification pursuant to the Tissue
Mill Environmental Indemnity Agreement, the Environmental Guaranty or the Water
Agreement (notwithstanding that the amount of such indemnification under the
Tissue Mill Environmental Indemnity Agreement, the Environmental Guaranty or the
Water Agreement may be limited by the terms of such agreements).
(b) KCTC Indemnification. KCTC hereby agrees to indemnify, defend and
hold harmless MESC and its directors, officers, employees and agents
(collectively, the "MESC Indemnified Parties") from and against any and all
Losses arising directly or indirectly, in whole or in part, out of the
negligence or willful misconduct of KCTC or any of its directors, officers,
employees or agents, in connection with this Agreement or KCTC's services or
work hereunder, whether within or beyond the scope of its duties or authority
under this Agreement. The indemnity provided herein shall not include any Losses
on account of events, acts or omissions as to which the MESC Indemnified Parties
(or any of them) are (or is) entitled to indemnification pursuant to the Tissue
Mill Environmental Indemnity Agreement, the Scott Environmental Indemnity
Agreement or the Water Agreement (notwithstanding that the amount of such
indemnification under the Tissue Mill Environmental Indemnity Agreement, the
Scott Environmental Indemnity or the Water Agreement may be limited by the terms
of such agreements).
(c) Joint Liability. In the event that any Losses arise, directly or
indirectly, in whole or in part, out of the joint or concurrent negligence of
KCTC and MESC, or their respective directors, officers, employees or agents,
each Party's liability therefor shall be limited to such Party's proportionate
degree of fault.
(d) Cooperation Regarding Claims. If either a KCTC Indemnified Party or
a MESC Indemnified Party 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 a Party (the "Indemnifying Party")
pursuant to this Section 10 (collectively, "Claims"), such party shall, as
promptly as is reasonably possible, give the Indemnifying 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 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 the Indemnifying Party of any
indemnification obligation it may have under this Section 10 unless such failure
shall materially diminish the ability of such Indemnifying Party to respond to
or to defend the party failing to give such notice against such Claim. KCTC and
MESC shall consult and cooperate with each other regarding the response to and
the defense of any such Claim and the Indemnifying Party shall, upon its
acknowledgment in writing of its obligation to indemnify the party (including
the KCTC Indemnified Parties or MESC Indemnified Parties, as applicable) seeking
indemnification, be entitled to and shall assume the defense or represent the
interests of the party seeking indemnification in respect of such Claim, 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 or delayed; provided further
that if any such settlement is reasonably likely to materially and adversely
affect such indemnified party's business operations other than as a result of
money damages or other money payments, 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; 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.
(e) Limitation of Liability.
(i) Limitation of Liability in General.
(1) Except as otherwise provided in Section 7, a
Party shall only be liable for direct damages as a result of a
breach or default by such Party under this Agreement. In no
event shall a Party be liable, 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; provided that the foregoing limitation on liability
shall not limit either Party's obligation to indemnify, defend
and hold harmless the other Party for any Losses occasioned by
third party claims (other than the claims of non-party
customers) against the indemnified Party.
(2) Neither Party shall be liable to the other Party
under this Section 10 for any Losses until and only to the
extent that any individual amount otherwise due (but unpaid)
to the indemnified party exceeds Twenty Thousand Dollars
($20,000).
(ii) 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 Indemnifying 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 10(e)(ii)
shall relieve the Indemnifying Party of its liability hereunder.
(f) Limitation of Liability for Other Party's Debts. Notwithstanding
anything to the contrary contained herein, (a) KCTC shall have no liability
whatsoever with respect to, and no lien shall be placed on KCTC's assets in
connection with, the obligations of MESC under its financing agreements or other
contracts between MESC and any other Person, and (b) MESC shall have no
liability whatsoever with respect to, and no lien shall be placed on MESC's
assets in connection with, the obligations of KCTC under its financing
agreements or other contracts between KCTC and any other Person; provided that
the provisions of this Section 10(f) shall not limit the right of either Party
to grant liens on their respective interests in the easements granted to MESC
under the Easement Deeds and the easements granted to KCTC under the Easement
Deeds.
(g) No Release of Insurers. The provisions of this Section 10 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.
(h) Representatives. No officer, director, agent, attorney, employee or
other individual representative of an Indemnifying Party shall be personally
liable for the obligation of such Indemnifying Party to indemnify for any Losses
under the provisions contained in this Section 10. Nothing in this Section 10(h)
shall relieve either Party of any liability to make any payment expressly
required to be made by such Party pursuant to this Agreement.
(i) Disclaimer of Warranties. EXCEPT AS SPECIFICALLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO
THE WORK OR SERVICES PERFORMED OR GOODS, MATERIALS OR OTHER ITEMS SUPPLIED
HEREUNDER, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY
PURPOSE.
(j) Survival of Indemnities. The provisions of this Section 10 shall
survive for five years following the expiration or termination of this
Agreement.
11. Default; Termination and Remedies.
(a) MESC's Default. The occurrence and continuation of any of the
following events or circumstances at any time during the Term, except to the
extent caused by, or resulting from, an act or omission of KCTC in breach of
this Agreement or otherwise excused hereunder, shall constitute an event of
default by MESC ("MESC Event of Default"):
(i) MESC fails to pay any amount due from it hereunder on the
due date thereof and such failure is not remedied within ten Business
Days after receipt of written notice thereof;
(ii) Except for the bankruptcy case of MESC pending in the
United States Bankruptcy Court for the Southern District of Alabama,
Case No. 99-10168, or the occurrence or continuation of any adversary
proceeding, contested matter, event, circumstances, or other matter
affecting, arising out of, or relating to such case, MESC's Bankruptcy;
or
(iii) MESC fails in any material respect to perform or comply
with any other obligation in this Agreement on its part to be observed
or performed by it which failure materially and adversely affects KCTC,
and such failure is not remedied within 30 days after KCTC has given
written notice to MESC of such failure and requiring its remedy;
provided however, that if such remedy cannot reasonably be cured within
such period of 30 days, such failure shall not constitute a MESC Event
of Default if MESC has promptly commenced and is diligently proceeding
to cure such default within the shortest practicable period.
