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EXHIBIT 10.3.11
AMENDED AND RESTATED
ENERGY SALES AGREEMENT
THIS AMENDED AND RESTATED ENERGY SALES AGREEMENT is entered into as of
December 16, 1996 by and between Phillips Petroleum Company, a Delaware
corporation, and Pasadena Cogeneration L.P., a Delaware limited partnership.
RECITALS
A. Phillips owns and operates HCC, which utilizes steam and electrical energy
for industrial purposes. The Partnership will construct, own and operate
the Project and intends to sell steam and electrical energy generated at
the Project to Phillips, and electrical energy to Third-Party Purchasers.
The Partnership intends that the Project will be certified as a
"Qualifying Cogeneration Facility" under the provisions of PURPA.
B. The Parties have previously entered into that certain Energy Sales
Agreement dated as of August 30, 1996 setting forth their respective
rights and obligations in connection with the operation of the Project,
and the purchase by Phillips and the sale by the Partnership of Electrical
Energy and Steam.
C. The Parties desire to modify the Energy Sales Agreement dated as of August
30, 1996 in certain respects to modify certain of their respective rights
and obligations in connection with the operation of the Project, and the
purchase by Phillips and the sale by the Partnership of Electrical Energy
and Steam.
D. The Parties therefore desire to amend and restate the Energy Sales
Agreement dated as of August 30, 1996 in its entirety and to enter into
this Agreement, which shall supersede the Energy Sales Agreement dated as
of August 30, 1996 in its entirety, effective as of December 16, 1996, to
set forth their respective rights and obligations in connection with the
operation of the Project, and the purchase by Phillips and the sale by the
Partnership of Electrical Energy and Steam.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the Parties, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. Capitalized terms used in this Agreement without
other definition shall have the meanings specified in Appendix A
to this Agreement, unless the context requires otherwise.
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1.2 CONSTRUCTION OF TERMS. As used in this Agreement, the terms
"herein," "herewith" and "hereof" are references to this
Agreement, taken as a whole, the term "includes" or "including"
shall mean "including, without limitation," and references to a
"Section", "subsection", "clause", "Exhibit", "Appendix" or
"Schedule" shall mean a Section, subsection, clause, Exhibit,
Appendix or Schedule of this Agreement, as the case may be, unless
in any such case the context requires otherwise. All references to
a given agreement, instrument or other document shall be a
reference to that agreement, instrument or other document as
modified, amended, supplemented and restated through the date as
of which such reference is made, and reference to a law,
regulation or ordinance includes any amendment or modification
thereof. A reference to a Person includes its successors and
permitted assigns. The singular shall include the plural and the
masculine shall include the feminine, and vice versa.
1.3 DRAFTING INTERPRETATIONS. Preparation of this Agreement has been a
joint effort of both the Parties and the resulting document shall
not be construed more severely against one of the Parties than
against the other.
1.4 DOCUMENTS INCLUDED. This Agreement consists of this document and
the Exhibits which are listed in the Table of Contents and
attached hereto or shall be attached hereto in accordance with the
provisions hereof, and which are specifically incorporated herein
and made a part hereof by this reference.
1.5 CONFLICTING PROVISIONS. In the event of any conflict between this
document and any Exhibit hereto, the terms and provisions of this
Agreement, as amended from time to time, shall control. In the
event of any conflict among the Exhibits, the Exhibit of the
latest date mutually agreed upon by the Parties shall control.
1.6 ENTIRE AGREEMENT. This Agreement together with the other Project
Agreements set forth the full and complete understanding of the
Parties relating to the subject matter of each such Project
Agreement as of the Effective Date, and supersede any and all
negotiations, other agreements and representations made or dated
prior thereto with respect to such subject matter thereof.
2. PURCHASE AND SALE OF ELECTRICAL ENERGY AND ELECTRICAL CAPACITY
2.1 EXCLUSIVE SOURCE. Except as provided in Section 2.3.2.1, from and
after the Commercial Operation Date and continuing for the
remainder of the Term, (a) the Partnership shall sell and deliver
to Phillips, and
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Phillips shall purchase and accept from the Partnership,
Electrical Energy at the Electrical Energy Point of Delivery, and
(b) the Partnership shall make available and Phillips shall
reserve electrical capacity generated by the Project, all in
accordance with the terms and conditions set forth in this Section
2. Phillips shall not purchase any electrical energy or capacity
for HCC from any other source, without the consent of the
Partnership, except as set forth in Section 2.8, as contemplated
by the Standby Agreement, if Phillips has electrical energy
requirements in excess of 90 MW or when the Partnership does not
meet its obligations to supply Electrical Energy to Phillips under
this Agreement. In addition, Phillips shall not purchase or use
any equipment for the sole purpose of generating electrical
energy; provided, however, Phillips may purchase or use any
equipment to generate electrical energy derived from the
optimization of its process unit operations.
2.2 PURCHASE AND SALE OBLIGATION FOR ELECTRICAL ENERGY AND
ELECTRICAL CAPACITY.
2.2.1 PURCHASE AND SALE OBLIGATION FOR ELECTRICAL ENERGY. The
Partnership shall sell and deliver to Phillips, and
Phillips shall purchase and accept from the Partnership,
at the Electrical Energy Point of Delivery, (a) all of the
electrical energy requirements of HCC up to 90 MW which
are in excess of any electrical energy permitted to be
generated by HCC from time to time from its process unit
operations under Section 2.1 above, and (b) at Phillips'
option, Electrical Energy in excess of the amount provided
under (a) above, up to a total of 90 MW; provided,
however, that the Partnership shall deliver up to, but
shall not be obligated to deliver more than, the total of
Firm Capacity and Interruptible Capacity. Notwithstanding
anything to the contrary contained herein, (x) the
commitment by Phillips to purchase Electrical Energy is on
an HCC requirements basis only, with no minimum amount of
Electrical Energy required to be taken by Phillips, and
(y) Phillips may at any time purchase any amounts of
electrical energy in excess of 90 MW from any third party.
2.2.2 PURCHASE AND SALE OBLIGATION FOR ELECTRICAL CAPACITY. The
Partnership shall make available to Phillips, and Phillips
shall reserve from the Partnership, the Firm Capacity and
the Interruptible Capacity.
2.3 ELECTRICAL PAYMENT.
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2.3.1 VARIABLE FUEL PAYMENT AND VARIABLE O&M PAYMENT. During the
Initial Term or any Phillips Extension Term, for any
Electrical Energy delivered to Phillips by the Partnership
for each Billing Period, Phillips shall pay the Variable
Fuel Payment and the Variable O&M Payment (a) at the rates
set forth in Exhibit A, or (b) if a price adjustment has
occurred pursuant to Section 2.8, at the rates specified
in the Pricing Notice Response. During any Renewal Term
for any Electrical Energy delivered to Phillips by the
Partnership, Phillips shall pay for Electrical Energy at
the price mutually agreed upon between the Parties.
2.3.2 ELECTRICAL CAPACITY PAYMENT.
2.3.2.1 COMMENCEMENT OF FIRM ELECTRICAL CAPACITY PAYMENTS.
Phillips shall pay the Partnership, in accordance with the
provisions of Section 5.2, the Electrical Capacity
Payment. Thirteen (13) months prior to the anticipated
Commercial Operation Date, the Partnership shall notify
Phillips of the anticipated Commercial Operation Date.
Phillips shall use reasonable efforts to terminate any
agreements with HL&P for the supply of electrical energy
(other than the Standby Agreement) and to arrange for the
Standby Agreement to be effective as of such anticipated
Commercial Operation Date. Notwithstanding Section 2.1 and
Section 5.2, Firm Electrical Capacity Payments shall begin
as of the date Phillips is able to terminate payments
under the HL&P agreements in effect immediately prior to
the Commercial Operation Date. In any event, the Firm
Electrical Capacity Payments shall commence no later than
thirty (30) days after the Commercial Operation Date.
2.3.2.2 ADJUSTMENTS TO ELECTRICAL CAPACITY PAYMENTS.
Phillips shall pay the Electrical Capacity Payments
through the Capacity Payment Termination Date; provided,
however, that the Electrical Capacity Payment shall be (a)
adjusted as provided in a Pricing Notice Response
delivered pursuant to Section 2.8.2, or (b) terminated in
the event of an HCC Shutdown on the terms described in
Section 5.2. During any period when a Force Majeure Event
prevents the Partnership from delivering Electrical Energy
to Phillips under this Agreement and Phillips is unable to
continue to obtain electrical energy under the tariff in
effect under the Standby Agreement at the time of the
Force Majeure Event, the Partnership shall pay to Phillips
the incremental increased
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demand costs Phillips actually pays under any alternate
tariffs as may be applicable in the circumstances over the
demand costs otherwise payable by Phillips under the
Standby Agreement. If the Partnership fails to make such
payments within fifteen (15) days after receipt of an
invoice from Phillips together with evidence of payment by
Phillips, Phillips may, at its option, offset the amount
of the incremental increase in demand payments it actually
pays against the Electrical Capacity Payment otherwise due
hereunder for such period of time as the Partnership fails
to either supply Electrical Energy or reimburse Phillips
for its increased demand costs.
2.3.3 PAYMENT FOR USE OF EXCESS ELECTRICAL ENERGY. If at any
time Phillips takes Electrical Energy from the Partnership
in excess of the total of 80 MVA plus the number of MVA
calculated pursuant to Section 2.4.2 of Interruptible
Capacity after integrating (averaging) amounts taken over
any hour period, Phillips shall pay the Partnership for
the exceeded amount the payment specified in Exhibit A.
The Partnership shall notify Phillips promptly after such
time as the Partnership determines that the electrical
capacity of the Project is fully committed.
2.4 INTERRUPTIBLE CAPACITY.
2.4.1 SCHEDULING INTERRUPTIBLE CAPACITY. Phillips shall furnish
the Partnership with an annual forecast of its planned
daily profile of its electrical requirements not later
than December 1st each year for the following calendar
year, indicating in such forecast its major planned
outages for the year. Phillips may update the annual
forecast if any changes in the annual forecast are
anticipated. The Partnership shall reserve Interruptible
Capacity for the megawatts Phillips indicates it will
require in the most recent forecast received by the
Partnership at least three (3) days in advance of the
effective change in the forecast.
2.4.2 MVA CALCULATION. Interruptible Electrical Capacity
Payments for each Billing Period shall be based upon the
greater of the following: (a) the number of MVA, on an
integrated (averaged) basis during any one-hour period of
maximum use above 80 MVA in a Billing Period; (b) the
maximum number of MVA requested by Phillips in such
Billing Period in the last timely notice received by the
Partnership as specified in Section 2.4.1 above; and (c)
five (5) MVA.
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2.5 STANDBY ELECTRICAL AGREEMENT.
2.5.1 STANDBY AGREEMENT. Prior to the Commercial Operation Date,
Phillips shall enter into a Standby Agreement pursuant to
which Phillips shall have Contingency Failure Protection
with regard to electrical energy. Neither Party shall have
any liability under a standby agreement entered into by
the other.
2.5.2 DEMAND PAYMENT ADJUSTMENT. If Phillips takes electrical
energy under the terms of the Standby Agreement, solely
because the Partnership failed to keep the Project at a
95% Availability Percentage, resulting in an upward
pricing adjustment in the demand payments under the
Standby Agreement, the Partnership shall reimburse
Phillips for the actual incremental amount of increase in
such demand payments Phillips is required to pay as a
result of the Project's failure to operate at a 95%
Availability Percentage within fifteen (15) days after
receipt of a copy of an invoice for any such increased
amount and evidence of payment of the applicable amount by
Phillips.
2.6 PAYMENT ADJUSTMENT FOR FAILURE TO SUPPLY.
2.6.1 ENERGY PAYMENT ADJUSTMENT. Notwithstanding any other
provision of this Agreement, the Partnership is obligated
to supply Phillips with Electrical Energy no more than 95%
of the time during any COD Year. If the Project does not
have Availability to supply Electrical Energy to Phillips,
Phillips shall obtain electrical energy pursuant to the
terms of the Standby Agreement, and the Partnership shall
not be deemed to be in default hereunder for any failure
to supply, even if the Project Availability Percentage is
less than 95% in a COD Year. The Partnership shall,
however, reimburse Phillips for any actual incremental
electrical energy costs to Phillips for any COD Year in
which the Project fails to achieve 95% Availability by
paying Phillips the amount of the Availability Debit for
such COD Year; provided that if any Availability Credits
have accrued during the applicable Availability Cycle
prior to any COD Year in such Availability Cycle in which
the Project fails to achieve 95% Availability, such
Availability Credits shall be used to offset the
Availability Debit otherwise payable to Phillips.
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2.6.2 REIMBURSEMENT FOR INCREMENTAL COSTS Within thirty (30)
days after the end of each COD Year, the Partnership shall
determine and advise Phillips of the Availability
Percentage of the Project for the preceding year. If the
Availability Percentage exceeds 95%, the Partnership shall
calculate and record an Availability Credit for such COD
Year. If the Availability Percentage is less than 95%, the
Partnership shall calculate and pay Phillips the amount of
the Availability Debit for such COD Year, after first
offsetting the amount of any Availability Credits which
may have accrued during the applicable Availability Cycle,
but were not used previously as offsets. The Partnership
shall pay such amount within forty-five (45) days after
the end of the COD Year.
2.7 ADDITIONAL ELECTRICAL ENERGY. If at any time or from time to time,
the Project has capacity in excess of 90 MW which has not been
sold to Third-Party Purchasers and Phillips requires Electrical
Energy in excess of 90 MW, Phillips may purchase Electrical Energy
and electrical capacity on terms and conditions negotiated by the
Partnership and Phillips at that time; provided, however, the
Partnership shall not have any obligation to make Electrical
Energy in excess of 90 MW available to Phillips.
2.8 OPTION TO ADJUST PURCHASE OF ELECTRICAL ENERGY AND ELECTRICAL
CAPACITY. Notwithstanding any other provision of this Agreement,
at any time during the Electrical Option Period, Phillips shall
have a one time option to adjust its obligation to purchase from
the Partnership all or a portion of its requirements for
electrical capacity and electrical energy under this Agreement in
accordance with the following provisions.
2.8.1 PRICING NOTICE. At any time during the Electrical Option
Period, Phillips may provide the Partnership with a
Pricing Notice. Phillips shall deliver a copy of the
Electrical Pricing Offer to the Partnership when it
delivers the Pricing Notice. Phillips shall not issue more
than one Pricing Notice during the Electrical Option
Period; provided, however, in the event any Electrical
Pricing Offer is withdrawn at any time prior to the
issuance of a Pricing Notice Response by the Partnership,
Phillips shall have the right to issue another Pricing
Notice during the Electrical Option Period.
