EXHIBIT 10.17
ELECTRIC ENERGY PURCHASE AGREEMENT
between
MILESBURG ENERGY, INC.,
as Seller
and
WEST PENN POWER COMPANY, as Buyer
_________________________
Dated as of February 25, 1987
_________________________
Relating to the
Milesburg Project
TABLE OF CONTENTS
PAGE
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INTRODUCTION AND PARTIES................................................... 1
RECITALS................................................................... 1
I. SALE AND PURCHASE OF ENERGY
1.1 Sale and Purchase of Project Energy......................... 2
1.2 Purchase Price.............................................. 2
1.3 Buyer's Right to Suspend Purchases
Under Certain Circumstances............................... 3
1.4 Force Majeure Affecting Seller.............................. 4
II. CONSTRUCTION AND FINANCING OF THE PROJECT
2.1 Construction of the Project................................. 5
2.2 Interconnection............................................. 8
2.3 Buyer's Action for Its Own Protection Only.................. 9
2.4 Financing of the Project.................................... 9
III. OPERATION AND MAINTENANCE OF THE PROJECT
3.1 Characteristics of Electric Power and
the Delivery Thereof...................................... 10
3.2 Compliance with Laws; Contest............................... 10
3.3 Fuel Stockpiling............................................ 11
3.4 Maintenance and Repair...................................... 11
3.5 Operation................................................... 12
3.6 Access; Financial Records;
Operating Budget; Etc..................................... 13
3.7 Insurance; Damage or Destruction;
Condemnation.............................................. 14
3.8 Maintenance of Reserve Fund................................. 14
IV. METERING AND BILLING
4.1 Metering Devices............................................ 15
4.2 Sealing of Metering Devices................................. 15
4.3 Inspection and Testing; Retroactive
Adjustments............................................... 15
4.4 Billing and Payment; Buyer's Records........................ 16
4.5 Buyer's Access to Metering Devices.......................... 16
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V. REPRESENTATIONS AND WARRANTIES; CONDITIONS
PRECEDENT TO SALE AND PURCHASE
5.1 Representations and Warranties of
Seller...................................................... 17
5.2 Representations and Warranties of
Buyer....................................................... 19
5.3 Conditions Precedent to Buyer's
Obligations as of Financing
Closing Date................................................ 20
5.4 Conditions Precedent to Buyer's Obligations
as of Commencement Date..................................... 22
5.5 Conditions Precedent to Seller's Obligations
as of Financing Closing Date................................ 24
5.6 Condition Precedent to Seller's
Obligations as of Commencement Date......................... 24
5.7 Condition Precedent to Both Parties'
Obligations................................................. 25
5.8 Survival...................................................... 25
VI. DEFAULTS AND REMEDIES
6.1 Events of Default as to Seller................................ 25
6.2 Rights of Buyer in Case of an Event
of Default as to Seller..................................... 27
6.3 Events of Default as to Buyer................................. 28
6.4 Rights of Seller in Case of an Event of
Default as to Buyer......................................... 29
VII. INDEMNIFICATION
7.1 Seller's Indemnification of Buyer............................. 30
7.2 Buyer's Indemnification of Seller............................. 31
VIII. ARBITRATION
8.1 Compulsory Arbitration........................................ 32
8.2 Performance During Proceeding................................. 33
IX. DEFINITIONS AND RULES OF CONSTRUCTION
9.1 Definitions................................................... 33
9.2 Rules of Construction......................................... 42
X. MISCELLANEOUS
10.1 Force Majeure............................................... 43
10.2 Term of this Agreement...................................... 43
10.3 Survival of Obligations..................................... 44
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10.4 Confidentiality............................................. 44
10.5 Further Assurances.......................................... 44
10.6 Specific Performance and Injunctive
Relief.................................................... 44
10.7 Entire Agreement; Severability.............................. 45
10.8 Counterparts, Assigns, Governing Law and
Amendments................................................ 45
10.9 Assignment.................................................. 45
10.10 Headings.................................................... 46
10.11 Notices..................................................... 46
10.12 No Implied Waiver........................................... 46
10.13 No Rights Conferred on Others............................... 46
10.14 Costs and Expenses.......................................... 47
10.15 PURPA....................................................... 47
10.16 Limitation of Liability..................................... 47
EXECUTION.................................................................. 48
EXHIBIT A - Matters to be Covered by Opinion of
Varnum, Riddering, Schmidt & Howlett
(Counsel to Seller).......................................... A-1
EXHIBIT B - Matters to be Covered by Opinion
of Reed Smith Shaw & McClay (Counsel
to Buyer).................................................... B-1
EXHIBIT C - Computation of Capacity
Replacement Charge - Example................................. C-1
EXHIBIT D - Form of Mortgage............................................... D-1
EXHIBIT E - Form of Recognition Agreement.................................. E-1
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ELECTRIC ENERGY PURCHASE AGREEMENT (this "Agreement") dated as of the
25th day of February, 1987, between MILESBURG ENERGY, INC., a Pennsylvania
corporation having its principal place of business at 248 Main Street,
Blossburg, Pennsylvania 16912 ("Seller"), and WEST PENN POWER COMPANY, a
Pennsylvania corporation having its principal place of business at 800 Cabin
Hill Drive, Greensburg, Pennsylvania 15601 ("Buyer").