(b) KCTC Default. The occurrence and continuation of any of
the following events or circumstances at any time during the Term, except to the
extent caused by, or resulting from, an act or omission of MESC in breach of
this Agreement or otherwise excused hereunder, shall constitute an event of
default by KCTC ("KCTC Event of Default"):
(i) KCTC fails to pay any amount due from it hereunder on the
due date thereof and such failure is not remedied within ten Business
Days after receipt of written notice thereof;
(ii) KCTC's Bankruptcy; or
(iii) KCTC fails in any material respect to perform or comply
with any other obligation in this Agreement on its part to be observed
or performed by it which failure materially and adversely affects MESC,
and such failure is not remedied within 30 days after MESC has given
written notice to KCTC of such failure and requiring its remedy;
provided however, that if such remedy cannot reasonably be cured within
such period of 30 days, such failure shall not constitute a KCTC Event
of Default if KCTC has promptly commenced and is diligently proceeding
to cure such default within the shortest practicable period.
(c) Remedies. Upon the occurrence and during the continuation of a KCTC
Event of Default or a MESC Event of Default, the non-defaulting Party may, in
addition to any other rights and remedies it may have under this Agreement or at
law or in equity, terminate this Agreement upon ten (10) days notice to the
Party in default.
(d) Waiver of KCTC Right to Terminate for Mill Closure. KCTC waives any
right it has now or in the future under Section 13.1 of the MOA to terminate
this Agreement in the event of a Mill Closure.
(e) Conditions and Effect of Failure of Conditions of Settlement
Agreement. This Agreement has been entered into pursuant to the Settlement
Agreement. If the conditions to the Settlement Agreement contained in Section 18
thereof do not occur, then this Agreement, other than this Section 11 (e), shall
be null and void ab initio in accordance with Section 19 of the Settlement
Agreement, and the rights of the Parties with respect to matters otherwise
governed by this Agreement for the period from and after the Effective Date will
be governed solely by the Tissue Mill Energy Services Agreement, the Pulp Mill
Energy Services Agreement (to the extent such agreement was not terminated
effective September 1, 1999), and the MOA. Notwithstanding anything in Section
19 of the Settlement Agreement to the contrary, any amounts paid under Section
7(b) of this Agreement will be repaid to the Party making such payment, and the
difference between amounts paid under this Agreement and those which would have
been paid under the Tissue Mill Energy Services Agreement, the Pulp Mill Energy
Services Agreement, and the MOA during the period between the Effective Date and
the termination of the Settlement Agreement will be paid, with interest at the
Prime Rate, within thirty (30) days of termination of the Settlement Agreement.
Any dispute as to the amounts to be paid or repaid under the preceding sentence
will be subject to resolution under Article 16 of the MOA.
12. Force Majeure
(a) Force Majeure in General. No Party shall be liable for, or be in
default under this Agreement as a result of, such Party's failure or inability
to perform any of its obligations hereunder or to deliver or accept products or
services to be provided pursuant to this Agreement because of an interruption of
its operations to the extent that such failure, inability or interruption of
operations is caused by a Force Majeure Event. "Force Majeure Events" shall (i)
include acts of God, acts of the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, volcanoes, fires, storms,
floods, disasters, civil disturbances, sabotage, interruptions in gas purchased
and transported on a firm basis, the binding order of any Governmental Authority
which has been resisted in good faith by all reasonable legal means, Changes of
Law, Labor Disputes or any other event or circumstance not within the control of
such Party which prevents such Party from performing its obligations hereunder
(but not including governmental actions (including but not limited to any
binding order of any Governmental Authority) which such Party could have
prevented by compliance with appropriate laws, regulations and standards) and
(ii) expressly exclude (A) a Party's financial inability to perform, (B) changes
in market prices for products or services produced by a Party, (C) interruptions
in gas purchased or transported on a non-firm basis and (D) any failure to
perform, and the effects of such failure, which could have been prevented,
overcome or remedied by the exercise by the Party claiming force majeure of
reasonable efforts. For purposes of this Section 12(a), (x) if a Change of Law
requires the permanent closure of the Energy Complex or the KCTC Facilities,
such Change of Law shall constitute a Force Majeure Event and (y) if a Change of
Law does not require such a permanent closure, only the period of time
reasonably required to comply with such Change of Law shall constitute a Force
Majeure Event. Force Majeure Events shall not relieve any Party of liability if
such Party fails to comply with Section 12(b) or (c) and the other Party is
materially adversely affected thereby.
(b) Notices. The Party claiming a Force Majeure Event (the "Affected
Party") shall give notice to the other Party (the "Non-Affected Party") promptly
after becoming aware of the Force Majeure Event giving details of the
circumstances constituting the Force Majeure Event and the likely duration
thereof, if reasonably known, and shall keep the Non-Affected Party informed of
any changes in such circumstances, including when such Force Majeure Event ends.
Each Party shall attempt in good faith to notify the other Party of any events
of which the notifying Party is aware which may be reasonably expected, with the
lapse of time or otherwise, to become a Force Majeure Event. Following the
receipt of a notice given pursuant to this Section12 (b), the Parties shall
consult in good faith to assess the Force Majeure Event and any ways in which it
may be mitigated or avoided.