2.8.2 RIGHT OF FIRST REFUSAL. The Partnership shall have a right
of first refusal to match the terms and conditions
required to be specified in an Electrical Pricing Offer
for a ninety (90) day period after receipt of the Pricing
Notice; provided, however,
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that the Partnership will be deemed to have matched the
pricing in the Electrical Pricing Offer if the
Partnership's price for energy and capacity as delivered
to Phillips at the point of interconnection to HCC is
equal to or less than the "all in" price in the Electrical
Pricing Offer for energy and capacity as delivered to
Phillips at the point of interconnection at HCC (i.e.,
including all transmission or transportation charges and
other charges in the Electrical Pricing Offer in addition
to commodity, demand or reservation charges). The
Partnership may exercise such right of first refusal by
delivering, within the ninety (90) day response period, a
Pricing Notice Response to Phillips setting forth the
adjusted pricing. Thereafter, the Partnership shall
continue to be the exclusive supplier of all required
electrical capacity and energy at HCC on and subject to
all of the terms and conditions set forth in this
Agreement, except that from and after twenty-four (24)
months after the Partnership receives the Pricing Notice,
the pricing hereunder shall be adjusted to those terms set
forth in the Pricing Notice Response for the remainder of
the Initial Term.
2.8.3 ADJUSTMENT TERMS. If the Partnership either fails to
deliver a Pricing Notice Response within the ninety (90)
day response period or notifies Phillips that the
Partnership will not issue a Pricing Notice Response,
Phillips' obligation to purchase (and the Partnership's
obligation to supply) electrical capacity and Electrical
Energy hereunder for the number of megawatts specified in
the Electrical Pricing Offer shall terminate as of
twenty-four (24) months after the Partnership receives the
Pricing Notice, and the Firm Electrical Capacity Payment
shall be reduced as set forth in Exhibit A for each annual
megawatt no longer supplied by the Partnership. In such
event, if the Partnership remains obligated to supply any
Firm Capacity to Phillips, Phillips shall take its
requirements for HCC first from the Partnership, and then
from the alternate source. Notwithstanding any termination
of the obligation to purchase and supply all or a portion
of the electrical capacity and Electrical Energy provided
for hereunder, all other provisions of this Agreement
shall remain in full force and effect, including the
obligation to purchase and supply Electrical Energy and
electrical capacity not covered by the Pricing Notice, as
well as Steam and Steam capacity on the terms described in
Section 3.
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3. PURCHASE AND SALE OF STEAM AND STEAM CAPACITY
3.1 EXCLUSIVE SOURCE. From and after the Commercial Operation Date
and continuing for the remainder of the Term, (a) the
Partnership shall sell and deliver to Phillips, and Phillips
shall purchase and accept from the Partnership, Steam at the
Point of Delivery for Steam, and (b) the Partnership shall make
available and Phillips shall reserve steam capacity from the
Project, all in accordance with the terms and conditions set
forth in this Section 3. Phillips shall not purchase any steam
or steam capacity for HCC from any other source, without the
consent of the Partnership, except to the extent Phillips
requires steam in excess of the Maximum Steam Requirement or
during any period when the Partnership does not meet its
obligations to supply Steam to Phillips under this Agreement,
even if due to a Force Majeure Event. In addition, Phillips
shall not purchase or use equipment for the sole purpose of
generating steam; provided, however, Phillips may purchase or
use any equipment to generate steam derived from the
optimization of its process unit operations.
3.2 PURCHASE AND SALE OBLIGATION FOR STEAM AND STEAM CAPACITY.
3.2.1 PURCHASE AND SALE OBLIGATION. The Partnership shall
sell and deliver to Phillips, and Phillips shall
purchase and accept from the Partnership, all the
Steam requirements of HCC up to the Maximum Steam
Requirement which are in excess of the amount of
steam permitted to be generated by HCC from time to
time in connection with process unit operations under
Section 3.1 above. Notwithstanding the foregoing,
except for a Force Majeure Event or HCC Shutdown, the
Partnership shall be obligated to deliver, and
Phillips shall be obligated to request, take and
productively use not less than the Minimum Steam
Requirement, nor more than the Maximum Steam
Requirement. Notwithstanding anything to the contrary
contained herein, (a) the commitment by Phillips to
purchase Steam in excess of the Minimum Steam
Requirement is on an HCC requirements basis only,
with no other minimum amount of Steam required to be
taken by Phillips, and (b) Phillips may at any time
purchase any amounts of steam in excess of the
Maximum Steam Requirement from any third party.
3.2.2 PURCHASE AND SALE OBLIGATION FOR STEAM CAPACITY. The
Partnership shall make available to Phillips, and
Phillips shall reserve from the Partnership, steam
capacity sufficient to enable the Partnership to
deliver Steam up to the Maximum Steam Requirement.
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3.3 CHARACTERISTICS OF STEAM. The Steam delivered by the
Partnership to Phillips at the Point of Delivery for Steam
shall conform to the Steam Specifications.
3.4 STEAM PAYMENT.
3.4.1 VARIABLE STEAM PAYMENT. From and after the Commercial
Operation Date and continuing for the Initial Term or
any Phillips Extension Term, for any Steam delivered
to Phillips by the Partnership, for each Billing
Period Phillips shall pay the Variable Steam Payment
at the rates set forth in Exhibit B attached hereto.
During any Renewal Term, for any Steam delivered to
Phillips by the Partnership, for each Billing Period
Phillips shall pay the Variable Steam Payment
mutually negotiated between the Parties.
3.4.2 FIXED STEAM O&M PAYMENT. From and after the
Commercial Operation Date and continuing for the
Initial Term or any Phillips Extension Term, Phillips
shall pay the Fixed Steam O&M Payment on a quarterly
basis in accordance with the provisions of Section
5.2; provided, however, the Fixed Steam O&M Payment
shall be suspended in accordance with Section 5.2 in
the event of an HCC Shutdown.
3.4.3 FIXED STEAM CAPACITY PAYMENT. From the Commercial
Operation Date through the Capacity Payment
Termination Date, Phillips shall pay the Partnership
the Fixed Steam Capacity Payment on a quarterly basis
in accordance with the provisions of Section 5.2;
provided, however, the Fixed Steam Capacity Payment
shall be suspended in accordance with Section 5.2 in
the event of an HCC Shutdown.
3.5 ADDITIONAL STEAM REQUIREMENT. If at any time after the
Commercial Operation Date the Project has steam capacity in
excess of the Maximum Steam Requirement, and Phillips requires
such additional steam and steam capacity, Phillips may purchase
such amounts on terms and conditions negotiated by the
Partnership and Phillips at that time; provided, however, the
Partnership shall not have any obligation to provide steam in
excess of the Maximum Steam Requirement to Phillips.
4. CONDENSATE RETURN
4.1 TRANSPORTATION OF STEAM AND CONDENSATE. Phillips shall take
delivery of and transport Steam from the Point of Delivery for
Steam into the HCC steam distribution system and shall maintain
a Steam line and a Condensate line properly supported and
insulated as required for the
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transportation of Steam and Condensate within the HCC steam
distribution system. The Partnership shall not be under any
obligation to inspect, maintain or repair the HCC steam
distribution system.
4.2 CONDENSATE RETURN. During any Billing Period, Phillips shall
return Condensate which meets the Condensate Return
Specifications to the Partnership at the Point of Delivery for
Condensate, in an amount equal to approximately fifty percent
(50%) of the Steam delivered to Phillips. The Partnership shall
monitor the Condensate delivered to the Partnership to
determine whether the Condensate meets the Condensate Return
Specifications. In the event any Condensate returned by
Phillips fails to meet the Condensate Return Specifications,
the Partnership shall be under no obligation to accept such
Condensate.
4.3 FAILURE TO SUPPLY CONDENSATE. If Phillips fails to return to
the Partnership approximately fifty percent (50%) of the Steam
delivered to Phillips by the Partnership as Condensate meeting
the Condensate Return Specifications, then the Partnership
shall, if possible, take and de-mineralize raw water (whether
supplied by a third party or is Raw Water supplied by Phillips)
in the Partnership's water treatment facility, in amounts
sufficient to permit the Partnership to continue to supply
Steam and Electrical Energy, to Phillips. The Partnership's
sole remedy for Phillips' failure to return to the Partnership
approximately fifty percent (50%) of the Steam as Condensate
shall be reimbursement (a) for the cost of such additional raw
water, and (b) for any additional chemical costs incurred by
the Partnership to de-mineralize such raw water.
4.4 OPERATION OF THE STANDBY BOILERS DUE TO PHILLIPS' FAILURE TO
SUPPLY RAW WATER AND CONDENSATE. The provisions of this Section
4.4 shall not apply unless Phillips is the sole supplier of raw
water to the Project under the Facility Services Agreement.
Phillips shall at all times use its Best Commercial Efforts to
ensure that the Partnership has sufficient Raw Water to both
make Steam and operate the Power Plant at capacity; provided
however, Phillips shall have no obligation to provide Raw Water
in excess of the maximum amounts required to be supplied under
the Facility Services Agreement. If the Partnership must shut
down its turbines solely because Phillips has failed to supply
sufficient Raw Water in accordance with Phillips' obligations
under the Facility Services Agreement and this Agreement, then
the Partnership shall use its Best Commercial Efforts to
continue to supply Steam sufficient to meet the Steam
requirements of HCC by operation of the Standby Boilers;
provided, however, Phillips shall pay the Partnership the
additional incremental costs for the operation of the Standby
Boilers.
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4.5 INTERRUPTION OF WATER SUPPLY. The Partnership shall have
storage capacity at the Project Site sufficient to enable it to
supply 200,000 lbs of Steam for at least thirty-six (36) hours
after an interruption in the supply of raw water. Under any
circumstances, if the interruption in the supply of raw water
to the Power Plant is of greater duration, Phillips and the
Partnership shall attempt to arrange for the Partnership to
obtain water from Phillips to enable the Partnership to
continue to make and deliver Steam.
5. BILLING AND PAYMENT
5.1 MONTHLY BILLING CYCLE FOR STEAM, ELECTRICAL ENERGY AND STANDBY.
The Partnership shall read the Metering Devices installed
pursuant to Section 8.1 monthly, and shall provide Phillips
with an invoice for each Billing Period setting forth the
amount of Steam and Electrical Energy delivered to Phillips
during such Billing Period and the amount of the Variable Fuel
Payment, Variable O&M Payment and Variable Steam Payment to be
paid by Phillips pursuant to Sections 2.3.1 and 3.4.1
respectively.
5.2 QUARTERLY PAYMENT FOR CAPACITY AND FIXED STEAM O&M. Except as
otherwise provided pursuant to Section 2.3.2.1, as of the
Commercial Operation Date and thereafter on a quarterly basis,
which quarters may, at the option of the Partnership, coincide
with the date payment is due to any Project Financing Entities,
the Partnership shall invoice Phillips and Phillips shall pay
one quarter of the annual Fixed Steam O&M Payment, one quarter
of the annual Fixed Steam Capacity Payment, one quarter of the
annual Firm Electrical Capacity Payment plus all Interruptible
Electrical Capacity Payments payable for the applicable
quarter, in arrears, for any whole or partial calendar quarter
occurring as of or after the Commercial Operation Date. The
Fixed Steam O&M Payment shall be payable during the Initial
Term or any Phillips Extension Term. The Fixed Steam Capacity
Payment and the Electrical Capacity Payment shall be payable
from the Commercial Operation Date through the Capacity Payment
Termination Date. If the Commercial Operation Date, the
Capacity Payment Termination Date or any termination date of
this Agreement does not coincide with the last day of a
calendar quarter, the first such payment and/or last such
payment, as applicable, shall be prorated on a daily basis over
a ninety (90) day period. In the event of an HCC Shutdown,
notwithstanding any termination of this Agreement pursuant to
Section 17.3, the Fixed Steam O&M Payment, Fixed Steam Capacity
Payment and the Electrical Capacity Payment shall continue to
be payable through the last day of the calendar year in which
the HCC Shutdown occurs, but shall terminate thereafter.
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5.3 PAYMENT OF INVOICES. Each invoice issued by the Partnership
shall be paid by Phillips by electronic funds transfer or by
such other means agreed upon by the Parties as will ensure that
the Partnership receives such payment in good funds (a) on or
before the last day of the month if Phillips receives the
invoice prior to the fifteenth (15th) day of the month, or (b)
within fifteen (15) days after receipt of an invoice at any
later time in the month. If Phillips disputes the correctness
of any statement, information or invoice submitted by the
Partnership hereunder, Phillips shall promptly submit to the
Partnership a written statement detailing the specific items
disputed. If the Parties are unable to reach agreement with
respect to a disputed item, such dispute shall be subject to
further resolution pursuant to the Dispute Resolution
Procedures. Notwithstanding the foregoing, if Phillips disputes
the correctness of any statement or invoice submitted by the
Partnership hereunder, Phillips shall nevertheless make payment
on the basis of the undisputed portion of the statement or
invoice within the time period specified for payment hereunder.
5.4 INTEREST. Amounts not paid by either Party to the other when
due under any provisions of this Agreement, including the
provisions of this Section 5, shall bear interest at the
Delayed Payment Rate from the date such payment is due until
and including the date of payment.
6. OPERATION OF THE PROJECT
6.1 OPERATION OF THE PROJECT. The Parties acknowledge and agree
that the Partnership shall delegate the operation and
maintenance of the Power Plant to Calpine, and that Calpine or
its Affiliates shall be the operator of the Power Plant for at
least a six (6) year period after the Commercial Operation
Date; provided, however that Phillips shall not unreasonably
withhold its consent to another operator during such period if
any Project Financing Entity reasonably requests a change in
the operator of the Power Plant. The Partnership may delegate
the operation and maintenance of the Power Plant after such six
(6) year period only if Phillips consents to another operator,
which consent shall not be unreasonably withheld. Phillips
shall have the absolute right to prohibit a competitor of
Phillips from becoming the operator of the Power Plant.
Notwithstanding any delegation, the Partnership shall remain
responsible to perform its obligations under this Agreement. At
all times after the Commercial Operation Date, the Partnership
shall operate and manage the Power Plant and the Operating
Easement Improvements, and Phillips shall operate and manage
the Development and Construction Easement Improvements, in a
manner consistent with Prudent Operating Practices. The
Partnership shall keep, or cause to be kept, in full force and
effect all Applicable Permits which are
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necessary for the ownership, operation, maintenance, use and
repair of the Power Plant and shall comply with, or cause to be
complied with, all Laws which are applicable to the Partnership
or the Project.
6.2 OPERATING AND COMMUNICATION GUIDELINES. Prior to the Commercial
Operation Date, the Parties shall develop written mutually
agreeable operating and communication procedures to serve as
guidelines for the Parties addressing operating and
communication aspects of mutual interest, including
communication links between the Parties for supplying
information on normal operations, interconnections or
separation, switching and equipment clearances, levels of
operating voltage and power factors, special procedures
required during the testing and initial operation of the
Project and scheduling considerations related to both planned
and emergency outages of the Project and HCC. Such guidelines
shall not override provisions of this Agreement.