WITNESSETH:
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WHEREAS, Seller desires to construct, equip, sell, lease as lessee and
operate a waste coal-fired plant consisting of a circulating fluidized bed
boiler and related facilities (the "Project") having a maximum design capacity
of 36.5 to 43 megawatts and to be located at Buyer's retired Milesburg Power
Station in the Borough of Milesburg in Centre County, Pennsylvania;
WHEREAS, upon completion of construction of the Project and
commencement of the operation thereof, Seller desires to sell electric energy
generated by the Project to Buyer, and Buyer desires to purchase such electric
energy from Seller subject to the terms and conditions set forth herein; and
WHEREAS, although the Project is to be a "qualifying facility" within
the meaning of PURPA (as herein defined), Buyer and Seller have negotiated and
reached agreement upon the terms and conditions hereof (including those as to
price) by arm's-length negotiations without regard to the specific provisions
and requirements of PURPA; and
WHEREAS, Seller and Buyer also contemplate entering into (i) a
Mortgage (as herein defined) making provision for certain matters with respect
to the Project and otherwise securing the performance of Seller's obligations
hereunder, and (ii) a Recognition Agreement (as herein defined) providing for
the rights and obligations of Buyer, Seller, Lessor (as herein defined) and the
Project Lender (as herein defined) in the event of default by Seller hereunder
or under the Lease (as herein defined) or in the event of certain defaults under
the Project Mortgage (as herein defined);
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt whereof is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
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SALE AND PURCHASE OF ENERGY
Section 1.1. Sale and Purchase of Project Energy. (a) From and
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after the Commencement Date Seller shall sell and deliver to Buyer, and from and
after the Interconnection Date Buyer shall accept and purchase from Seller, the
Project Energy, as, if and when delivered to Buyer's System at the
Interconnection, subject only to (i) the maximum Contract Output specified
pursuant to Section 1.1(b), (ii) the right of Buyer to suspend purchases of
Project Energy as provided in Section 1.3, and (iii) Force Majeure affecting
Seller's ability to sell such Project Energy as provided in Section 1.4.
(b) Seller shall have the right, exercisable by notice to Buyer not
later than 30 days after the Commencement Date, to increase the Contract Output
from 36.5 megawatthours per hour up to a maximum Contract Output to be specified
in such notice of not more than 43 megawatthours per hour.
(c) The obligation of Seller to sell and deliver, and the obligation
of Buyer to accept and purchase, Project Energy pursuant to Section 1.1(a) shall
in no event exceed the Contract Output; provided, however, that Seller shall
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have the right to sell (in which case Buyer shall be obligated to purchase), and
Buyer shall have the right to purchase (in which case Seller shall be obligated
to sell), on a weekly basis, any Project Energy in excess of the Contract Output
("Additional Project Energy"). Notwithstanding the foregoing, Buyer shall have
the right, in its reasonable discretion and subject to considerations of sound
electric utility practice, to interrupt or reduce deliveries of Additional
Project Energy in order to adjust said deliveries to operating conditions on
Buyer's system. Buyer shall use all reasonable efforts to give Seller notice of
each such reduction and of the causes therefor promptly after the occurrence of
the same.