(c) Obligations Following a Force Majeure Event. The rights and
obligations of the Parties under this Agreement shall be suspended in whole or
in part, as the circumstances may require, to the extent that the ability of a
Party to perform any of its relevant obligations under this Agreement or to
operate its respective facilities is materially and adversely affected by a
Force Majeure Event (whether or not such Force Majeure Event is suffered
directly by the KCTC Facilities or the Energy Complex or otherwise causes an
interruption of operations at the Site); provided that if a Force Majeure Event
causes the Actual MESC KCTC Steam Production Capacity to fall below the KCTC
Maximum Steam Processing Demand (whether or not such Force Majeure Event also
has affected the KCTC Facilities), then (i) any resulting shortfall in the
provision of Processing Services to KCTC shall not result in any Down Time and
(ii) for any such Force Majeure Event having a duration greater than 90 days,
the Minimum Steam Processing Services Volume for such Contract Year (and any
subsequent Contract Year in which the Force Majeure Event continues to remain in
effect) shall be reduced proportionately based upon the hours the Force Majeure
Event remains in effect after the 90th day during such Contract Year (or during
such subsequent Contract Year) and the reduction in MESC's capacity to provide
Steam Processing Services to KCTC below the KCTC Maximum Steam Processing Demand
during such period compared to the total hours in the Contract Year (or such
subsequent Contract Year) and the KCTC Maximum Steam Processing Demand (as shown
in Section 1.0 of Exhibit F); provided further that if a Force Majeure Event
affects only the KCTC Facilities, then for any such Force Majeure Event having a
duration greater than 90 days, the Minimum Steam Processing Services Volume for
such Contract Year (and if applicable, the subsequent Contract Year) shall be
reduced proportionately based upon the hours the Force Majeure Event remains in
effect during such Contract Year (and if applicable, the following Contract
Year) after the 90th day and up through the 180th day from the initiation of
such Force Majeure Event and the reduction in KCTC's capacity to use Steam
Processing Services below the KCTC Maximum Steam Processing Demand during such
period compared to the total hours in the Contract Year (and if applicable, the
subsequent Contract Year) and the KCTC Maximum Steam Processing Demand (as shown
in Section 2.0 of Exhibit F); provided further that if a Force Majeure Event
causes the Actual MESC KCTC Power Production Capacity to fall below the KCTC
Maximum Power Processing Demand (whether or not such Force Majeure Event also
has affected the KCTC Facilities), then (i) any resulting shortfall in the
provision of Processing Services to KCTC shall not result in any Down Time and
(ii) for any such Force Majeure Event having a duration greater than 90 days,
during each hour that such Force Majeure Event remains in effect after the 90th
day, the KCTC HLF Contract Capacity for such hour shall be reduced
proportionately based upon the reduction in MESC's capacity to provide Power
Processing Services to KCTC during such hour below the KCTC Maximum Power
Processing Demand (as shown in Section 3.0 of Exhibit F for an hour in which the
KCTC HLF Contract Capacity is to be reduced); provided further that during the
First Pricing Period if a Force Majeure Event affects only the KCTC Facilities,
then for any such Force Majeure Event having a duration greater than 90 days,
during each hour that such Force Majeure Event remains in effect after the 90th
day and up through the 180th day from the initiation of such Force Majeure
Event, the KCTC HLF Contract Capacity for such hour shall be reduced
proportionately based upon the reduction in KCTC's capacity to use Power
Processing Services during such hour below the KCTC Maximum Power Processing
Demand (as shown in Section 4.0 of Exhibit F for an hour in which the KCTC HLF
Contract Capacity is to be reduced); provided further that if after the First
Pricing Period the Force Majeure Event affects only the KCTC Facilities, then
for any such Force Majeure Event having a duration greater than 90 days, during
each hour that such Force Majeure Event remains in effect after the 90th day
from the initiation of such Force Majeure Event, the KCTC HLF Contract Capacity
for such hour shall be reduced proportionately based upon the reduction in
KCTC's capacity to use Power Processing Services during such hour below its KCTC
Maximum Power Processing Demand (as shown in Section 4.0 of Exhibit F for an
hour in which the KCTC HLF Contract Capacity is to be reduced). Suspension of
any obligation as a result of a Force Majeure Event shall not affect any rights
or obligations which may have accrued prior to such suspension or, if the Force
Majeure Event affects only some rights and obligations, any other rights or
obligations of the Parties. The Affected Party shall make all reasonable efforts
to remedy the circumstances constituting the Force Majeure Event (if
practicable) and mitigate the adverse effects of the Force Majeure Event and to
remedy the Force Majeure Event expeditiously, and, following the remedy or other
termination of the Force Majeure Event, shall promptly (i) notify the
Non-Affected Party of the remedy or other termination of the Force Majeure Event
and that the Affected Party will resume its performance hereunder and (ii)
resume its performance hereunder.
(d) Total or Partial Destruction of Energy Complex. With regard to any
Force Majeure Event that causes a total or partial destruction of the Energy
Complex and the affected facilities are not rebuilt or otherwise restored or
replaced within six months of the initiation of such Force Majeure Event, MESC
shall advise KCTC within such six month period whether it intends to rebuild or
otherwise restore or replace the affected facilities. If MESC notifies KCTC that
it does not intend to rebuild or otherwise restore or replace such facilities,
either Party may terminate this Agreement upon ten (10) days notice. If (i) MESC
notifies KCTC that it does intend to rebuild or otherwise restore or replace
such facilities, and (ii) such restoration, rebuilding or replacement has not
been completed within three (3) years of the initiation of the Force Majeure
Event, then either Party may terminate this Agreement upon ten (10) days notice.
(e) KCTC Purchase of Replacement Steam Processing Services or Power
Processing Services. To the extent that MESC is unable to supply all of the
Steam Processing Services or all of the Power Processing Services to be provided
by it to KCTC under this Agreement because of a Force Majeure Event affecting
MESC, KCTC may buy from a third party or produce for itself such amount of Steam
or Steam Processing Services or such amount of Electric Energy or Power
Processing Services that MESC is unable to supply during the period such Force
Majeure Event is in effect. MESC shall not be responsible for any of the cost of
such replacement Steam, Steam Processing Services, Electric Energy, or Power
Processing Services.
13. Representations and Warranties
(a) Representations and Warranties of MESC. MESC hereby makes the
following representations and warranties to KCTC:
(i) MESC is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Alabama and has the legal power and authority to own its properties, to
carry on its business as now being conducted and to enter into this
Agreement and carry out the transactions contemplated hereby and
perform and carry out all covenants and obligations on its part to be
performed under and pursuant to this Agreement.
(ii) The execution, delivery and performance by MESC of this
Agreement have been duly authorized by all necessary corporate action,
and do not and will not require any consent or approval of MESC's
members other than that which has been obtained (evidence of which
shall be, if it has not heretofore been, delivered to KCTC).
(iii) Except as may be affected by (A) that certain issuance
of $255,210,000 principal amount of 8.665% First Mortgage Bonds due
2017 issued by MESC, (B) that certain issuance of the $85,000,000
principal amount of 6.95% Solid Waste Revenue Refunding Bonds (Mobile
Energy Service Company, L.L.C. Project) Series 1995 due 2020 issued by
the Industrial Development Board of the City of Mobile, Alabama, (C)
that certain Revolving Credit Agreement dated August 1, 1995 to which
MESC is a party, (D) matters arising out of or related to such debt
issuances or agreement, and (E) contractual obligations of MESC related
to such debt issuances or agreement, the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
the fulfillment of and compliance with the provisions of this
Agreement, do not and will not conflict with or constitute a breach of
or a default under, any of the terms, conditions or provisions of any
legal requirements, or any organizational documents, agreement, deed of
trust, mortgage, loan agreement, other evidence of indebtedness or any
other agreement or instrument to which MESC is a party or by which it
or any of its property is bound, or result in a breach of or a default
under any of the foregoing.