6.3 STEAM REDUNDANCY REQUIREMENTS. From and after the Commercial
Operation Date and continuing for the remainder of the Term,
the Partnership shall provide Phillips with firm standby Steam
availability from the Standby Boilers. The Partnership shall
operate the Project, including the Standby Boilers, in
compliance with the Steam Redundancy Requirements.
6.4 STANDBY BOILERS OPERATING RIGHTS.
6.4.1 EXERCISE OF RIGHTS. The Partnership acknowledges that
a reliable supply of Steam is critical to the
efficient and safe operation of HCC and agrees that
the Project shall be operated in such a manner as to
provide a reliable source of Steam to HCC. Phillips
shall be entitled to exercise the Standby Boilers
Operating Rights during the Term of this Agreement if
any of the Partnership, the Project Financing
Entities, or any assignee of either (a) fails for any
reason to supply Steam in accordance with the terms
of this Agreement and the Standby Boilers are capable
of operation or (b) decides to no longer supply Steam
in breach of its obligations to supply Steam
hereunder. If the failure to deliver Steam is the
result of clause (a) above, then Phillips shall have
the right to immediately exercise the Standby Boilers
Operating Rights by sending notice by facsimile to
the Partnership at the Power Plant and as provided in
Section 21.1, or to such other address as the
Partnership may from time to time indicate, and to
the Project Financing Entity and any other assignee
of which Phillips has received notice, that Phillips
has failed to receive Steam and that it intends to
promptly exercise the Standby Boilers Operating
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Rights. If the Partnership is still providing an
uninterrupted supply of Steam but decides to no
longer supply Steam under clause (b) above, then the
Partnership shall immediately notify Phillips in the
quickest possible way (in person or telephone),
confirmed no later than the next Business Day
thereafter in writing, and Phillips shall have the
right to exercise the Standby Boilers Operating
Rights in advance of the actual cessation of Steam
deliveries.
6.4.2 PARTNERSHIP COOPERATION. Upon the exercise by
Phillips of the Standby Boilers Operating Rights, the
Partnership shall use its Best Commercial Efforts to
afford Phillips access to the Project and to assist
Phillips to obtain control of the operation of the
Standby Boilers to the extent necessary to enable
Phillips to exercise the Standby Boilers Operating
Rights.
6.4.3 PARTNERSHIP FUEL GAS. During any period that Phillips
exercises the Standby Boilers Operating Rights, the
Partnership grants Phillips the right, which shall
not be construed as an obligation, to utilize the
Partnership's supply of fuel gas to the extent
available, as reasonably required by Phillips to
operate the Standby Boilers.
6.4.4 REMEDIES AND LIABILITIES. The exercise by Phillips of
the Standby Boilers Operating Rights shall be in
addition to any other remedies available to Phillips
hereunder, shall not affect the running of any of the
cure periods with respect to an Event of Default, and
shall not be deemed an assumption by Phillips of any
liability of the Partnership for the period during
which Phillips exercises the Standby Boilers
Operating Rights. During the exercise of Standby
Boilers Operating Rights, Phillips shall operate the
Standby Boilers in accordance with Prudent Operating
Practices and all Permits and Laws. Phillips shall
have no liability to the Partnership for damages to
the Standby Boilers during the period Phillips
exercises the Standby Boilers Operating Rights unless
such damage is caused by the gross negligence or
willful misconduct of Phillips or the Permitted Steam
Operator(s). In no event shall Phillips' election to
exercise the Standby Boilers Operating Rights be
deemed to constitute a transfer of title to the
Standby Boilers or any of the Partnership's
obligations as owner thereof.
6.4.5 REIMBURSEMENT FOR COSTS AND EXPENSES. The Partnership
agrees to reimburse Phillips for reasonable labor
costs
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and expenses incurred by Phillips in the exercise of
the Standby Boilers Operating Rights.
6.4.6 CESSATION OF STANDBY BOILER OPERATING RIGHTS.
Phillips shall have the right to continue to exercise
the Standby Boilers Operating Rights until the
earlier to occur of (a) such time as the Partnership,
its agent or its assignee assumes operational control
of the Standby Boilers and provides Steam to Phillips
in accordance with the terms of this Agreement, or
(b) Phillips obtains another permanent supply of
steam for HCC, but in no event longer than two (2)
years.
6.4.7 TRAINING. From the Commercial Operation Date and
continuing for the remainder of the Term, the
Partnership shall annually provide a training class
on the operation of the Standby Boilers, at no cost
to Phillips, for up to eight Phillips employees or
agents as potential Permitted Steam Operators. The
Partnership shall not have any obligation to pay
labor costs or related expenses for such Phillips
employees or agents.
6.5 PHILLIPS REPRESENTATIVE. Phillips shall appoint an individual
as the Phillips Representative; provided, however, that
Phillips may at any time in its sole discretion by written
notice to the Partnership designate a substitute or replacement
Phillips Representative. The Phillips Representative shall not
have any authority to amend this Agreement. The Phillips
Representative shall receive all reports required hereunder and
shall be available during normal business hours for
consultations with the Partnership Representative and other
Partnership personnel. The Partnership shall be entitled to
rely upon any consents, approvals or authorizations provided by
the Phillips Representative. No directions or approvals given
by any Phillips personnel other than the Phillips
Representative shall be binding upon Phillips, except that (a)
the Phillips Representative may notify the Partnership in
writing of any alternate representative who may act in the
absence of the Phillips Representative, and (b) the Phillips
Representative, by written notice to the Partnership
Representative, may designate named individuals who shall have
full power and authority to act on behalf of the Phillips
Representative with respect to designated areas of
responsibility.
6.6 THE PARTNERSHIP REPRESENTATIVE. The Partnership shall appoint
an individual as the Partnership Representative; provided,
however, that the Partnership may at any time in its sole
discretion by written notice to Phillips designate a substitute
or replacement Partnership Representative. The Partnership
Representative shall not have any
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authority to amend this Agreement. The Partnership
Representative shall receive required reports, and shall be
available during normal business hours for consultation with
the Phillips Representative and other Phillips personnel.
Phillips shall be entitled to rely upon any consents, approvals
or authorizations provided by the Partnership Representative.
No directions or approvals given by any Partnership personnel
other than the Partnership Representative shall be binding upon
the Partnership, except that (a) the Partnership Representative
may notify Phillips in writing of any alternate representative
who may act in the absence of the Partnership Representative,
and (b) the Partnership Representative, by written notice to
the Phillips Representative, may designate named individuals
who shall have full power and authority to act on behalf of the
Partnership Representative with respect to designated areas of
responsibility.
6.7 OBLIGATION TO PROVIDE AUXILIARY BOILERS. Notwithstanding the
provisions of Section 15, in the event the Standby Boilers are
no longer capable of operation or cannot supply Steam up to the
Maximum Steam Requirement, the Partnership shall within twelve
(12) hours after such damage or destruction rent, and advise
Phillips that it has rented, auxiliary boilers sufficient to
supply Steam up to the Maximum Steam Requirement and that such
boilers will be available for operation within seven (7) days.
In the event the Partnership fails to rent such auxiliary
boilers and notify Phillips as required above, then Phillips
shall have the right, on behalf of and at the Partnership's
cost and expense, to rent and operate auxiliary boilers
sufficient to supply Steam up to the Maximum Steam Requirement.
Phillips may offset any such reasonable costs and expenses
incurred by it against Fixed Steam O&M and Fixed Steam Capacity
Payments due to the Partnership hereunder. The Partnership
shall continue to rent auxiliary boilers sufficient to meet the
steam requirements of HCC which are not in excess of the
Maximum Steam Requirement until the earlier to occur of (a)
such time as the Partnership is capable of providing Steam up
to the Maximum Steam Requirements of HCC or (b) termination of
this Agreement.
7. MAINTENANCE AND REPAIR OF THE PROJECT
7.1 THE PARTNERSHIP'S MAINTENANCE OBLIGATIONS. After the Commercial
Operation Date, the Partnership shall keep and maintain the
Power Plant in good operating condition, consistent with
Prudent Operating Practices, and shall make or cause to be made
all repairs and equipment overhauls necessary to keep the Power
Plant in such condition. The Partnership shall be responsible,
at its expense, for the maintenance, repair and replacement of
(a) the Development and Construction Easement Improvements
through the Commercial
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Operation Date and (b) the Operating Easement Improvements, and
for keeping such improvements in good operating condition,
consistent with Prudent Operating Practices. The Partnership
shall repair and restore operation of the Easement Improvements
for which it has the responsibility to maintain as soon as
reasonably practicable after notice of any failure or damage.
Except under emergency circumstances, the Partnership shall use
its Best Commercial Efforts to schedule any planned maintenance
outages for such Easement Improvements during planned outages
for HCC; provided, however, the Partnership shall not be forced
to accept a maintenance schedule which would conflict with its
obligations to Third Party Purchasers, materially increase
maintenance costs or cause damage to the Power Plant.
7.2 PHILLIPS' MAINTENANCE OBLIGATIONS. After the Commercial
Operation Date, Phillips shall be responsible, at its expense,
for the maintenance, repair and replacement of the Development
and Construction Easement Improvements, and for keeping such
improvements in good operating condition, consistent with
Prudent Operating Practices. Phillips shall repair and restore
operation of the Development and Construction Easement
Improvements as soon as reasonably practicable after notice of
any failure or damage. Except under emergency circumstances,
Phillips shall use its Best Commercial Efforts to schedule any
planned maintenance outages for the Development and
Construction Easement Improvements during planned outages for
the Power Plant; provided, however, Phillips shall not be
forced to accept a maintenance schedule which would conflict
with its obligations to third parties, materially increase
maintenance costs or cause damage to HCC. In the event Phillips
requires that the Development and Construction Easement
Improvements be taken out of service for maintenance, repair or
any other reason on an emergency basis, Phillips shall promptly
notify the Partnership and shall use its Best Commercial
Efforts to minimize any interruption in the delivery of Steam,
Condensate or Water while completing such maintenance or
repairs. Notwithstanding the foregoing provisions of this
Section 7.2, the maintenance costs for the high voltage
equipment at HCC substation 1 shall be shared equally between
the Parties.
7.3 SCHEDULED MAINTENANCE FOR THE POWER PLANT AND HCC. No later
than December 1st of each year the Parties shall exchange
production schedules which identify periods for planned outages
of the Power Plant and HCC. The Parties shall use their
respective Best Commercial Efforts to work together to maximize
efficiencies and minimize downtime for maintenance outages at
both the Power Plant and HCC. The Parties shall notify each
other by telephone as soon as possible concerning the cause and
anticipated duration of any forced outage of their respective
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facilities. Subject to obligations to third parties, whenever
possible, the Parties shall coordinate scheduled maintenance
requiring outages of the Power Plant and HCC. Neither Phillips
nor the Partnership shall be forced to accept a maintenance
schedule which would conflict with its obligations to third
parties, materially increase maintenance costs or cause damage
to the Power Plant, the Easement Improvements or HCC.
7.4 INSPECTION AND OBSERVATION RIGHTS. At any time, upon reasonable
advance notice and the availability of the Project Site manager
or a designee to accompany Phillips, and provided the
Partnership has approved the names of the Phillips authorized
representatives, Phillips and its authorized representatives
shall have the right to enter upon the Project Site and to
obtain access to the Power Plant to inspect and observe the
operation and condition of the Power Plant. Any inspection by
Phillips shall not relieve the Partnership of any of its
obligations under the Project Agreements. Pursuant to the terms
of the Project Agreements, upon reasonable advance notice, the
availability of the HCC Site general manager or a designee to
accompany the Partnership, and provided Phillips has approved
the names of the Partnership's authorized representatives, the
Partnership and its authorized representatives shall have the
right to enter upon the HCC Site and to obtain access to the
Development and Construction Easement Improvements to inspect
and observe the operation and condition of such facilities. Any
inspection by the Partnership shall not relieve Phillips of any
of its obligations under the Project Agreements.
8. METERING
8.1 METERING DEVICES. At the Partnership's expense, the Partnership
shall install or cause to be installed the Metering Devices for
determining the quantity (and any other parameters deemed
appropriate by the Partnership and Phillips) of the Steam and
Electrical Energy delivered by the Partnership under this
Agreement. All such Metering Devices shall be owned and
maintained by the Partnership. Phillips shall provide the
Partnership adequate space for those Metering Devices which are
to be installed at the HCC Site.
8.2 PERIODIC INSPECTION. The Partnership shall inspect and test all
Metering Devices upon installation thereof. In addition, on an
annual basis thereafter or upon the request of Phillips, the
Partnership shall inspect and test each Metering Device and
shall provide Phillips reasonable advance notice of, and shall
permit an authorized representative of Phillips to be present
at, any such inspection or test. The cost and expense of any
such inspection or test shall be paid by the
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Partnership. If a Metering Device is found to be defective or
inaccurate, it shall promptly be adjusted, calibrated, repaired
or replaced by the Partnership at the Partnership's cost and
expense. If at any time Phillips desires to independently test
the Metering Devices, Phillips shall have the right to test a
Metering Device upon reasonable advance notice to the
Partnership and upon the availability of the Project Site
manager or a designee to accompany Phillips. Phillips shall
bear the cost of any such testing if the Metering Device is
determined to be accurate within the tolerances indicated in
Section 8.3, but the Partnership shall otherwise bear the cost
of such testing.
8.3 RETROACTIVE ADJUSTMENTS. If a Metering Device fails to
register, or if the measurement made by a Metering Device is
found upon testing to be inaccurate by an amount exceeding plus
or minus two percent (2%) of full scale with respect to a
Metering Device measuring Steam, or by an amount exceeding plus
or minus one half of one percent (.5%) with respect to a
Metering Device measuring Electrical Energy, an adjustment
shall be made correcting all measurements of Steam and
Electrical Energy made by the inaccurate or defective Metering
Device during the Adjustment Period. If the Parties are unable
to agree on the amount of the adjustment to be applied to the
Adjustment Period, the amount of the adjustment shall be
determined (a) by correcting the error if the percentage of
error is ascertainable by calibration, tests or mathematical
calculation, or (b) if not so ascertainable, by estimating on
the basis of deliveries under similar conditions during periods
when the Metering Device was registering accurately. Upon the
determination of the amount of any adjustment, Phillips shall
pay to the Partnership any additional amounts then due for
deliveries of Steam or Electrical Energy during the Adjustment
Period at such time as other payments are due for the Billing
Period in which the determination is made, or Phillips shall be
entitled to a credit against the next subsequent payments due
for deliveries of Steam or Electrical Energy, whichever case is
applicable.