Section 1.2. Purchase Price. (a) Prior to the Commencement Date,
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but no earlier than Interconnection Date, Buyer shall pay for the Project Energy
delivered to it at a rate per kilowatthour equal to the monthly Variable Energy
Cost Rate, actually experienced, as determined monthly by Buyer, for all APS
Proxy Units.
(b) On and after the Commencement Date, Buyer shall pay for the
Project Energy delivered to it pursuant to Section 1.1, up to an amount not
exceeding the Contract Output, monthly at a rate per kilowatthour equal to the
sum of the fixed Capacity Cost Rate plus the Avoided Energy Cost Rate as
determined monthly by Buyer, which rate per kilowatthour shall be applied to the
Project Energy delivered to Buyer for each Billing Period during the term of
this Agreement and (ii) pay for any Additional Project Energy monthly at a rate
per kilowatthour equal to the Avoided Energy Cost Rate.
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(c) Notwithstanding anything to the contrary in this Section 1.2, if
the Project ceases to be a "qualifying facility" within the meaning of PURPA,
Buyer shall pay for any Project Energy tendered to Buyer's System at a rate per
kilowatthour equal to the lesser of the rate set forth above or the appropriate
rate (expressed in kilowatthours per hour) approved by, and specified in the
tariff filed or to be filed by Seller with, the appropriate governmental agency
having jurisdiction over Seller with respect to rate making from time to time
pursuant to applicable law.
(d) Notwithstanding anything to the contrary in this Section 1.2, (i)
if the average number of kilowatthours per hour of Project Energy delivered to
Buyer during the Off-Peak Hours in any Billing Period exceeds the average number
of kilowatthours per hour of Project Energy delivered to Buyer during the On-
Peak Hours in such Billing Period, Buyer shall not be obligated to pay a
Capacity Cost Rate for the number of kilowatthours of Project Energy delivered
to Buyer during such Billing Period equal to the product of the amount of such
excess times the total number of Off-Peak Hours in such Billing Period and (ii)
Buyer shall not be obligated to pay the purchase price specified in this Section
1.2 for that number of kilowatthours of Project Energy delivered to Buyer in any
one hour which equals the number of kilowatthours of Internal Energy supplied by
Buyer during such hour. At Seller's request Buyer shall supply to Seller
Internal Energy and, to the extent the Internal Energy supplied by Buyer during
any hour exceeds the Project Energy, if any, delivered to Buyer during such
hour, Buyer shall charge Seller for the excess at rates which are just and
reasonable and which do not discriminate against Seller. For purposes of this
Section 1.2(d), in determining the average number of kilowatthours per hour of
Project Energy delivered to Buyer during any Billing Period, or any portion
thereof, any hours (or portions thereof) during which no deliveries of Project
Energy were made because of Unavoidable Interruptions shall be excluded. In
addition, if deliveries of Project Energy during any Billing Period are reduced
below the level that otherwise would have occurred because of Unavoidable
Interruptions, then the number of hours equal to the product of the total time
(expressed in hours) during which such reduced deliveries occurred multiplied by
the reduction in deliveries (expressed as a percentage of the average hourly
deliveries of Project Energy during the preceding 12 Billing Periods or portion
thereof) shall be excluded.
Section 1.3. Buyer's Right to Suspend Purchases Under Certain
------------ ------------------------------------------------
Circumstances.
- -------------
(a) Buyer shall have the right to suspend purchases of Project Energy
for temporary periods in connection with Scheduled Outages. Buyer shall use all
reasonable efforts to give Seller reasonable advance notice, orally or in
writing, of each such suspension and of the anticipated duration thereof, and
Buyer
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shall use all reasonable efforts to minimize the frequency and duration of such
suspensions.