(iv) This Agreement constitutes the legal, valid and binding
obligation of MESC enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement
of creditors' rights generally or by general equitable principles,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
(v) There is no pending or, to the knowledge of MESC,
threatened action or proceeding affecting MESC before any Governmental
Authority, which purports to affect the legality, validity or
enforceability of this Agreement.
(vi) MESC has all approvals of any Governmental Authority
necessary for it to perform its obligations under this Agreement.
The parties acknowledge that each of the above representations and
warranties is made with the understanding that the order dated January 24, 2000
approving the Settlement Agreement has been appealed by S.D. Warren Company (the
"Sappi Appeal") and that MESC is executing this Agreement with the Sappi Appeal
pending. To the extent that the Sappi Appeal or its outcome or MESC's execution
of this Agreement with the Sappi Appeal pending causes MESC to breach any of the
above representations and warranties, such breach is hereby waived by KCTC.
(b) Representations and Warranties of KCTC. KCTC hereby makes the
following representations and warranties to MESC:
(i) KCTC is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania, is
qualified to do business in the State of Alabama and has the legal
power and authority to own its properties, to carry on its business as
now being conducted and to enter into this Agreement and carry out the
transactions contemplated hereby and perform and carry out all
covenants and obligations on its part to be performed under and
pursuant to this Agreement.
(ii) The execution, delivery and performance by KCTC of this
Agreement have been duly authorized by all necessary corporate action,
and do not and will not require any consent or approval of KCTC's Board
of Directors or shareholders other than that which has been obtained
(evidence of which shall be, if it has not heretofore been, delivered
to MESC).
(iii) The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the
fulfillment of and compliance with the provisions of this Agreement do
not and will not conflict with or constitute a breach of or a default
under, any of the terms, conditions or provisions of any legal
requirements, or its articles of incorporation or bylaws, or any deed
of trust, mortgage, loan agreement, other evidence of indebtedness or
any other agreement or instrument to which KCTC is a party or by which
it or any of its property is bound, or result in a breach of or a
default under any of the foregoing.
(iv) This Agreement constitutes the legal, valid and binding
obligation of KCTC enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement
of creditors' rights generally or by general equitable principles,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
(v) There is no pending or, to the knowledge of KCTC,
threatened action or proceeding affecting KCTC before any Governmental
Authority, which purports to affect the legality, validity or
enforceability of this Agreement.
(vi) KCTC has all approvals of any Governmental Authority
necessary for it to perform its obligations under this Agreement.
The parties acknowledge that each of the above representations and
warranties is made with the understanding that the order dated January 24, 2000
approving the Settlement Agreement has been appealed by S.D. Warren Company (the
"Sappi Appeal") and that KCTC is executing this Agreement with the Sappi Appeal
pending. To the extent that the Sappi Appeal or its outcome or KCTC's execution
of this Agreement with the Sappi Appeal pending causes KCTC to breach any of the
above representations and warranties, such breach is hereby waived by MESC.
14. 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 by the applicable Party hereto if
personally delivered; when transmitted by the applicable Party hereto 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; and when received by the applicable Party hereto, if sent for next day
delivery to a domestic address by recognized overnight delivery service or if
sent by certified or registered mail, return receipt requested. Notices shall be
given:
If to KCTC, to:
Kimberly-Clark Tissue Company
1400 Holcomb Bridge Road
Roswell, Georgia 30076
Attention: K.A. Strassner, Vice President
Environment and Energy
Facsimile No.: (770) 587-8634
Confirmation No.: (770) 587-7093
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: David M. Stahl, Esq.
Facsimile No. (312) 853-7036
Confirmation No.: (312) 853-2667
If to MESC, to:
Mobile Energy Services Company, L.L.C.
900 Ashwood Parkway - Suite 500
Atlanta, Georgia 30338-4780
Attention: General Manager
Facsimile No.: (334) 330-1301
Confirmation No.: (334) 330-1329
with a copy to:
Troutman Sanders
600 Peachtree, N.E. - Suite 5200
Atlanta, Georgia 30308-2216
Attention: Hugh M. Davenport, Esq.
Facsimile No.: (404) 962-6541
Confirmation No.: (404) 885-3122
and
Andrews & Kurth, L.L.P.
600 Travis Street - Suite 4200
Houston, Texas 77002
Attention: Jeffrey E. Spiers
Facsimile No.: (713) 220-4285
Confirmation No.: (713) 220-4103
15. Disagreements
(a) Administrative Committee Procedure. Except to the extent otherwise
provided in Section 6(b), if any disagreement arises on matters concerning this
Agreement, the disagreement shall be referred to one Senior Management
representative of each Party, who shall attempt to timely resolve the
disagreement within thirty days of the referral thereof. If such representatives
can resolve the disagreement, such resolution shall be reported in writing to
and shall be binding upon the Parties. The Parties by mutual agreement may, but
shall have no obligation to, seek the appointment of a mediator. If such
representatives cannot resolve the disagreement within thirty days of the
referral thereof (or such additional time that the Parties may agree in
writing), or a Party fails to appoint a representative within fifteen days of
written notice of the existence of a disagreement, then the matter shall proceed
to arbitration as provided in Section 15(b).
(b) Arbitration. If the Parties are unable to resolve a disagreement
arising on a matter pertaining to this Agreement following the procedure
specified by Section 15(a) (within the time periods specified therein), such
disagreement shall be settled by binding arbitration. Such arbitration shall be
held in Mobile, Alabama unless the Parties agree to an alternative location. The
arbitration shall be governed by the United States Arbitration Act (9 U.S.C.
ss.1 et seq.), and any award issued pursuant to such arbitration may be enforced
in any court of competent jurisdiction. This agreement to arbitrate and any
other agreement or consent to arbitrate entered into in accordance herewith will
be specifically enforceable under the prevailing arbitration law of any court
having jurisdiction. Notice of demand for arbitration must be filed in writing
with the other Party to this Agreement. Arbitration shall be conducted as
follows:
(i) Either Party may give the other Party written notice in
sufficient detail of the disagreement and the specific provision of
this Agreement under which the disagreement arose. The demand for
arbitration must be made within two (2) years of when the Party
initiating the arbitration knew, or in the exercise of reasonable care
should have known, of the facts or circumstances giving rise to the
dispute. In no event may the demand for arbitration be made if the
institution of legal or equitable proceedings based on such
disagreement is barred by the applicable statute of limitations. Any
arbitration related to this Agreement may be consolidated with any
other arbitration proceedings related to this Agreement.