8.4 ACCESS TO METERING DEVICES. Pursuant to the terms of the
Project Agreements, upon reasonable advance notice, the
availability of the HCC Site general manager or a designee to
accompany the Partnership, and provided Phillips has approved
the names of the Partnership's authorized representatives, the
Partnership and its authorized representatives shall have the
right to enter upon the HCC Site and to obtain access to the
Metering Devices owned and maintained by the Partnership on the
HCC Site to read, inspect, test, repair and remove such
Metering Devices.
9. REVIEW MEETINGS
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After the Commercial Operation Date, unless otherwise mutually agreed by
the Parties, the Partnership shall conduct a quarterly Review Meeting with
Phillips to discuss information pertinent to the operation or maintenance of the
Project or any other matters pertinent to the performance of the Parties under
the Project Agreements. Review Meetings shall take place at the Project Site,
unless otherwise agreed by the Phillips Representative and the Partnership
Representative.
10. SALES TO THIRD PARTY PURCHASERS
The Parties acknowledge that the Power Plant is intended to have an
aggregate generating capacity in excess of the Firm Capacity and Interruptible
Capacity committed to Phillips pursuant to this Agreement. The Partnership shall
be entitled at any time, in its sole discretion, to make deliveries and sales of
such excess electrical energy and electrical capacity from the Power Plant to
HL&P and other Third-Party Purchasers under short-term or long-term
arrangements. The Partnership shall have sole responsibility for the marketing
and sale of such electrical energy and electrical capacity to HL&P and
Third-Party Purchasers. Any sales to Third-Party Purchasers shall be consistent
with the Partnership's obligations under this Agreement and shall not adversely
affect deliveries of Electrical Energy or Firm Capacity and Interruptible
Capacity to Phillips hereunder.
11. TERM OF AGREEMENT
11.1 TERM. This Agreement shall be in effect for the Initial Term
and any Renewal Term or Phillips Extension Term, unless
terminated earlier in accordance with the other provisions of
this Agreement.
11.2 RENEWAL TERM. Three (3) years prior to the end of the Initial
Term, the Parties shall meet and negotiate for such terms,
conditions and pricing for the renewal of the Project
Agreements as may be mutually acceptable to the Parties. If the
Parties reach a mutual agreement on the terms, conditions and
pricing for extending the Initial Term of the Project
Agreements, then the Project Agreements shall be extended on
such negotiated terms for a Renewal Term.
11.3 PHILLIPS EXTENSION TERM. In the event the Parties can not reach
mutual agreement under Section 11.2, then Phillips shall have
the option, exercisable by delivering a written notice to the
Partnership no later than two (2) years prior to the end of the
Initial Term, to extend the Initial Term of all of the Project
Agreements in effect as of the last day of the Initial Term for
the Phillips Extension Term upon the same terms and conditions
as are applicable as of the end of the Initial Term, except
that the price for Electrical Energy and Steam shall not
include the Electrical Capacity Payment or Fixed Steam Capacity
Payment. If during the Electrical Option Period Phillips
exercised the option to adjust as set forth in Section 2.8, the
Partnership shall notify Phillips of any
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uncommitted electrical energy and electrical capacity up to 90
MW which may become available during the Phillips Extension
Term and the Parties may negotiate regarding the price of any
such electrical energy and capacity. If Phillips does not elect
to extend the Project Agreements for the Phillips Extension
Term, the Term of this Agreement shall end upon the expiration
or other termination of the Initial Term.
12. INSURANCE
12.1 INSURANCE COVERAGES. From after the earlier of Financial
Closing or the Equity Commitment Date, the Partnership shall,
at all times during the Term of this Agreement or any other
Project Agreement, provide and maintain the types and amounts
of insurance as set forth in this Section 12. In the event any
insurance (including the limits thereof) hereby required to be
maintained is not reasonably available or obtainable on a
commercially reasonable basis in the commercial insurance
market, the Partnership may request Phillips to agree that such
requirements be reduced or eliminated for a specified period,
and Phillips shall not unreasonably withhold its agreement to
waive such requirements for the specified period. The
Partnership shall procure at its own expense, and shall
maintain in full force and effect during the Term of this
Agreement or any other Project Agreement (or as otherwise
provided in this Section 12) with insurance carriers (with the
exception of captive insurance companies used as provided in
Section 12.8) having an A.M. Best rating of B++VII or better or
of recognized responsibility satisfactory to Phillips, the
types and amount of insurance and with limits and coverages no
less than those set forth below.
12.1.1 WORKERS' COMPENSATION INSURANCE. Workers'
Compensation insurance as required by state laws, and
Employer's Liability (including Occupational Disease)
coverage with limits of One Million Dollars
($1,000,000).
12.1.2 COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial
General Liability insurance with a combined single
limit of not less than One Million Dollars
($1,000,000) per occurrence. Such coverage shall
include Premises/Operations, Broad Form Property
Damage and Personal Injury, Products-Completed
Operations, Explosion, Collapse and Underground
Hazards coverage, Broad Form Contractual Liability
and Independent Contractors Liability.
12.1.3 AUTOMOBILE LIABILITY INSURANCE. Automobile Liability
Insurance including coverage for owned, non-owned and
hired
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automobiles with a combined single limit of not less
than One Million Dollars ($1,000,000) per occurrence.
12.1.4 EXCESS/UMBRELLA LIABILITY INSURANCE. Excess/Umbrella
Liability insurance covering claims in excess of the
underlying insurance described in Sections 12.1.1
through 12.1.3, with a combined single limit of
Twenty-Nine Million Dollars ($29,000,000) per
occurrence.
The amounts of insurance required in Sections 12.1.1 through 12.1.4 may be
satisfied by purchasing coverage in the amounts specified or by any combination
thereof, so long as such insurance meets the requirements specified herein.
12.2 ENDORSEMENTS. All policies of insurance described in Sections
12.1.1 through 12.1.4 to be maintained by the Partnership shall
be written or endorsed as follows:
12.2.1 WAIVER OF SUBROGATION. With respect to Workers'
Compensation/Employer's Liability Insurance, to
provide that the insurer (a) shall waive for the
benefit of Phillips (i) all rights of subrogation
against Phillips, its Affiliates, co-venturers, or
their directors, officers, employees or agents, for
payment under such policies, (ii) any right of
set-off and counterclaim, and (iii) any other right
to deduction whether by attachment or otherwise by
any Person to or for whom the insurer pays monies or
other benefits, and (b) in the event and to the
extent that the Parties agree that such provisions
are available on commercially reasonable terms, shall
assign and relinquish to Phillips such rights of
recovery, including any rights of liens;
12.2.2 SEVERABILITY. To provide a severability of interest
of the cross liability clause;
12.2.3 PRIMARY COVERAGE. That the insurance shall be primary
and not excess to or contributing with any insurance
or self-insurance maintained by Phillips; and
12.2.4 ADDITIONAL INSURED. With the exception of the
insurance required under Section 12.1.1, to name
Phillips, its Affiliates and co-ventures at HCC, and
their directors, officers, employees and agents, as
additional insureds with respect to any injury or
damage arising from any work or services performed by
the Partnership, its Affiliates, their contractors or
agents under the Project Agreements or the presence
of the Partnership, its Affiliates, their contractors
or agents, on Phillips' premises.
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12.3 ALL-RISK PROPERTY INSURANCE.
12.3.1 BUILDER'S ALL-RISK INSURANCE AND ALL-RISK PROPERTY
AND BOILER AND MACHINERY INSURANCE. The Partnership
shall procure and maintain at its own expense (a)
Builder's All-Risk Insurance covering physical loss
or damage to the Project and its assets (without an
exclusion for resultant damage from defective
materials and parts and with limits not less than the
full replacement value of the Project, including all
assets on or off the Project Site or in transit) and
(b) effective upon the Commercial Operation Date,
All-Risk Property and Boiler and Machinery insurance
covering physical loss or damage during the operation
of the Project. The All-Risk Property and Boiler and
Machinery insurance shall not contain an exclusion
for resultant damage from defective materials and
parts. Such insurance shall have limits not less than
the Estimated Maximum Loss of the Project and shall
include coverage for Three Million Dollars
($3,000,000) for extra expense which would be
incurred by the Partnership in supplying an alternate
source of steam to Phillips in the event such steam
was not available from the Project.
12.3.2 WAIVER OF SUBROGATION. The insurance required in this
Section 12.3 shall be (a) written or endorsed to
provide for a waiver of subrogation for the benefit
of Phillips, its Affiliates or co-venturers at HCC,
and their directors, officers, employees and agents,
and (b) provided by insurance carriers with an A.M.
Best rating of B++VII or shall be of recognized
responsibility satisfactory to Phillips.
12.4 CONTRACTORS AND SUBCONTRACTORS. The Partnership shall at all
times during the Term of this Agreement or any other Project
Agreement, cause every contractor or subcontractor employed by
the Partnership to carry insurance of types and amounts
necessary to cover risks inherent in the work or services being
performed by such contractors or subcontractors. Coverages for
completed operations under the Commercial General Liability
insurance provided by the prime general contractor and its
subcontractors during the construction of the Project shall
remain in effect for a period of at least two (2) years
following the Commercial Operation Date. Alternatively, the
Partnership may arrange any or all insurance policies on behalf
of the contractors and subcontractors. When requested by
Phillips, the Partnership shall furnish Phillips with
certificates of insurance evidencing coverage for each
contractor and subcontractor.
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12.5 PHILLIPS INSURANCE COVERAGES. At all times during the Term of
this Agreement or any other Project Agreement, Phillips, its
Affiliates and co-venturers, and insurers shall waive (a) any
right of recovery which Phillips or the insurer may have or
acquire against the Partnership, its Affiliates, or their
directors, officers, employees or agents, for payment under
those policies or coverages set forth below and (b) any right
of subrogation which Phillips or the insurers may have or
acquire for payments to any Person who asserts a claim against
the Partnership, its Affiliates, or their directors, officers,
employees or agents, by any Person to or for whom the insurer
pays monies or other benefits:
12.5.1 WORKERS' COMPENSATION INSURANCE. Workers'
Compensation Insurance as required by state law and
Employer's Liability Insurance (including
Occupational Disease) coverage with limits of One
Million Dollars ($1,000,000).
12.5.2 COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial
General Liability Insurance with a combined single
limit of not less than One Million Dollars
($1,000,000) per occurrence. Such coverage shall
include Premises/Operations, Broad Form Property
Damage and Personal Injury, Products-Completed
Operations, Explosion, Collapse and Underground
Hazards coverage, Broad Form Contractual Liability
and Independent Contractors Liability.
12.5.3 AUTOMOBILE LIABILITY INSURANCE. Automobile Liability
insurance, including coverage for owned, non-owned
and hired automobiles with a combined single limit of
not less than One Million Dollars ($1,000,000) per
occurrence.
12.5.4 EXCESS/UMBRELLA LIABILITY INSURANCE. Excess/Umbrella
Liability insurance covering claims in excess of the
underlying insurance described in Sections 12.5.1
through 12.5.3 with a combined single limit of
Twenty-Nine Million Dollars ($29,000,000) per
occurrence.
12.5.5 PROPERTY INSURANCE. All-Risk Property Insurance which
shall cover assets at HCC in an amount of not less
than Two Hundred Million Dollars ($200,000,000).
Phillips shall have the right to self-insure any or part of the coverage
shown in this Section 12.5. In the event the long term senior unsecured
debt securities of Phillips fall below both BBB- by Standard & Poor's
Corporation and Baa3 by Moody's Investors Service, Phillips will procure
insurance in excess of One Million Dollars ($1,000,000) up to Phillips'
insurance captive's then full retentions
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from insurers not affiliated with Phillips which have a Best rating of
no less than A-10.
12.6 EVIDENCE OF INSURANCE. Prior to the initiation or performance
of any work or services under the Project Agreements, the
Partnership and Phillips shall furnish to each other
certificates of insurance from each insurance carrier showing
that the above required insurance and endorsements are in full
force and effect, the amount of the carrier's liability
thereunder, and further providing that the insurance will not
be canceled, materially changed or not renewed until the
expiration of at least thirty (30) days (or ten (10) days in
the case of cancellation due to non-payment of premiums) after
written notice of such cancellation, material change or
nonrenewal has been received by Phillips or the Partnership,
respectively; provided, however, that in the event and to the
extent that Phillips, in its sole discretion, shall self-insure
any such coverages, Phillips shall provide to the Partnership
written notice of such self-insurance.
12.7 DISCLAIMER. The insurance requirements set out in this Section
12 are not a representation that the coverage and limits
provided thereby are sufficient to protect the interest of the
Partnership or Phillips and shall not be deemed as a limitation
on the Partnership's or Phillips' liability.
12.8 PLACEMENT OF INSURANCE COVERAGE WITH CAPTIVE.
12.8.1 PHILLIPS' CAPTIVE INSURER. Phillips shall have the right
to use its wholly-owned captive insurance company to insure or
reinsure part of all of the coverage shown in Section 12.5.
Such captive insurance company shall maintain capital and
surplus of at least One Hundred Million Dollars ($100,000,000)
throughout the period during which the captive insurance
company shall provide coverage to Phillips. Audited annual
reports for the captive insurance companies shall be provided
at the request of the Parties or of a Project Financing Entity
each year.
12.8.2 THE PARTNERSHIP'S CAPTIVE INSURER. The Partnership shall
have the right to use its wholly-owned captive insurance
company, if any, to insure or reinsure part of all of the
coverage shown in Section 12.1. Such captive insurance company
shall maintain capital and surplus of at least One Hundred
Million Dollars ($100,000,000) throughout the period during
which the captive insurance company shall provide coverage to
the Partnership. Audited annual reports for the captive
insurance companies shall be provided at the request of the
Parties or of a Project Financing Entity each year.
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13. INDEMNIFICATION
13.1 RELEASE AND INDEMNIFICATION BY THE PARTNERSHIP. Subject to the
limitation set forth in Section 13.4, the Partnership shall
release, indemnify, defend and hold Phillips, its Affiliates,
and each of their employees, directors and agents, harmless
from and against any and all damages, liabilities, expenses and
costs (including court costs and reasonable attorneys' fees) as
a result of any claims, demands, suits, causes of action,
proceedings or judgments for (a) any damage to or loss of
property (including the Project) of the Partnership, its
Affiliates, or any of the Partnership's partners (excluding
Phillips if it is a partner) or (b) any personal injury or
death to any of the employees, contractors, agents or Invitees
of the Partnership, its Affiliates, or any of the Partnership's
partners (excluding Phillips if it is a Partner); provided,
however, that such indemnity and release shall not apply to any
damage to land or water which is the subject of the
environmental indemnity provisions in the Ground Lease and
Easement Agreement.