(ii) The Parties shall attempt to agree on a person to serve
as arbitrator within thirty (30) days of service of the notice referred
to in Section 15(b)(i). If the Parties cannot agree on an arbitrator
within such period, the parties shall request that an arbitrator be
selected by the Chief Judge for the United States Court of Appeals for
the Eleventh Circuit or such other court as the Parties may agree upon.
(iii) The Parties shall have ninety (90) days from the
selection of the arbitrator to conduct discovery and present evidence
and argument to the arbitrator. The arbitrator shall use all reasonable
means to expedite discovery and to sanction noncompliance with
reasonable discovery requests or any discovery order. The arbitrator
shall have forty-five (45) calendar days after the conclusion of the
ninety-day period to reach a determination. To the extent not in
conflict with the procedures set forth herein, which shall govern, such
arbitration shall be held in accordance with the prevailing rules of
the Atlanta office of the American Arbitration Association for
commercial arbitration, but will not be administered by the American
Arbitration Association without the agreement of both Parties.
(iv) The arbitrator shall have the right only to interpret and
apply the terms and conditions of this Agreement and to order any
remedy allowed by this Agreement, but may not change any term or
condition of this Agreement, deprive either Party of any right or
remedy expressly provided hereunder, or provide any right or remedy
that has been expressly excluded hereunder.
(v) The arbitrator shall give a written decision to the
Parties stating his or her findings of fact and conclusions of law, and
shall furnish to each Party a copy thereof signed by him or her within
five calendar days from the date of his or her determination. The
arbitrator's decision shall be final and binding upon the Parties.
(vi) Each Party shall pay the cost of the arbitrator as
determined by the arbitrator. Each Party shall otherwise bear its own
costs of the arbitration.
(c) Obligations to Pay Charges and Perform. If a disagreement should
arise on any matter which is not resolved as provided in Section 15(a), then,
pending the resolution of the disagreement by arbitration as provided in Section
15(b), MESC shall continue to operate the Energy Complex in a manner consistent
with the applicable provisions of this Agreement and KCTC and MESC shall
continue to pay all charges and perform all other obligations required in
accordance with the applicable provisions of this Agreement.
(d) Preliminary Injunctive Relief. Nothing in this Section 15 shall
preclude, or be construed to preclude, the resort by either Party to a court of
competent jurisdiction solely for the purposes of securing a temporary or
preliminary injunction to avoid irreparable harm pending arbitration pursuant to
this Section 15; provided however, that the Parties agree that no such temporary
or preliminary injunction shall remain in effect for a period greater than 160
days.
(e) Settlement Discussions. The Parties agree that no offers of
settlement made in the course of the dispute process described in this Section
15 will be offered into evidence for any purpose in any litigation or
arbitration between the Parties, nor will any such offers of settlement be used
in any manner against either Party in any such litigation or arbitration.
Further, no such offers of settlement shall constitute an admission or waiver of
rights by either Party in connection with any such litigation or arbitration.
16. Assignment
(a) Subject to Section 16(b), neither Party may assign its rights or
obligations under this Agreement without the prior written consent of the other
Party, which shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, a Party shall have the right to assign its rights and obligations
hereunder without the consent of the other Party to any wholly-owned subsidiary
of such Party.
(b) MESC may assign its rights and obligations under this Agreement to
a Qualified Energy Complex Operator, and KCTC may assign its rights and
obligations under this Agreement to any Person that demonstrates to MESC's
reasonable satisfaction that it has the financial capability to perform KCTC's
obligations under this Agreement. A permitted assignment hereunder will relieve
the assigning Party from all rights and obligations so assigned and assumed (to
the extent so assigned and assumed) arising on or after the date of assignment
and assumption.
(c) MESC may assign its rights and interest under this Agreement (i) to
its Lenders and (ii) to the Lenders to any direct or indirect wholly-owned
subsidiary of MESC that incurs debt to finance cogeneration facilities for
operation in conjunction with the Energy Complex, as collateral security for the
obligations of MESC and such subsidiary to their respective Lenders, provided
that KCTC received from such Lenders at least the same rights and benefits,
including but not limited to, consent to Step In Rights under the MOA and to
KCTC's rights under Section 7(e)(iv) of this Agreement as KCTC has from such
Lenders under the existing Tissue Mill Energy Services Agreement. KCTC shall
reasonably cooperate with MESC and such subsidiary and their respective Lenders
from time to time, including, without limitation, the furnishing of such
information, certificates, and reasonable opinions of counsel as such Lenders
may reasonably request, and in connection with any such collateral assignment,
KCTC shall enter into a consent and agreement with such Lenders on such terms as
may be customary under the circumstances and as shall be reasonably required by
such Lenders, provided that the foregoing undertaking shall not obligate KCTC to
materially change any of its rights or benefits, or materially increase any of
its burdens, liabilities, or obligations, under this Agreement or obligate KCTC
to incur any out-of -pocket costs that MESC refuses to reimburse. For purposes
of this Section 16(c), the term "Lenders" shall mean providers of debt
financing, owners of debt instruments, and their respective successors and
assigns, including transferees of debt instruments, and any trustee, collateral
agent or other fiduciary or nominee acting on behalf of any of the foregoing
Persons.
17. No Third Party Beneficiary; No Dedication
This Agreement is intended to be solely for the benefit of MESC and
KCTC 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. The
Parties' successors and permitted assigns shall be bound by the provisions of
this Agreement. 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.
18. Prohibition Against KCTC Operation of Pulp Mill
During the Term, KCTC will not construct or operate a chemical kraft or
sulfite pulp mill on the Real Property. Breach of this covenant by KCTC will
cause a reinstatement of the Pulp Mill Energy Services Agreement with respect to
such pulp mill operations, as provided in the MOA.
19. Governing Law
Except as provided in Section 15, this Agreement shall be construed in
accordance with, and governed by, the laws of the state of New York without
regard to its conflicts of laws provisions.
20. Partial Invalidity
Wherever possible, each provision hereof shall be interpreted in such
manner as to be effective and valid under applicable law, but in case any one or
more of the provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such provision shall be
ineffective to the extent, but only to the extent, of such invalidity,
illegality or unenforceability without invalidating the remainder of such
invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable. In the
event that such a construction would be unreasonable or would deprive a Party of
a material benefit under this Agreement, the Parties shall seek to amend this
Agreement to remove the invalid provision and otherwise provide the benefit
unless prohibited by any Governmental Rule.
21. Waivers
The failure of either Party hereto to enforce at any time any provision
of this Agreement shall not be construed to be a waiver of such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of a Party thereafter to enforce each and every such provision. A waiver
under this Agreement must be in writing and state that it is a waiver. No waiver
of any breach of this Agreement shall be held to constitute a waiver of any
other or subsequent breach.
22. 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.
23. Entire Agreement and Amendments
Except as provided in the Settlement Agreement, this Agreement
(including the Exhibits hereto which are an integral part of the Agreement)
supersedes all previous representations, understandings, negotiations and
agreements either written or oral between the Parties hereto or their
representatives with respect to Power Processing Services and Steam Processing
Services to be provided to, and the supply and delivery of Electric Energy and
Steam to, the KCTC Facilities and constitutes the entire agreement of the
Parties with respect thereto. This Agreement supercedes and replaces the Tissue
Mill Energy Services Agreement dated as of December 12, 1994, as amended,
between KCTC (as successor to Scott Paper Company) and MESC (as assignee of
MESH, formerly known as Mobile Energy Services Company, Inc.). No amendments or
changes to this Agreement shall be binding unless made in writing and duly
executed by both Parties.
24. Master Operating Agreement
As between the Parties, Sections 3.5, 3.6, 3.9, 3.10, 3.11 and 3.12 and
Articles 4, 6, 7, 8, 10, 12 (only to the extent such Article 12 might be
interpreted to apply to this Agreement), 13 (except as provided in Section 18
hereof), 14, 15, 16 (as to any disputes arising under or related to this
Agreement and except as provided in Section 11(e) of this Agreement), and 17 (as
to any matters arising under or related to a Party's performance or
non-performance of this Agreement) of the MOA are no longer applicable. Nothing
in this Agreement shall affect the rights or obligations of the Paper Mill Owner
under the MOA or any other Agreement. KCTC hereby waives any right it might have
to terminate the MOA based upon any termination of the Pulp Mill Energy Services
Agreement or the termination of the Tissue Mill Energy Services Agreement as a
result of the implementation of the Settlement Agreement or any of the
transactions provided for therein, including the entry by the Parties into this
Agreement.
25. 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.
26. Decision-Making by Parties.
Except where this Agreement expressly provides for a different
standard, whenever this Agreement provides for 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 and without unreasonable delay. 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.
27. No Recourse to Affiliates.
This Agreement is solely and exclusively between MESC and KCTC, 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 venture,
affiliate, director of 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.
28. Further Assurances.
KCTC and MESC agree to cooperate in all reasonable respects necessary
to consummate the transactions contemplated by this Agreement, and each will
take all reasonable actions within its authority to secure the cooperation of
its affiliates.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date set forth at the beginning of this Agreement.
MOBILE ENERGY SERVICES COMPANY, L.L.C.
By
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
KIMBERLY-CLARK TISSUE COMPANY
By
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT A
APPLICABLE MEASURING DEVICES
The following are descriptions of the measuring devices to be employed
in metering energy system: A summary chart of all the Applicable Measuring
Devices denoting acceptable tolerance and calibration frequency is in Exhibit
U-5 of the MOA.
Steam Measuring Devices:
The Energy Complex will supply steam to the KCTC Facilities at the
following pressure levels: 50 psig and 300 psig. Metering equipment is installed
on the steam lines to the KCTC Facilities to measure pressure, differential
pressure, and temperature.
The metering equipment includes a "smart" temperature
element/transmitter, a "smart" pressure transmitter, a "smart" differential
pressure transmitter, and a venturi-type flow meter installed on each steam
line. The design is based on the use of the following meters: venturi tube with
straightening vanes (calibrated to achieve + 0.25 percent accuracy); resistance
temperature detector (+ 0.7 percent accuracy): pressure transmitter (+ 0.075
percent accuracy for calibrated span); and differential pressure transmitter (+
0.075 percent accuracy for calibrated span). The meters have been installed on
each steam line as follows (the system is depicted in more detail in the
drawings SK-SCBL-01, SK-SF-001, SK-SF-002 in Exhibit U-1 of the MOA):
KCTC Facilities: Three on 300 psig lines (Instrument identification
numbers 91FI024, 91FI025, 91FI220); Three on 50 psig lines (Instrument
identification numbers 91FI027, 91FI147, 91FI155)
Signals from the instruments are sent to the existing Distributed
Control System for billing purposes. Readings are averaged over one-hour
intervals to support the billing system. Flow and enthalpy are calculated in the
billing system; flow is calculated by the Distributed Control System using the
measured differential pressure, pressure, and temperature along with the flow
coefficient measured during initial calibration.
Return Condensate Measuring Devices:
The KCTC Facilities deliver KCTC Return Condensate to the Energy
Complex. Metering equipment, which measure flow and temperature, is installed on
the return condensate line from the KCTC Facilities.
The metering equipment includes a "smart" temperature
element/transmitter and a V-cone type flow meter is installed on the return
condensate line. The design is based on the use of the following meters:
calibrated V-cone flow meters (+ 0.25 percent accuracy over rated linear flow
range) and resistance temperature detectors (+ 0.7 percent accuracy). The meter
is installed on the return condensate line as follows (the system is depicted in
more detail in the drawing SK-CR-001 in Exhibit U-1 of the MOA):
KCTC Facilities: instrument identification number 91FI028
KCTC Return Condensate found to exceed the conductivity specifications
may be dumped prior to the flowmeter so only acceptable Return Condensate is
metered. V-cone meters are installed downstream of the high-conductivity dump
valves, and are flanged for removal for future calibration.
All analog signals are sent to the Distributed Control system.
Flow and temperature signals are sent to the existing Distributed
Control System for billing purposes. Readings are averaged over one-hour
intervals to support the billing. Enthalpy of the condensate will be calculated
in the billing system.