13.2 RELEASE AND INDEMNIFICATION BY PHILLIPS. Subject to the
limitation set forth in Section 13.4, Phillips shall release,
indemnify, defend and hold the Partnership, its Affiliates, any
of the Partnership's partners and each of their employees,
directors and agents harmless from and against any and all
damages, liabilities, expenses and costs (including court costs
and reasonable attorneys' fees) as a result of any claims,
demands, suits, causes of action, proceedings or judgments for
(a) any damage to or loss of property (including HCC) of
Phillips or its Affiliates or (b) of any personal injury or
death to any of the employees, contractors, agents or Invitees
of Phillips or its Affiliates; provided, however, that such
indemnity and release shall not apply to any damage to land or
water which is the subject of the environmental indemnity
provisions in the Ground Lease and Easement Agreement.
13.3 COMPREHENSIVE CONSTRUCTION AND APPLICATION. THE PARTIES HEREBY
EXPRESS THEIR INTENT THAT THE RELEASES OF LIABILITY AND
INDEMNITIES CONTAINED IN SECTIONS 13.1 AND 13.2 ABOVE BE
LIBERALLY CONSTRUED. SUCH RELEASES OF LIABILITY AND INDEMNITIES
SHALL APPLY TO ANY LOSS, DAMAGE, DEFECT, PERSONAL INJURY OR
DEATH:
(A) WHICH ARISES FROM THE PERFORMANCE OF THE PROJECT
AGREEMENTS; AND
(B) WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF, INCLUDING,
WITHOUT LIMITATION, UNSEAWORTHINESS, STRICT LIABILITY,
BREACH OF WARRANTY (EXPRESS OR
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IMPLIED), IMPERFECTION OF MATERIALS, CONDITION OF ANY
PREMISES OR TRANSPORT TO OR FROM SUCH PREMISES, OR THE
NEGLIGENCE OF THE INDEMNITEE (OR RELEASED PARTY) OR ITS
EMPLOYEES, AGENTS AND INVITEES, WHETHER SUCH NEGLIGENCE BE
SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE; AND
(C) WHETHER THE CLAIM THEREFOR IS BASED ON COMMON LAW, CIVIL
LAW, MARITIME LAW, STATUTE OR CONTRACTUAL OBLIGATION
BETWEEN THE INDEMNITEE AND A THIRD PARTY.
13.4 LIMITATION ON INDEMNITIES. Notwithstanding anything to the
contrary contained herein, it is expressly agreed that
liability under the indemnities and releases contained in
Section 13.1 and 13.2 (including the obligation for attorneys'
fees and costs of defense) arising out of any single occurrence
which directly or indirectly results in coverage relating to
personal injury to or death of employees, agents, contractors,
their respective employees or Invitees, shall be limited to
Seven Million Five Hundred Thousand Dollars ($7,500,000). If in
the course of defense by either Party or any claims subject to
this Section 13.4, a Party believes its potential liability
under the indemnities set forth in Section 13.1 or 13.2, as
applicable, is likely to exceed the Seven Million Five Hundred
Thousand Dollar ($7,500,000) limitation, said Party shall have
the option of notifying the other Party that it will
unconditionally agree to pay the other Party the first Seven
Million Five Hundred Thousand Dollars ($7,500,000) of damages,
liabilities, expenses and costs (including but not limited to
court costs and attorneys' fees). The notifying Party shall
transfer the defense of all pending suits and claims subject to
this Section 13.4 to the other Party, and will cooperate in
arranging for an orderly transition in responsibility for
handling such suits and claims. The other Party shall, at its
option, be entitled to require that the notifying Party provide
security in a form satisfactory to the other Party to guarantee
payment of the Seven Million Five Hundred Thousand Dollars
($7,500,000) less any amount of damages, liabilities, expenses
and costs already incurred by the notifying Party (all of which
will be credited against this Seven Million Five Hundred
Thousand Dollar ($7,500,000) maximum payment under the
indemnities and releases contained in Sections 13.1 and 13.2).
To the extent any amount of damages, liabilities, expenses and
costs exceed the limitation set forth in this Section 13.4, the
Parties shall rely upon such rights and remedies as they may
have at law or in equity.
13.5 PROPERTY DAMAGE EXCLUSION. Notwithstanding the provisions of
Sections 13.1 and 13.2, each Party shall be liable to the
extent of its
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negligence for damage to the property of the other Party or its
Affiliates for the first One Hundred Thousand Dollars
($100,000) per occurrence.
13.6 MUTUAL INDEMNIFICATION FOR BREACH OF REPRESENTATIONS; FINES AND
PENALTIES.
13.6.1 PARTNERSHIP INDEMNIFICATION. The Partnership shall
indemnify, defend and hold Phillips, its Affiliates,
and each of their employees, directors and agents,
harmless from and against any and all (i) damages,
liabilities, expenses and costs (including court
costs and reasonable attorneys' fees) as a result of
any claims, demands, suits, causes of action,
proceedings or judgments arising as a result of the
breach of any of the representations and warranties
made by the Partnership herein, or (ii) any and all
fines or penalties (criminal or civil) or other
liabilities, expenses and costs (including court
costs and reasonable attorneys' fees) incurred or
paid as a result of any claims, demands, suits,
causes of action, proceedings or judgments made or
asserted by any Person against Phillips, its
Affiliates, or any of their employees, directors or
agents, for failure of the Partnership to comply with
any applicable Law or Permit related to the
performance of the obligations of the Partnership,
its Affiliates, or their employees, contractors or
agents, under the Project Agreements or arising out
of or otherwise related to the operation of the
Project; provided, however, that such indemnity shall
not apply to the extent that such fine, penalty or
other liability, expense or cost results from any
environmental matter which is the subject of the
environmental indemnity provisions in the Ground
Lease and Easement Agreement.
13.6.2 PHILLIPS INDEMNIFICATION. Phillips shall indemnify,
defend and hold the Partnership, its Affiliates, and
each of their employees, directors and agents,
harmless from and against any and all (i) damages,
liabilities, expenses and costs (including court
costs and reasonable attorneys' fees) as a result of
any claims, demands, suits, causes of action,
proceedings or judgments arising as a result of the
breach of any of the representations and warranties
made by Phillips herein, or (ii) any and all fines or
penalties (criminal or civil) or other liabilities,
expenses and costs (including court costs and
reasonable attorneys' fees) incurred or paid as a
result of any claims, demands, suits, causes of
action, proceedings or judgments made or asserted by
any Person against the Partnership, its Affiliates,
or any of their employees,
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directors or agents, for failure of Phillips to
comply with any applicable Law or Permit related to
the performance of the obligations of Phillips, its
Affiliates, or their employees or agents, under the
Project Agreements or arising out of or otherwise
related to the operation of HCC; provided, however,
that such indemnity shall not apply to the extent
that such fine, penalty or other liability, expense
or cost results from any environmental matter which
is the subject oF environmental indemnity provisions
in the Ground Lease and Easement Agreement.
13.7 EXCLUSIONS FROM RELEASES AND INDEMNITIES. Notwithstanding
anything to the contrary contained herein, the releases of
liabilities and indemnifications contained in Sections 13.1,
13.2 and 13.6 above and Section 2.7.3 of the Ground Lease and
Easement Agreement shall not apply to awards or assessment of
punitive damages and may not be relied upon by a Party to the
extent that any claim or liability was caused by the willful
misconduct of such Party.
13.8 NOTICE OF LEGAL DEFENSE. After receipt of notice of the
commencement of any legal action or claim against a Party as to
which the indemnities in this Section 13 may apply, the
indemnified Party shall provide reasonably prompt written
notice to the indemnifying Party; provided, however, that the
failure of the indemnified Party to provide such reasonably
prompt notice shall not relieve the indemnifying Party of any
obligations under this Section 13, but shall only reduce the
liability of the indemnifying Party by the amount of damages
attributable to the failure of the indemnified Party to give
such reasonably prompt notice. After receipt of such notice,
the indemnifying Party may, or if so requested by such
indemnified Party shall, assume the defense of such claim or
legal action without any reservation of rights and with counsel
reasonably satisfactory to the indemnified Party. The
indemnifying Party shall control the settlement of all claims
over which it has assumed defense; provided, however, that the
indemnifying Party shall not conclude any settlement which
requires any action or forbearance from action by the
indemnified Party or any of its Affiliates without the prior
written approval of the indemnified Party. In connection with
any such legal action or claim, when requested the indemnified
Party shall provide reasonable assistance, at the indemnifying
Party's expense, to the indemnifying Party. In all cases the
indemnified Party shall have the right to participate in and be
represented by counsel of its own choice and at its own expense
in any such legal action or claim.
13.9 APPLICATION OF INDEMNITIES. Except as specifically provided in
Sections 13.1, 13.2 and 13.6 above, the indemnities and
releases provided in this Section 13 shall be in addition to
and not in derogation
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or substitution of the releases or indemnifications provided
elsewhere in the Project Agreements.
13.10 SURVIVAL. The provisions of this Section 13 shall survive the
termination or expiration of the Project Agreements.
14. LIABILITY; NO DEDICATION
14.1 THIRD PARTIES. Except as otherwise expressly provided in
Section 13, nothing in this Agreement shall be construed to
create any duty to, standard of care with respect to, or any
liability to, any Person who is not a party to this Agreement.
14.2 NO DEDICATION. No undertaking by either Party under any
provision of this Agreement shall constitute the dedication of
that Party's electrical or transmission system, equipment or
facilities, or any portion thereof, to the other Party or to
the public, or affect the status of Phillips or of the
Partnership as an independent private entity and not a public
utility.
14.3 NO PARTNERSHIP. Nothing contained in this Agreement shall be
construed to create as between Phillips and the Partnership an
association, trust, partnership, joint venture, association
taxable as a corporation or other entity for the conduct of any
business for profit, or impose a trust or partnership duty,
obligation or liability or agency relationship on, or with
regard to, either Party. Each Party shall be individually and
severally liable for its own obligations under this Agreement.
14.4 NO CONSEQUENTIAL DAMAGES. The Parties agree that it is the
intent that notwithstanding anything to the contrary contained
in Section 14.5, neither Phillips nor the Partnership, nor
their respective officers, directors, partners, shareholders,
agents, employees, contractors or Affiliates, shall be liable
to the other Party or to its Affiliates, officers, directors,
shareholders, partners, agents, employees, successors or
assigns, for claims for incidental, special, indirect, punitive
or consequential damages of any nature connected with or
resulting from performance or non-performance of this
Agreement, including claims in the nature of lost revenue,
income or profits, irrespective of whether such claims are
based upon negligence, strict liability, contract, operation of
law or otherwise; provided, however, nothing in the foregoing
shall limit the obligation of a party to indemnify the other
party (the "Indemnitee") with respect to claims against the
Indemnitee under indemnities of the Indemnitee in favor of its
lenders and contractors to the extent such claims are otherwise
within the terms of Section 13.1 or Section 13.2 (as
applicable) hereof. Notwithstanding the foregoing, it is
specifically intended by the Parties that, subject to the duty
to mitigate,
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direct damages incurred as a result of a breach of the Project
Agreements, including payments, costs and expenses required
under the Project Agreements are not to be construed as
consequential damages or otherwise restricted hereunder.
14.5 INTENT. Except in cases of willful misconduct, the Parties
intend that the waivers and disclaimers of liability, releases
from liability, limitations and apportionments of liability,
and remedy provisions expressed throughout this Agreement shall
apply even in the event of the fault, negligence (in whole or
in part), strict liability or breach of contract of the Party
released or whose liability is waived, disclaimed, limited,
apportioned or fixed by such remedy provision, and shall extend
to such Party's Affiliates and to its and their partners,
shareholders, directors, officers, employees, contractors and
agents. The Parties also intend and agree that such provisions
shall continue in full force and effect notwithstanding the
termination, suspension, cancellation or rescission of this
Agreement, or of any other agreement entered into pursuant
hereto.
15. FORCE MAJEURE
15.1 EXCUSED PERFORMANCE. Each Party shall be excused from
performance hereunder and shall not be considered to be in
default or be liable in damages or otherwise with respect to
any obligation hereunder, except the obligation to pay money in
a timely manner for liabilities actually incurred, if and to
the extent that its failure of, or delay in, performance is due
to a Force Majeure Event; provided, that:
(a) Such Party gives the other Party written notice
describing the particulars of the Force Majeure Event,
including the expected duration, as soon as is reasonably
practicable, but in no event later than ten (10) days
after the occurrence of such event;
(b) The suspension of performance is of no greater scope
and of no longer duration than is reasonably required by
the Force Majeure Event;
(c) The Party affected by the Force Majeure Event uses its
Best Commercial Efforts to mitigate the effects thereof;
(d) No obligations of the Party which arose before the
occurrence causing the suspension of performance are
excused as a result of the occurrence; and
(e) When the Party is able to resume performance of its
obligations under this Agreement, such Party shall give
the other
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Party written notice to that effect and shall promptly
resume performance hereunder.
15.2 BURDEN OF PROOF. If the Parties are unable in good faith to
agree that a Force Majeure Event has occurred, the Parties
shall submit the dispute for resolution in accordance with the
Dispute Resolution Procedures, and the Party claiming a Force
Majeure Event shall have the burden of proof as to whether such
Force Majeure Event has occurred.
15.3 TERMINATION FOR FORCE MAJEURE.
15.3.1 RIGHT TO TERMINATE.
(a) Either Party may terminate this Agreement with
respect to the purchase and sale of Electrical Energy
upon thirty (30) days written notice if, following
the Commercial Operation Date, a Force Majeure Event
(other than as set forth in Section 15.3.2) hereunder
prevents either Party from substantial performance of
its obligations hereunder with respect to the
purchase and sale of Electrical Energy for a
continuous period of one (1) year.
(b) Either Party may terminate this Agreement with
respect to the purchase and sale of Steam upon thirty
(30) days written notice if, following the Commercial
Operation Date, a Force Majeure Event (other than as
set forth in Section 15.3.2) hereunder prevents
either Party from substantial performance of its
obligations hereunder with respect to the purchase
and sale of Steam for a continuous period of one (1)
year.
15.3.2 DESTRUCTION OR SUBSTANTIAL DAMAGE TO THE POWER PLANT
OR HCC AS THE FORCE MAJEURE EVENT. If destruction or
substantial damage to the Power Plant or HCC is a
Force Majeure Event hereunder, and a Party is
prevented from substantially performing its
obligations hereunder for a continuous period of two
(2) years, then either Party may terminate this
Agreement upon thirty (30) days written notice;
provided, however, if the Partnership does not
complete the rebuilding of the Power Plant as
required pursuant to Section 17.4 and elects to
terminate this Agreement pursuant to this Section
15.3.2, then the Partnership shall pay to Phillips
the Termination Fee, if applicable, pursuant to
Section 17.4.
15.3.3 MITIGATION PLAN. Notwithstanding the foregoing, this
Agreement shall not be terminated as set forth above
if the Party prevented from performing its
obligations is unable,
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despite the use of its Best Commercial Efforts, to
overcome the effects of such Force Majeure Event
during such one (1) or two (2) year period, as the
case may be, but nonetheless has demonstrated to the
reasonable satisfaction of the other Party that (a)
it is pursuing a plan approved by the other Party to
overcome the effects of the Force Majeure Event and
resume performance of its obligations hereunder, (b)
it is diligently applying its Best Commercial Efforts
to overcome the effects of the Force Majeure Event,
and (c) the Force Majeure Event can be overcome
within a reasonable time after the expiration of
either the one (1) or two (2) year period, as the
case may be.
16. EVENTS OF DEFAULT
16.1 DEFINITION. An Event of Default under this Agreement shall be
deemed to exist with respect to a Party upon the occurrence of
any one or more of the following events:
(a) Failure by a Party hereunder to make payment of any
amount due to the other Party under this Agreement, which
failure continues for a period of ten (10) days after
receipt of written notice of such nonpayment, unless such
amount is in dispute, in which case the Dispute Resolution
Procedures shall apply;
(b) Failure by a Party hereunder to perform fully any
other material obligation under this Agreement, if such
Party does not cure such failure within sixty (60) days of
the date of receipt of a notice from the other Party
demanding such cure (or within such longer period of time,
as is reasonably necessary to accomplish such cure, if it
cannot be reasonably accomplished within such sixty (60)
day period and such Party diligently commences such cure
in such period and continues such cure to completion);
(c) Failure by a Party hereunder to comply with the terms
of any final decision or order issued pursuant to the
Dispute Resolution Procedures, if such Party does not cure
such failure within sixty (60) days of the date of receipt
of a notice from the other Party demanding such cure (or
within such longer period of time, as is reasonably
necessary to accomplish such cure, if it cannot be
reasonably accomplished within such sixty (60) day period
and such Party diligently commences such cure in such
period and continues such cure to completion);
(d) If by order of a court of competent jurisdiction, a
receiver or liquidator or trustee of a Party or of any of
the property of a Party shall be appointed, and such
receiver or liquidator or trustee shall
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not have been discharged within a period of sixty (60)
days; or if by decree of such a court, a Party shall be
adjudicated bankrupt or insolvent or any substantial part
of the property of such Party shall have been sequestered,
and such decree shall have continued undischarged and
unstayed for a period of sixty (60) days after the entry
thereof; of if a petition to declare bankruptcy or to
reorganize a Party pursuant to any of the provisions of
the federal Bankruptcy Code, as it now exists or as it may
hereafter be amended, or pursuant to any other similar
state statute applicable to such Party, as now or
hereafter in effect, shall be filed against such Party and
shall not be dismissed within sixty (60) days after such
filing;
(e) If a Party shall file a voluntary petition in
bankruptcy under any provision of any federal or state
bankruptcy law or shall consent to the filing of any
bankruptcy or reorganization petition against it under any
similar law; or, without limitation of the generality of
the foregoing, if a Party shall file a petition or answer
or consent seeking relief or assisting in seeking relief
in a proceeding under any of the provisions of the federal
Bankruptcy Code, as it now exists or as it may hereafter
be amended, or pursuant to any other similar state statute
applicable to such Party, as now or hereafter in effect,
or an answer admitting the material allegations of a
petition filed against it in such a proceeding; or if a
Party shall make an assignment for the benefit of its
creditors; or if a Party shall admit in writing its
inability to pay its debts generally as they become due;
or if a Party shall consent to the appointment of a
receiver or receivers, or trustee or trustees, or
liquidator or liquidators of it or of all or any part of
its property; or
(f) If (i) Calpine shall directly or indirectly cease to
retain at least fifty percent (50%) of all general partner
interests in the Partnership, (ii) Calpine shall directly
or indirectly cease to retain at least twenty-five percent
(25%) of the overall ownership interests in the
Partnership, or (iii) the Partnership ceases to own one
hundred percent (100%) of the Project, in each case
without Phillips' consent, which consent shall not be
unreasonably withheld; provided, however, any foreclosure
by, or transfer in lieu of foreclosure to, any Project
Financing Entities may occur without Phillips' consent and
shall not constitute an Event of Default hereunder.
16.2 REMEDIES FOR DEFAULT. Subject to the provisions of Sections
14.4 and 14.5, upon the occurrence and during the continuation
of an Event of Default, the Party not in default shall have the
right to (a) terminate this Agreement with respect to either
the purchase and sale of Steam or
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Electrical Energy upon five (5) days written notice to the
other Party, or (b) terminate this Agreement in its entirety
upon five (5) days written notice to the other Party (which
notice may be given prior to the expiration of the cure periods
set forth in Section 16.1), in addition to the right to pursue
any remedy under this Agreement, or now or hereafter existing
under applicable Law or in equity; provided, however, that in
the case of an Event of Default with respect to the
Partnership, Phillips shall provide the Project Financing
Entities (a) with notice of such Event of Default and (b) the
opportunity to exercise the cure rights and such other rights,
remedies, acknowledgments, waivers and consents as may be
agreed to by Phillips in a Consent and Agreement in accordance
with the terms thereof.
16.3 REMEDIES NOT EXCLUSIVE. Except as otherwise expressly provided
to the contrary in the Project Agreements regarding the
Development Phase, the rights and remedies herein provided in
case of an Event of Default shall not be exclusive but shall,
to the extent permitted by Law, be cumulative and in addition
to all other rights and remedies existing at Law, in equity or
otherwise, except those rights and remedies which have been
waived or relinquished hereunder by the Parties pursuant to the
provisions of Sections 14.4 and 14.5. No delay or omission of a
Party to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute
a waiver of such default or an acquiescence therein. Every
right and remedy given by this Agreement or by Law to a Party
may be exercised from time to time, and as often as may be
deemed expedient, by such Party.
17. TERMINATION
17.1 TERMINATION DURING THE DEVELOPMENT PHASE. This Agreement shall
terminate in the event that either Party terminates the Project
Agreements during the Development Phase in accordance with
Section 4 of the Development and Construction Agreement.
17.2 TERMINATION FOR FAILURE TO ACHIEVE COMMERCIAL OPERATION.
Phillips shall have the right to terminate this Agreement upon
ten (10) days written notice of the Partnership in the event
the Commercial Operation Date has not occurred on or before
July 12, 2000, unless the Commercial Operation Date does not
occur on such date due to Phillips being in an Event of Default
or as a result of a Force Majeure Event, in which case the
termination date for such failure to achieve the Commercial
Operation Date shall be extended by one day for each day of
such Event of Default or such Force Majeure Event, as the case
may be, but shall not be extended for more than three hundred
sixty-five (365) days due solely to Force Majeure Events.
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17.3 TERMINATION FOR HCC SHUTDOWN. In the event of an HCC Shutdown,
either Party may terminate this Agreement upon thirty (30) days
written notice to the other Party; provided, however, the
Partnership shall continue to supply the residual electrical
energy requirements of HCC, if any, at the prices set forth in
this Agreement for the Variable Fuel Payment and Variable O&M
Payment, and the Electrical Capacity Payment shall be reduced
on a pro rata basis to the amount of electrical capacity being
reserved. Notwithstanding any such termination, the Fixed Steam
O&M Payment, the Fixed Steam Capacity Payment and the
Electrical Capacity Payment shall continue through the end of
the calendar year in which the HCC Shutdown occurs.
17.4 RIGHT TO TERMINATE FOR DESTRUCTION OR SUBSTANTIAL DAMAGE TO THE
POWER Plant. Notwithstanding anything to the contrary contained
herein, in the event the Power Plant is destroyed or
substantially damaged, then the Partnership shall be obligated
to rebuild the Power Plant as soon as possible thereafter such
that the Partnership shall be able to deliver Electrical Energy
and Steam to Phillips hereunder; provided, however, the
Partnership at its option, exercisable by written notice to
Phillips at any time within one hundred eighty (180) days after
the date of such damage or substantial destruction, may elect
not to rebuild the Power Plant and to terminate this Agreement
by paying to Phillips within fifteen (15) days after receipt
forty percent (40%) of each dollar of insurance proceeds
received by the Partnership up to a maximum of the Termination
Fee after first deducting all sums due to the Project Financing
Entities.
17.5 TERMINATION FOR FAILURE TO TAKE OFF-GAS. If Phillips terminates
the Facility Services Agreement because the Partnership was in
an Event of Default under the terms of the Facility Services
Agreement for failure to take Off-Gas, then Phillips may
terminate this Agreement by providing written notice to the
Partnership at any time within sixty (60) days after the
termination of the Facility Services Agreement.
17.6 TERMINATION OF GROUND LEASE AND EASEMENT AGREEMENT. In the
event the Ground Lease and Easement Agreement terminates, this
Agreement shall terminate.
17.7 TERMINATION IN THE EVENT OF FORECLOSURE. In the event of an
election by the Project Financing Entities under Section
13.3(ii) of the Ground Lease and Easement Agreement and the
Project Financing Entities do not assume, or cause a third
party (such third party being subject to the approval and
consent rights of Phillips as set forth in the Project
Agreements) to assume, all of the Partnership's obligations
under the Project Agreements arising after the acquisition date
within thirty (30)
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days of an acquisition (including foreclosure or transfer in
lieu of foreclosure) by the Project Financing Entities of (a)
the Project or the Partnership or any interests therein or (b)
the interests of a lessor in the Project or the Partnership (in
the event a financing lease or other similar financing
technique is used), then Phillips shall have the right to
immediately terminate this Agreement by delivery of written
notice thereof to the Project Financing Entities.
18. DISPUTE RESOLUTION
18.1 PROCEDURE. In the event a dispute arises between Phillips and
the Partnership regarding the application or interpretation of
any provision of this Agreement, the Parties agree to use the
procedures in this Section 18 to resolve any such disputes;
provided, however, that this Section shall not apply to
disputes relating in any manner to any indemnity, insurance or
release obligations under the Project Agreements.
18.2 INITIAL RESOLUTION ATTEMPTS. Either Party may initiate dispute
resolution procedures by sending written notice to the other
Party specifically stating the complaining Party's claim and
requesting dispute resolution in accordance with this Section
18. The receiving Party shall reply with the designation of a
person authorized to settle the dispute and shall list two (2)
alternative dates (both of which must be within ten (10)
Business Days after receipt of the complaint) for meeting at a
mutually agreeable location. If the matter has not been
resolved within ten (10) days of such meeting, each Party shall
refer the dispute to a senior executive of its organization who
shall meet at a mutually agreeable location within fourteen
(14) days to resolve the dispute.
18.3 ALTERNATIVE DISPUTE RESOLUTION. If the matter has not been
resolved within fourteen (14) days of the meeting of the senior
executives, the Parties will attempt in good faith to resolve
the dispute by employing a neutral mediator to attempt to
resolve the dispute in accordance with the CPR Model Procedure
for Mediation of Business Disputes; provided, however, that if
both Parties agree, the Parties can attempt to resolve the
dispute in accordance with the CPR Model Minitrial Procedure.
If the dispute has not been resolved pursuant to Section 18.2
within sixty (60) days of the commencement of such procedure,
the complaining Party may require the dispute to be settled by
arbitration.
18.4 ARBITRATION. All arbitration shall be in accordance with the
CPR Rules for Non-Administered Arbitration of Business Disputes
by three (3) arbitrators who shall be neutral, independent, and
generally knowledgeable about the type of transaction which
gave rise to the dispute. The arbitration shall be governed by
the United States
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Arbitration Act, 9 U.S.C. ss. 1-16; provided, however, that the
arbitrators shall include in their report/award a list of
findings, with supporting evidentiary references, upon which
they have relied in making their decision. The award rendered
by the arbitrators shall be final and binding upon the Parties
and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of
arbitration shall be Houston, Texas.
18.5 GENERAL RULES AND PROVISIONS. Notwithstanding anything to the
contrary contained herein, and regardless of any procedures or
rules of the CPR, it is expressly agreed that the following
shall apply and control over any other provision in this
Section 18:
(a) Except to the extent that the Parties may agree upon
selection of one or more arbitrators, the CPR shall select
arbitrators from a panel reviewed by the Parties. Each
Party shall be entitled to exercise peremptory strikes
against one-third of the panel and may challenge other
candidates for lack of neutrality or lack of
qualification. Challenges shall be resolved in accordance
with the CPR rules.
(b) The Parties shall have at least twenty (20) days following
close of the arbitration hearing within which to submit a
brief (not to exceed eighteen (18) pages in length) and
ten (10) days from date of receipt of the opponent's brief
within which to respond thereto (response not to exceed
ten (10) pages in length).
(c) Arbitrators shall not award punitive damages or attorneys'
fees (except attorneys' fees specifically authorized in
the Project Agreements).
(d) The fees and expenses of the mediator and arbitrators
shall be shared equally by the Parties, and each Party
shall bear its own costs and expenses.
(e) The Parties may by written agreement (signed by both
Parties) alter any time deadline, location(s) for
meeting(s), or procedure outlined in this Section 18 or in
the CPR rules.
(f) Time is of the essence for purposes of the provisions of
this Section 18.
(g) Either Party may seek a restraining order, temporary
injunction, or other provisional judicial relief if the
Party in its sole judgment believes that such action is
necessary to avoid irreparable injury or to preserve the
status quo. The Parties will continue to participate
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in good faith in the procedures despite any request for
provisional relief. Notwithstanding anything to the
contrary contained herein, in no event shall this Section
18.5(g) apply to Phillips' exercise of the Standby Boilers
Operating Rights, and the Partnership covenants and
agrees, and shall cause the Partners to covenant and
agree, not to seek a restraining order, temporary
injunction, or other provisional judicial relief with
respect to Phillips' exercise of the Standby Boilers
Operating Rights.
(h) The arbitrators shall have no authority, power or right to
alter, change, amend, modify, waive, add to or delete from
any of the provisions of the Project Agreements, and any
award rendered by the arbitrators shall be consistent with
the terms and conditions of the Project Agreements.
19. ASSIGNMENT
19.1 AGREEMENT BINDING. This Agreement shall be binding upon, and
shall inure to the benefit of, the Parties and their successors
and permitted assigns.
19.2 PERMITTED ASSIGNMENT. This Agreement shall not be assignable by
either Party without the prior written consent of the other
Party hereto, which consent shall not be unreasonably withheld
or delayed, except that this Agreement may be assigned (a) by
the Partnership without such consent (but with notice to
Phillips) to Project Financing Entities as security for the
obligations of the Partnership under any Project Financing
Agreement, and (b) by Phillips without such consent in
accordance with Section 19.3 below. Notwithstanding the
foregoing, Phillips shall have the absolute right to prohibit
assignment of this Agreement to competitors of Phillips'
business. Unless otherwise expressly agreed by the Parties, any
assignment of this Agreement shall not relieve the assigning
Party of any of its obligations under this Agreement. Except
with respect to the collateral assignment permitted under
clause (a) of this Section 19.2, no assignment by either Party
of this Agreement for any purpose whatsoever shall be valid
until all obligations of the assignor hereunder shall have been
assumed by the assignee by a written agreement delivered to the
other Party. Any assignment which does not comply with the
provisions of this Section 19.2 shall be null and void.