Electric Energy Measuring Devices:
The Energy Complex will supply electric energy to the KCTC Facilities.
An Electric Energy metering system is installed to meter the power delivered to
the KCTC Facilities. The Electric Energy metering system will measure and/or
calculate, as well as display, total delivered consumption and demand quantities
for the KCTC Facilities, which will include kWh and kW. The four generators that
MESC owns and the three APC tie points are metered.
A computer system, including hardware and software, is installed to
total and display the power usage and demand quantities for the KCTC Facilities.
The computer system will also provide the total values to the billing system and
the Distributed Control System.
The Electric Energy metering system includes two potential transformers
on each 13.8 kV bus serving KCTC Facilities loads. Two current transformers and
a kilowatt-hour/kilovar-hour meter are installed on each 13.8 kV feeder serving
the KCTC Facilities' loads as follows (the system is shown in more detail in
Exhibit U-2 to the MOA):
KCTC Facilities (27 Feeders)
R107 U152
R110 S130 U153 V169 W187
R113 U147 U156 V171
S121 U148 U157 V172
S122 U149 V166 V173
S124 U150 V167 MLC53/54
S129 U151 V168 W186
The design is based on using the following meters and instrument
transformers: solid state kilowatt-hour/kilovar-hour meters (+ 0.3 percent
accuracy from light load to class amperes); GE type JVM-5 potential transformers
(ANSI accuracy class 0.3 at burdens W, X, M, Y, and Z); and GE type JKM-5
current transformers (ANSI accuracy class 0.3 at burdens B-0.1 through B-2).
The kilowatt-hour/kilovar-hour meters receive current and voltage
signals from the current and potential transformers connected to each feeder.
Each kilowatt-hour/kilovar-hour meter is equipped with a pulse initiator that
generates pulses proportional to kilowatt-hours and kilovar-hours. The output of
the pulse initiators is connected to a computer system with software designed to
accumulate and total the pulses to generate the total power usage of the KCTC
Facilities. The totaling system measures, and is capable of displaying, total
delivered consumption and demand quantities, including kWh and kW. The system
has the capability of printing monthly billing support documentation for the
KCTC Facilities including kWh usage and kW demand.
Pulse outputs from the generator kWh meters and the "IN" and "OUT"
pulses from existing APC kWh meters are totaled using the computer system to
determine total power on the 13.8 kV bus system.
The system supplies the totaled values to the billing system.
<PAGE>
EXHIBIT B
APPLICABLE DELIVERY POINTS
Each Applicable Delivery Point shall be at the point where the
receiving facility assumes care, custody and control of the applicable Metered
Flow.
The Applicable Delivery Points are:
1. Steam Delivery Point: MESC will own the pipes carrying
Steam within the boundaries of the Energy Complex and on the
utility/pipe bridges owned by KCTC. KCTC will own the pipes
and assume care, custody and control of the Steam at the point
where the pipes exit the utility/pipe bridges within the KCTC
Facilities' boundaries (see Drawing No. SK-SCBL-01 in Exhibit
T-1 to the MOA for interface points).
2. Power Processing Delivery Point: The Power Processing
Delivery Points are discussed and illustrated in Exhibit U-2
to the MOA.
3. KCTC Return Condensate Delivery Point: MESC will assume
ownership of the Return Condensate pipe lines and care,
custody and control of the KCTC Return Condensate at the point
where these lines are picked up on utility/pipe bridges owned
by KCTC (see Drawing No. SK-SCBL-01 in Exhibit T-1 to the MOA
for interface points).
<PAGE>
EXHIBIT C
Kimberly Clark Tissue Mill Energy Services Agreement
Sample Bill
Example Steam Processing Services Invoice (Sample Month), First Contract Year
KCTC Steam Processing Charge =
{Total Steam Processing Services (MMBTU) in Billing Period Delivered by MESC to
KCTC - Condensate provided by KCTC to MESC (MMBTU) in Billing Period}
X $4.50/MMBTU + Applicable City of Mobile Business License Tax, or Equivalent
Example:
{168,000 MMBTU - 17,000 MMBTU} X $4.50 =
$679,500 + Applicable City of Mobile Business License Tax, or Equivalent
<PAGE>
Example Steam Processing Services Invoice
(Sample Month), Second through Sixth Contract Years
KCTC Steam Processing Charge =
{Total Steam Processing Services (MMBTU) in Billing Period Delivered by MESC to
KCTC - Condensate provided by KCTC to MESC (MMBTU) in Billing Period}
X $4.50/MMBTU X
(NYMEX, Henry Hub, Average of last three
trading days of the month for the previous 12 Mo. X .50) +
--------------------------------------------------------
(NYMEX, Henry Hub, Average of last three
trading days of the month, 9/98-8/99)
(Market Index, Coal, Previous 12 Mo. X .50)
-------------------------------------------
(Market Index, Coal, 9/98-9/99)
+ Applicable City of Mobile Business License Tax, or Equivalent
Example:
{168,000 MMBTU - 17,000 MMBTU} X $4.50 X
{$2.60/MMBTU} {$2.00/MMBTU}
------------ ------------
{.50} + {.50}
{$2.50/MMBTU} {$1.80/MMBTU}
= $730,840
+ Applicable City of Mobile Business License Tax, or Equivalent
<PAGE>
Example Power Processing Services Invoice (Sample Month)
<TABLE>
<CAPTION>
Line No. Billing Billing Charges Billing
Item Units Charges
<S> <C> <C> <C> <C>
1 HLF Revenue
2 Customer Access Charge 1 $2,000.00 $2,000.00
3 Demand Charge (kW) (1) 39,750 $10.00 $397,500.00
4 Energy Charge (2) 26,760,000 $0.004569 $122,266.44
5 Transformation Facilities Charge
If provided from transmission lines 0 $0.760/kW $0.00
If provided from distribution lines 0 $1.300/kW $0.00
6 Rate ECR Charge (3) 26,760,000 $0.013213 $353,579.88
7 Rate RSE Charge (if applicable) 0 $0.000000 $0.00
8 Rate CNP Charge (if applicable) 0 $0.000000 $0.00
------------------
9 Rate T Charge (if applicable) 0 $0.000000 $0.00
10
11 Total HLF Revenue $875,346.32
12
13 RTP-D-Revenue
14 Customer Access Charge 1 $2,000.00 $2,000.00
15 Summation of Hourly Energy Charges (4) $104,397.76
16 Transformation Facilities Charge
If provided from transmission lines 0 $0.760/kW $0.00
If provided from distribution lines 0 $1.300/kW $0.00
17 ECR Charge (5) 3,630,000 $0.013213 $47.963.19
------------------
17 Rate RSE Charge (if applicable) 0 $0.000000 $0.00
19 Rate CNP Charge (if applicable) 0 $0.000000 $0.00
20 Rate T Charge (if applicable) 0 $0.000000 $0.00
21
22 Total RTP-D Revenue $154,360.95
23
24
25 Total Power Processing Services Charge $1,029,707.27
26
27 Gross Receipts Tax $21,594.14
28 Business License Tax $41,188.29
29
30 Total Power Charge including Taxes $1,092,489.70
</TABLE>
(1) Demand Charge billing unit is the greater of: 1. Highest actual "HLF
usage" during current month 2. 90% of highest actual "HLF usage" during
preceding 11 months 3. 90% of "HLF contract capacity" (currently 39,750
kW)
(2) Energy Charge billing unit is the monthly summation of "HLF Usage"
(3) CR Charge billing unit (for HLF Revenue portion) is the monthly
summation of the product of "RTP-D Usage"
(4) RTP-D Revenue (excluding ESA Charge) is the monthly summation of the
product of "RTP-D Usage" and hourly RTP-D prices from Alabama Power.