19.3 SALE OR ENCUMBRANCE BY PHILLIPS. Phillips shall have the right,
without the consent of the Partnership (but with notice to the
Partnership), to (a) sell, assign or otherwise transfer
ownership of all or any part of HCC to any Person, provided
such Person agrees in writing to be bound by
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the terms and conditions of this Agreement and to assume
Phillips' obligations hereunder as they relate to the portion
of HCC acquired by such Person, and (b) mortgage or otherwise
encumber Phillips' interests in HCC, the Project Site, the
Easement Improvements or in the Project Agreements.
19.4 PROJECT FINANCING ENTITY DOCUMENTS. In connection with any
collateral assignment by the Partnership to a Project Financing
Entity as described in Section 19.2(a) above, Phillips agrees
to execute and deliver a Consent and Agreement in a form which
is reasonably acceptable to Phillips; provided, however,
Phillips shall not be obligated to agree to anything which
could impact the integrity and continued reliable and safe
operation of HCC. Phillips further agrees to furnish the
Project Financing Entity with such other documents as may be
reasonably requested. Notwithstanding the foregoing, Phillips
shall have no obligation to, and shall not be considered to be
in default for failure to, modify, alter or amend any of the
Project Agreements to accommodate any Person, including Project
Financing Entities.
19.5 ACQUISITION BY PROJECT FINANCING ENTITIES. In the event a
Project Financing Entity acquires (including by foreclosure or
transfer in lieu of foreclosure) all or any part of the
Project, then from and after such acquisition such Project
Financing Entity shall be bound by and agrees to assume the
obligations of the Partnership under the Project Agreements
which arise after the date of such acquisition.
20. REPRESENTATIONS AND WARRANTIES
Each Party hereby represents and warrants to the other Party that, as of
the Effective Date:
20.1 STANDING AND QUALIFICATION. Such Party is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its organization, is in good standing and is
qualified to do business in Texas and in all other
jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to
qualify would have a material adverse effect on its financial
condition, operations, prospects or business.
20.2 NO VIOLATION OF LAW; LITIGATION. Such Party (to its best
knowledge) is not in violation of any applicable Law
promulgated, or judgment entered by any federal, state, local
or other governmental authority which violations, individually
or in the aggregate, would adversely affect its performance of
any obligations under this Agreement. There are no legal or
arbitration proceedings or any proceeding by or before any
governmental or regulatory authority or agency, now pending or
(to its
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best knowledge) threatened against it which, if adversely
determined, could have a material adverse effect upon its
financial condition, operations, prospects or business, as a
whole, or its ability to perform under this Agreement.
20.3 LICENSES AND CONSENTS. Such Party (to its best knowledge) is
the holder of all Applicable Permits or other authorizations
required to permit it to operate or conduct its business now
and as contemplated by this Agreement, and, except for the
Applicable Permits and other approvals to be obtained by the
Parties pursuant to the Project Agreements, no authorization,
consent or approval of, notice to or filing with, any
governmental or regulatory authority is required for the
execution, delivery or performance by such Party of this
Agreement.
20.4 NO CONFLICT OR BREACH. To its best knowledge the execution,
delivery and performance by such Party of the Project
Agreement, the compliance with the terms and provisions hereof,
and the carrying out of the transactions contemplated hereby,
does not conflict or will not conflict with or result in a
breach or violation of any of the terms, conditions or
provisions of any Law, governmental rule or regulation or the
charter documents, as amended, or bylaws, as amended, of such
Party or any order, writ, injunction, judgment or decree of any
court or governmental authority against such Party or by which
it or any of its properties is bound, or any loan agreement,
indenture, mortgage, note, resolution, bond, or contract or
other agreement or instrument to which such Party is a party or
by which it or any of its properties is bound, or constitutes
or will constitute a default thereunder or will result in the
imposition of any lien upon any of its properties.
20.5 AUTHORITY. Such Party has all necessary power and authority to
execute, deliver and perform the Project Agreements and its
obligations hereunder; the execution, delivery and performance
of this Agreement has been duly authorized by all necessary
action on its part; it has duly and validly executed and
delivered this Agreement; and the Agreement constitutes a
legal, valid and binding obligation of such Party enforceable
against such Party in accordance with the terms hereof, except
as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or moratorium or other similar laws
relating to the enforcement of creditors' rights generally and
by general equitable principles.
20.6 NO FEES. Such Party has not entered into any agreement,
arrangement or understanding with any Person which will result
in the obligation of the other Party, or any of its Affiliates,
to pay any finder's fee, brokerage commission or similar
payment in connection with this Agreement.
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21. NOTICES
21.1 WRITING. Any notice, demand, offer or other written instrument
required or permitted to be given pursuant to this Agreement
shall be in writing signed by the Party giving such notice and
shall, to the extent reasonably practicable, be sent by telefax
(confirmed by a mailed or courier copy received within five (5)
days), and if not reasonably practicable to send by telefax,
then by hand delivery, overnight courier, telegram or
registered or certified mail, return receipt requested, to the
other Party at such address as set forth below.
If delivered to Phillips:
Phillips Chemical Company, a Division of Phillips Petroleum
Company
1400 Jefferson, Pasadena, TX 77501
Attention: HCC General Manager
Telephone: 713-475-3610
Telefax: 713-475-3589
With a copy to:
Phillips Chemical Company, a Division of Phillips Petroleum
Company
2625 Bay Area Boulevard
Houston (Clear Lake) TX 77058
Attention: ATTN: Plastics Finance Manager
Telephone: 713-244-3076
Telefax: 713-244-3005
If delivered to the Partnership:
Pasadena Cogeneration L.P.
50 West San Fernando
San Jose, California 95113
Attention: Asset Manager and General Counsel
Telephone: (408) 995-5115
Telefax: (408) 995-0505
With a copy to:
Calpine Pasadena Cogeneration, Inc.
Project Office Address as provided by
Calpine Pasadena Cogeneration, Inc.
Pasadena, TX
Attention: Plant Manager
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Each Party shall have the right to change the place to which
notice shall be sent or delivered or to specify one additional
address to which copies of notices may be sent, in either case by
similar notice sent or delivered in like manner to the other
Party.
21.2 TIMING OF RECEIPT. Without limiting any other means by which a
Party may be able to prove that a notice has been received by
the other Party, a notice shall be deemed to be duly received:
(a) If delivered by hand, overnight courier or telegram, on
the date when received at the address of the recipient;
(b) If sent by registered or certified mail, on the date of
the return receipt; or
(c) If sent by telefax, upon receipt by the sender of an
acknowledgment or transmission report generated by the
machine from which the telefax was sent indicating that
the telefax was sent in its entirety and received at the
recipient's telefax number.
22. MISCELLANEOUS
22.1 AMENDMENTS. No change, amendment or modification of this
Agreement shall be valid or binding upon the Parties unless
such change, amendment or modification shall be in writing and
duly executed by both Parties.
22.2 CAPTIONS. The captions contained in this Agreement are for
convenience and reference only and in no way define, describe,
extend or limit the scope or intent of this Agreement or the
intent of any provision contained herein.
22.3 SEVERABILITY. The invalidity of one or more phrases, sentences,
clauses or Sections contained in this Agreement shall not
affect the validity of the remaining portions of this Agreement
so long as the material purposes of this Agreement can be
determined and effectuated.
22.4 NO WAIVER. Any failure of either Party to enforce any of the
provisions of this Agreement or to require compliance with any
of its terms at any time during the pendency of this Agreement,
shall in no way affect the validity of this Agreement, or any
part hereof, and shall not be deemed a waiver of the right of
such Party thereafter to enforce any and each such provision.
Any consent or approval given pursuant to this Agreement shall
be limited to its express terms and shall not otherwise
increase the
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obligations of the Party giving such consent or approval or
otherwise reduce the obligations of the Party receiving such
consent or approval.
22.5 FURTHER ASSURANCES. Each Party agrees to execute and deliver
all further instruments and documents, and take any further
action that may be reasonably necessary, to effectuate the
purposes and intent of this Agreement.
22.6 ESTOPPEL CERTIFICATES. Each Party shall, from time to time,
upon fifteen (15) days prior request by the other Party,
execute, acknowledge and deliver to the requesting Party a
certificate signed by an authorized officer of such Party
stating that this Agreement is unmodified and in full force and
effect (or, if there have been modifications, that such
Agreement is in full force and effect as modified, and setting
forth such modifications) and either stating that to the
knowledge of the signer of such certificate no Event of Default
exists hereunder or thereunder or specifying each such Event of
Default to which the signer has knowledge. Any certificate
given pursuant to this Section 22.6 may be relied upon by the
Project Financing Entity and by any prospective mortgagee or
purchaser of any interest in this Agreement, the Power Plant,
or any other portion of the Project.
22.7 CONFIDENTIALITY. During the Term of this Agreement, it may
become necessary or desirable, from time to time, for either
Party to provide or disclose to the other Party information
that is either confidential or proprietary (which shall not
include information already known to such other Party or
generally known or available to the public). The Labeling Party
may orally request such information to be kept confidential if
such information is not in a written format, and in such case
shall identify and confirm such confidential information in
writing to the other Party no later than fifteen (15) days
after such disclosure. If the confidential or proprietary
information is in a written format, the Labeling Party shall
label such information as either confidential or proprietary.
The other Party shall not reproduce, copy, use or disclose
(except when required by governmental authorities or by Law)
any such information in whole or in part to a third party for
any purpose without the consent of the Labeling Party. The
other Party shall restrict the internal disclosure of any such
confidential or proprietary information to only those
employees, officers and directors who have a "need to know"
such information, and shall restrict those individuals from
disclosing, using or permitting the disclosure of such
information. In disclosing confidential or proprietary
information to governmental authorities, the disclosing Party
shall cooperate with the Labeling Party to minimize the amount
of such information furnished. At the specific request of the
Labeling Party , the disclosing Party shall endeavor to secure
the agreement of such
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46
governmental authorities to maintain specified portions of such
information in confidence. In the case of any disclosure of any
such confidential or proprietary information, whether or not
such disclosure is permitted by this Section 22.7, the
disclosing Party shall promptly give written notice thereof to
the Labeling Party.
22.8 LIMITATION ON PHOTOS AND VIDEOS AT HCC. The Partnership, its
Affiliates, and each of their employees, directors, agents and
Invitees, shall not take any photographs, films, videos or
similar visual depictions of any part of HCC without Phillips'
prior written approval.
22.9 RECORDS AND AUDIT. Each Party shall, and shall procure that its
contractors shall, maintain a true and correct set of records
pertaining to all activities relating to its performance of
this Agreement and all transactions related thereto. Each Party
further agrees, and shall procure that its contractors agree,
to retain all such records for a period of not less than two
(2) years after the termination of this Agreement. Any
representative or representatives authorized by a Party may
audit any and all such records of the other Party or its
contractors at any time or times during the Term of this
Agreement and during the two (2) year period following its
termination. The foregoing obligations in this Section 22.9
shall survive the termination, expiration or mutual
cancellation of this Agreement.
22.10 CONFLICT OF INTEREST. The Partnership shall not, and shall
procure that its contractors shall not, pay any commissions,
fees or grant any rebates to any employee, officer or agent of
Phillips nor favor employees, officers or agents of Phillips
with gifts or entertainment of significant cost or value, nor
enter into any business arrangement with employees, officers or
agents of Phillips other than as a representative of Phillips,
without Phillips' written approval. Compliance with this
Section 22.10 is subject to audit under Section 22.9 above.
22.11 NO LIABILITY. Except as otherwise expressly provided in this
Agreement, no Affiliate of any Party, nor the officers,
directors, employees or agents of such Affiliate of any Party,
shall have any liability to the other Party in connection with
this Agreement; provided, however, this Section 22.11 shall not
be construed to limit liability of any such Affiliate or Person
under any other agreement.
22.12 APPLICABLE LAW. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Texas,
including with respect to matters of construction, validity and
performance, without giving effect to any choice of law rules
that may direct the application of the laws of another
jurisdiction.
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22.13 VENUE AND SUBMISSION TO JURISDICTION. THE VENUE FOR ANY LEGAL
ACTION TO ENFORCE, INTERPRET OR OTHERWISE LITIGATE DISPUTES
RELATING TO THIS AGREEMENT SHALL BE HOUSTON, TEXAS, AND EACH
PARTY HERETO HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF THE FEDERAL AND STATE COURTS OF THE STATE OF TEXAS LOCATED
IN HOUSTON, TEXAS. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE
PREVAILING PARTY IN ANY SUCH ACTION SHALL BE ENTITLED TO
RECOVER FROM THE OTHER PARTY REASONABLE ATTORNEYS' FEES AND
COSTS.
22.14 COUNTERPARTS. This Agreement may be signed in any number of
counterparts and each counterpart shall represent a fully
executed original as if signed by both Parties.
22.15 SURVIVAL. Notwithstanding any provision of this Agreement to
the contrary, expiration or other termination of this Agreement
shall not relieve the Parties of obligations that by their
nature should survive such expiration or termination, including
remedies in the case of a termination for an Event of Default,
promises of indemnity, payment obligations, confidentiality,
audit rights, and dispute resolution provisions.
23. INCORPORATION OF PROVISIONS
Notwithstanding anything to the contrary contained herein, Philips shall
have the rights set forth in Sections 13 and 14 (titled Project Financing
Agreements and Electric Utility Agreements) of the Ground Lease and Easement
Agreement and such provisions are incorporated herein and made a part hereof by
this reference and shall apply as though fully set forth herein.
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IN WITNESS WHEREOF, Phillips and the Partnership have caused this
Agreement to be executed by their duly authorized representatives as of December
16, 1996.
PHILLIPS PETROLEUM COMPANY
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
PASADENA COGENERATION L.P.
By: Calpine Pasadena Cogeneration, Inc., its
General Partner
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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EXHIBIT A
TO THE AMENDED AND RESTATED ENERGY SALES AGREEMENT
ELECTRICAL ENERGY PRICING
VARIABLE FUEL PAYMENT = Actual Power Usage1/ (kWH/Billing Period) x Variable
Fuel Component
VARIABLE FUEL COMPONENT (1995 basis) = $0.01119/kWH x Fuel Gas Escalator
VARIABLE O&M PAYMENT = Actual Power Usage1/ (kWH/Billing Period) x Variable O&M
Component; provided, however, during the first COD Year, as a one time
adjustment, a reduction of Five Hundred Thousand Dollars ($500,000) shall be
made during the first COD Year by reducing the Variable O&M Payments by
$41,666.67 each month during the first COD Year.
VARIABLE O&M COMPONENT (1995 basis) = $0.00649/kWH x the O&M Escalator.
FIRM ELECTRICAL CAPACITY PAYMENT = for 80 MVA, $5,518,187 per annum, paid
quarterly.