(5) ECR Charge billing unit (for RTP-D Revenue portion) is the monthly
summation of "RTP-D Usage"
<PAGE>
Kimberly Clark ESA
Example Load Analysis (Sample Day)
<TABLE>
<CAPTION>
Actual HLF RTP-D RTP-D
Hour Usage Energy Energy Prices RTP-D
Ending (kW) (kW) (kW) ($/MWh) Revenue
<S> <C> <C> <C> <C> <C> <C>
1 40,000 39,750 250 $0.010957 $2.74
2 38,000 38,000 0 $0.010467 $0.00
3 33,000 33,000 0 $0.010167 $0.00
4 29,000 29,000 0 $0.009987 $0.00
5 25,000 25,000 0 $0.009847 $0.00
6 32,000 32,000 0 $0.009777 $0.00
7 39,000 39,000 0 $0.010057 $0.00
8 42,000 39,750 2,250 $0.010587 $23.82
9 45,000 39,750 5.250 $0.011707 $61.46
10 45,000 39,750 5.250 $0.014277 $74.95
11 47,000 39,750 7,250 $0.021347 $154.77
12 48,000 39,750 8,250 $0.024287 $200.37
13 50,000 39,750 10,250 $0.027287 $279.69
14 50,000 39,750 10,250 $0.030287 $310.44
15 51,000 39,750 11,250 $0.033287 $374.48
16 52,000 39,750 12,250 $0.041974 $514.18
17 53,000 39,750 13,250 $0.034287 $454.30
18 51,000 39,750 11,250 $0.031287 $251.98
19 50,000 39,750 10,250 $0.029287 $300.19
20 48,000 39,750 8,250 $0.028287 $233.37
21 45,000 39,750 5,250 $0.026287 $138.01
22 40,000 39,750 250 $0.020697 $5.17
23 35,000 35,000 0 $0.014517 $0.00
24 25,000 25,000 0 $0.013007 $0.00
Monthly Total (kWh) (1)
30,390,000 26,760,000 3,630,000 $104,397.76
Max (kW) 53,000 39,750 13,250
</TABLE>
(1) Monthly Total is the sum of the values in each column times 30 (i.e.,
for this sample calculation, it is assumed that K-C's load is the same
for each day of a 30-day month)
<PAGE>
EXHIBIT D
APC HLF Rate
<PAGE>
EXHIBIT E
APC RTPD Rate
<PAGE>
EXHIBIT F
1.0 MESC FORCE MAJEURE EVENT - STEAM
Change in KCTC Minimum Steam Processing Services Volume =
Minimum Steam Processing Services Volume x
[Days greater than 90 x 24] x
8760*
[KCTC Maximum Steam Actual MESC KCTC
Processing Demand - Steam Production Capacity]
---------------------------------------------
KCTC Maximum Steam Processing Demand
* For Contract Years that are less than 365 days in duration, the 8760 shall be
reduced to an amount equal to the number of hours in such Contract Year.
<PAGE>
2.0. KCTC Force Majeure Event - Steam
Change in KCTC Minimum Steam Processing Services Volume =
Minimum Steam Processing Services Volume x
[(Days greater than 90 and less
than or equal to 180) x
24] x 8760*
[KCTC Maximum Steam Actual KCTC
Processing Demand - Capacity to use Steam]
-----------------------------------------
KCTC Maximum Steam Processing Demand
* For Contract Years that are less than 365 days in duration, the 8760 shall be
reduced to an amount equal to the number of hours in such Contract Year.
<PAGE>
3.0 MESC Force Majeure Event - Power
Change in KCTC HLF Contract Capacity =
KCTC HLF Contract Capacity x
[KCTC Maximum Actual MESC KCTC
Power Processing Demand - Power Processing Capacity]
---------------------------------------------------
KCTC Maximum Power Processing Demand
Note: This formula is applied on an hourly basis for Force Majeure
Events in excess of ninety (90) days to determine the KCTC HLF Capacity
in such hour where the minimum demand is to be reduced based on a Force
Majeure Event. The HLF Contract Capacity for a month in which some
hours had such an adjustment would be equal to the average of the HLF
Contract Capacity for all hours in the month.
<PAGE>
4.0 KCTC Force Majeure Event - Power
Change in KCTC HLF Contract Capacity =
KCTC HLF Contract Capacity x
[KCTC Maximum Actual KCTC capacity to
Power Processing Demand - use Power Processing Services]
-------------------------------------------------------
KCTC Maximum Power Processing Demand
Note: This formula is applied on an hourly basis for Force Majeure
Events in excess of ninety (90) days (up through the 180th day such
Force Majeure Event remains in effect) to determine the KCTC HLF
Capacity in such hour where the minimum demand is to be reduced based
on a Force Majeure Event. The HLF Contract Capacity for a month in
which some hours had such an adjustment would be equal to the average
of the HLF Contract Capacity for all hours in the month.