INTERRUPTIBLE ELECTRICAL CAPACITY PAYMENT = 10 MVA of Interruptible Electrical
Capacity at $3,550 per MVA-month x the MVA determined pursuant to Section 2.4.2
of the Energy Sales Agreement, paid quarterly, for up to 10 MVA.
PAYMENT FOR USE OF EXCESS ELECTRICAL ENERGY required pursuant to Section 2.3.3 =
(a) $5.75 per kVA-month for a Billing Period if the electrical capacity of the
Project has not been fully committed at the time of such demand, or (b) $17.25
per kVA-month for such Billing Period at any time after the electrical capacity
of the Project is fully committed.
OPTION TO ADJUST: if the number of MW supplied hereunder is reduced as a result
of Phillips' exercise of the Option to Adjust pursuant to Section 2.8, the Firm
Electrical Capacity Payment shall be reduced by $68,977.33 for each annual
megawatt, of Firm Electrical Capacity no longer supplied by the Partnership.
All Escalators and results of calculations shall be rounded up or down, as
appropriate, to 3 decimal places (1.0333 to 1.033, 1.0335 to 1.034).
1/ "ACTUAL POWER USAGE" shall mean the actual kWH/hours delivered to Phillips
from the Partnership during a Billing Period.
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Payment Payment
Electricity Period Terms
- ------------------------------------- -------------- ------------------------------
Variable O&M Payment Monthly o (See Section 5.3)
Variable Fuel Payment Monthly o (See Section 5.3)
Firm Capacity Payment Quarterly o end of quarter in arrears
(See Section 5.3)
Interruptible Capacity Payment Quarterly o end of quarter in arrears
(See Section 5.3)
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EXHIBIT B
TO THE AMENDED AND RESTATED ENERGY SALES AGREEMENT
STEAM PRICING
VARIABLE STEAM PAYMENT = Actual Steam Usage 1/ (klbs/month) x Variable Steam
Component
VARIABLE STEAM COMPONENT (1995 basis) = $2.259/klb 2/ x Fuel Gas Escalator
FIXED STEAM CAPACITY PAYMENT = for up to the Maximum Steam Requirement
$2,000,000 per annum, paid quarterly.
FIXED STEAM O&M PAYMENT (1995 basis) = $1,155,000 per annum x the O&M Escalator,
paid quarterly.
Steam Payment Period Payment Terms
- -------------------------------------------------------------------------------
Variable Steam Payment Monthly (See Section 5.3)
Fixed Steam O&M Payment Quarterly end of quarter in
arrears (See Section 5.3)
Fixed Steam Capacity Payment Quarterly end of quarter in
arrears (See Section 5.3)
All Escalators and results of calculations shall be rounded up or down, as
appropriate, to 3 decimal places (1.0333 to 1.033, 1.0335 to 1.034).
1/ "ACTUAL STEAM USAGE" shall mean the actual pounds of Steam delivered to
Phillips from the Partnership during a Billing Period.
2/ For low pressure (50-90 psig) process steam, this amount shall be
$2.220/klb.
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EXHIBIT C
TO THE AMENDED AND RESTATED ENERGY SALES AGREEMENT
STEAM SPECIFICATIONS
1) INTERMEDIATE PRESSURE PROCESS STEAM
PRESSURE 335 PSIG
TEMPERATURE SATURATED
TOTAL SOLIDS Less Than 0.05 PPM
SODIUM Less Than 0.02 PPM
SILICA Less Than 0.02 PPM
(1) Steady state operations within HCC require the steam pressure
variation be limited to +/- 10 psi.
(2) The Project must be capable of responding to an instantaneous
change in 335 psig steam demand of 60,000 lbs/hr without
pressure degradation or excursions exceeding 15 psig from the
regulated 335 psig steam header pressure within HCC at the
Point of Delivery for Steam.
2) LOW PRESSURE PROCESS STEAM
PRESSURE 50 - 90 PSIG
TEMPERATURE 310(Degree) - 340(Degree)F
TOTAL SOLIDS Less Than 0.05 PM
SODIUM Less Than 0.02 PPM
SILICA Less Than 0.02 PPM
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EXHIBIT D
TO THE AMENDED AND RESTATED ENERGY SALES AGREEMENT
CONDENSATE RETURN SPECIFICATIONS
PRESSURE 50 to 60 PSIG (depending on location)
TEMPERATURE 240 DEG F
pH 8.5
Conductivity Less Than 20 MHO/CM
AMOUNT RETURNED approximately 50%
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AMENDED AND RESTATED
ENERGY SALES AGREEMENT
BETWEEN
PHILLIPS PETROLEUM COMPANY
AND
PASADENA COGENERATION L.P.
DATED AS OF DECEMBER 16, 1996
THE PASADENA COGENERATION PROJECT
55
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS AND INTERPRETATION.....................................................1
1.1 Definitions...............................................................1
1.2 Construction of Terms.....................................................2
1.3 Drafting Interpretations..................................................2
1.4 Documents Included........................................................2
1.5 Conflicting Provisions....................................................2
1.6 Entire Agreement..........................................................2
2. PURCHASE AND SALE OF ELECTRICAL ENERGY AND ELECTRICAL CAPACITY.....................2
2.1 Exclusive Source..........................................................2
2.2 Purchase and Sale Obligation for Electric Energy and
Electrical Capacity.................................................3
2.2.1 Purchase and Sale Obligation for Electrical
Energy.....................................................3
2.2.2 Purchase and Sale Obligation for Electrical
Capacity...................................................3
2.3 Electrical Payment........................................................3
2.3.1 Variable Fuel Payment and Variable O&M Payment................4
2.3.2 Electrical Capacity Payment...................................4
2.3.2.1 Commencement of Firm Electrical
Capacity Payments...................................4
2.3.2.2 Adjustments to Electrical Capacity
Payments............................................4
2.3.3 Payment for Use of Excess Electrical Energy...................5
2.4 Interruptible Capacity....................................................5
2.4.1 Scheduling Interruptible Capacity.............................5
2.4.2 MW Calculation................................................5
2.5 Standby Electrical Agreement..............................................5
2.5.1 Standby Agreement.............................................6
2.5.2 Payment Adjustment............................................6
2.6 Payment Adjustment for Failure to Supply..................................6
2.6.1 Payment Adjustment...........................................6
2.6.2 Reimbursement for Incremental Cost...........................6
2.7 Additional Electrical Energy..............................................7
2.8 Option to Adjust Purchase of Electrical Energy and
Electrical Capacity.................................................7
2.8.1 Pricing Notice................................................7
2.8.2 Right of First Refusal........................................7
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2.8.3 Adjustment Terms..............................................8
3. PURCHASE AND SALE OF STEAM AND STEAM CAPACITY......................................9
3.1 Exclusive Source..........................................................9
3.2 Purchase and Sale Obligation for Steam and Steam Capacity.................9
3.2.1 Purchase and Sale Obligation..................................9
3.2.2 Purchase and Sale Obligation for Steam Capacity...............9
3.3 Characteristics of Steam.................................................10
3.4 Steam Payment............................................................10
3.4.1 Variable Steam Payment.......................................10
3.4.2 Fixed Steam O&M Payment......................................10
3.4.3 Fixed Steam Capacity Payment.................................10
3.5 Additional Steam Requirement.............................................10
4. CONDENSATE RETURN.................................................................10
4.1 Transportation of Steam and Condensate...................................10
4.2 Condensate Return........................................................11
4.3 Failure to Supply Condensate.............................................11
4.4 Operation of the Standby Boilers due to Phillips' Failure
to Supply Raw Water and Condensate.................................11
4.5 Interruption of Water Supply.............................................12
5. BILLING AND PAYMENT...............................................................12
5.1 Monthly Billing Cycle for Steam, Electrical Energy and
Standby............................................................12
5.2 Quarterly Payment for Capacity and Fixed Steam O&M.......................12
5.3 Payment of Invoices......................................................13
5.4 Interest.................................................................13
6. OPERATION OF THE PROJECT..........................................................13
6.1 Operation of the Project.................................................13
6.2 Operating and Communication Guidelines...................................14
6.3 Steam Redundancy Requirements............................................14
6.4 Standby Boilers Operating Rights.........................................14
6.4.1 Exercise of Rights...........................................14
6.4.2 Partnership Cooperation......................................15
6.4.3 Partnership Fuel Gas.........................................15
6.4.4 Remedies and Liabilities.....................................15
6.4.5 Reimbursement for Costs and Expenses.........................15
6.4.6 Cessation of Standby Boiler Operating Rights ...............16
6.4.7 Training.....................................................16
6.5 Phillips Representative..................................................16
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6.6 The Partnership Representative...........................................16
6.7 Obligation to Provide Auxiliary Boilers..................................17
7. MAINTENANCE AND REPAIR OF THE PROJECT.............................................17
7.1 The Partnership's Maintenance Obligations................................17
7.2 Phillips' Maintenance Obligations........................................18
7.3 Scheduled Maintenance for the Power Plant and HCC........................18
7.4 Inspection and Observation Rights........................................19
8. METERING..........................................................................19
8.1 Metering Devices.........................................................19
8.2 Periodic Inspection......................................................19
8.3 Retroactive Adjustments..................................................20
8.4 Access to Metering Devices...............................................20
9. REVIEW MEETINGS...................................................................20
10. SALES TO THIRD PARTY PURCHASERS..................................................20
11. TERM OF AGREEMENT................................................................21
11.1 Term 21
11.2 Renewal Term............................................................21
11.3 Phillips Extension Term.................................................21
12. INSURANCE........................................................................21
12.1 Insurance Coverages.....................................................22
12.1.1 Workers' Compensation Insurance.............................22
12.1.2 Commercial General Liability Insurance......................22
12.1.3 Automobile Liability Insurance..............................22
12.1.4 Excess/Umbrella Liability Insurance.........................22
12.2 Endorsements............................................................23
12.2.1 Waiver of Subrogation.......................................23
12.2.2 Severability................................................23
12.2.3 Primary Coverage............................................23
12.2.4 Additional Insured..........................................23
12.3 All-Risk Property Insurance.............................................24
12.3.1 Builder's All-Risk Insurance and All-Risk
Property and Boiler and Machinery Insurance...............24
12.3.2 Waiver of Subrogation.......................................24
12.4 Contractors and Subcontractors..........................................24
12.5 Phillips Insurance Coverages............................................25
12.5.1 Workers' Compensation Insurance.............................25
12.5.2 Commercial General Liability Insurance......................25
12.5.3 Automobile Liability Insurance..............................25
12.5.4 Excess/Umbrella Liability Insurance.........................25
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12.5.5 Property Insurance..........................................25
12.6 Evidence of Insurance...................................................26
12.7 Disclaimer..............................................................26
12.8 Placement of Insurance Coverage with Captive............................26
12.8.1 Phillips' Captive Insurer...................................26
12.8.2 The Partnership's Captive Insurer...........................26
13. INDEMNIFICATION..................................................................27
13.1 Release and Indemnification by the Partnership..........................27
13.2 Release and Indemnification by Phillips.................................27
13.3 COMPREHENSIVE CONSTRUCTION AND APPLICATION..............................27
13.4 Limitation on Indemnities...............................................28
13.5 Property Damage Exclusion...............................................28
13.6 Mutual Indemnification for Breach of Representations;
Fines and Penalties................................................29
13.6.1 Partnership Indemnification.................................29
13.6.2 Phillips Indemnification....................................29
13.7 Exclusions from Releases and Indemnities................................30
13.8 Notice of Legal Defense.................................................30
13.9 Application of Indemnities..............................................30
13.10 Survival...............................................................31
14. LIABILITY; NO DEDICATION.........................................................31
14.1 Third Parties...........................................................31
14.2 No Dedication...........................................................31
14.3 No Partnership..........................................................31
14.4 No Consequential Damages................................................31
14.5 Intent..................................................................32
15. FORCE MAJEURE....................................................................32
15.1 Excused Performance.....................................................32
15.2 Burden of Proof.........................................................33
15.3 Termination for Force Majeure...........................................33
15.3.1 Right to Terminate..........................................33
15.3.2 Destruction or Substantial Damage to the Power
Plant or HCC as the Force Majeure Event...................33
15.3.3 Mitigation Plan.............................................33
16. EVENTS OF DEFAULT................................................................34
16.1 Definition..............................................................34
16.2 Remedies for Default....................................................35
16.3 Remedies Not Exclusive..................................................36
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17. TERMINATION......................................................................36
17.1 Termination During the Development Phase................................36
17.2 Termination for Failure to Achieve Commercial Operation.................36
17.3 Termination for HCC Shutdown............................................36
17.4 Right to Terminate for Destruction or Substantial Damage
to the Power Plant.................................................37
17.5 Termination for Failure to Take Off-Gas.................................37
17.6 Termination of Ground Lease and Easement Agreement......................37
17.7 Termination in the Event of Foreclosure.................................37
18. DISPUTE RESOLUTION...............................................................38
18.1 Procedure...............................................................38
18.2 Initial Resolution Attempts.............................................38
18.3 Alternative Dispute Resolution..........................................38
18.4 Arbitration.............................................................38
18.5 General Rules and Provisions............................................39
19. ASSIGNMENT.......................................................................40
19.1 Agreement Binding.......................................................40
19.2 Permitted Assignment....................................................40
19.3 Sale or Encumbrance by Phillips.........................................40
19.4 Project Financing Entity Documents......................................41
19.5 Acquisition by Project Financing Entities...............................41
20. REPRESENTATIONS AND WARRANTIES...................................................41
20.1 Standing and Qualification..............................................41
20.2 No Violation of Law; Litigation.........................................41
20.3 Licenses and Consents...................................................42
20.4 No Conflict or Breach...................................................42
20.5 Authority...............................................................42
20.6 No Fees.................................................................42
21. NOTICES..........................................................................42
21.1 Writing.................................................................42
21.2 Timing of Receipt.......................................................44
22. MISCELLANEOUS....................................................................44
22.1 Amendments..............................................................44
22.2 Captions................................................................44
22.3 Severability............................................................44
22.4 No Waiver...............................................................44
22.5 Further Assurances......................................................44
22.6 Estoppel Certificates...................................................45
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22.7 Confidentiality.........................................................45
22.8 Limitation on Photos and Videos at HCC..................................46
22.9 Records and Audit.......................................................46
22.10 Conflict of Interest...................................................46
22.11 No Liability...........................................................46
22.12 Applicable Law.........................................................46
22.13 Venue and Submission to Jurisdiction...................................46
22.14 Counterparts...........................................................47
22.15 Survival...............................................................47
23. INCORPORATION OF PROVISIONS......................................................47
APPENDICES
APPENDIX A Definitions
EXHIBITS
EXHIBIT A Electrical Energy Pricing
EXHIBIT B Steam Pricing
EXHIBIT C Steam Specifications
EXHIBIT D Condensate Return Specifications
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