(b) If Buyer is unable as a result of a System Emergency to take and
use Project Energy as, if and when tendered to it hereunder, Buyer shall use all
reasonable efforts to promptly notify Seller, orally or in writing, of the
circumstances giving rise to the System Emergency, and during, but no longer
than, the continuation of such System Emergency, the obligation of Buyer to
purchase Project Energy hereunder shall be suspended to the extent necessitated
by the System Emergency. Buyer shall use all reasonable efforts to minimize the
duration of any such System Emergency.
(c) In addition, Buyer shall have the right to suspend purchases of
Project Energy, up to an aggregate total of 90 hours in any one calendar year
over not more than 20 occasions in such calendar year, in connection with any
Minimum Loading Condition. Buyer shall use all reasonable efforts to give Seller
reasonable advance notice, orally or in writing, of each such suspension and of
the anticipated duration thereof, and shall use all reasonable efforts to
minimize the frequency and duration of such suspensions.
(d) No Project Energy shall be delivered to the Interconnection
during any period of suspension pursuant to this Section 1.3. Whenever Buyer
shall reasonably determine, under sound electric utility practice, that (i) the
Interconnection Facilities are the cause of frequent or prolonged System
Emergencies, or (ii) the characteristics of the electric power being delivered
by Seller under this Agreement do not comply with the requirements of Section
3.1, then Buyer may disconnect Buyer's System from the Interconnection until
such cause has been remedied. Buyer shall use all reasonable efforts to give
Seller reasonable advance notice, orally or in writing, of each such
disconnection and of the causes therefor and Buyer shall reconnect Buyer's
System to the Interconnection when such cause has been remedied.
Section 1.4. Force Majeure Affecting Seller. If Seller is unable
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as a result of Force Majeure to deliver Project Energy to Buyer in accordance
with the terms of this Agreement or to perform any other obligation hereunder,
Seller shall use all reasonable efforts to promptly notify Buyer of the cause or
causes constituting such Force Majeure. During, but no longer than, the
continuation of such Force Majeure, the obligation of Seller to deliver Project
Energy to Buyer in accordance with the terms of this Agreement or to perform any
such other obligation shall be suspended to the extent affected by such Force
Majeure, but Seller shall use all reasonable efforts to overcome the cause or
causes constituting such Force Majeure as provided in Section 10.1 and to resume
deliveries of Project Energy to Buyer hereunder or to resume performance of any
such other obligation hereunder.
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ARTICLE II
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CONSTRUCTION AND FINANCING OF THE PROJECT
Section 2.1. Construction of the Project. (a) Seller shall
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proceed with all due diligence to perform or cause to be performed (i) the
design, engineering and construction of the Project, and (ii) the placing of the
same in service at the Contract Output. The parties currently estimate that
with the exercise of such diligence Seller will be able to place the Project in
service at the Contract Output on or after January 1, 1990 but no later than
March 31, 1990. The Project shall be designed, constructed and completed in a
good and workmanlike manner only with materials and equipment of good quality
(except that all new and refurbished machinery and equipment shall be of first-
rate quality), in such manner as to provide a reasonable likelihood that the
useful life of the Project will at least equal the term of this Agreement and
strictly in accordance with (i) the Plans and Specifications and accompanying
data reviewed by Buyer pursuant to this Section 2.1, (ii) all applicable Legal
Requirements, (iii) sound engineering and construction practice and sound
electric utility practice, and (iv) such requirements as Buyer may reasonably
deem necessary or desirable in order for the Interconnection to Buyer's System
to be made in accordance with Section 2.2 and in accordance with sound
engineering and electric utility practice (the foregoing standards of design and
construction being herein collectively called the "Design and Construction
Standard").
(b) Seller shall diligently enforce all construction contracts with
respect to the Project, and shall obtain and maintain with respect to the
Project during construction such insurance coverage as is provided in the
Project Mortgage.
(c) Seller shall obtain from the general contractor for the Project a
warranty in favor of Seller to the effect that the Project has been constructed
in accordance with the Design and Construction Standard and that the Project is
free of structural defects; provided, however, that such warranty may exclude
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any reference to the reasonable likelihood that the useful life of the Project
will at least equal the term of this Agreement. In addition, each item of new
or refurbished machinery and equipment installed as part of the Project shall be
warranted by the manufacturer thereof to be free of defects and to perform in
accordance with the Project specifications. Such warranties (which shall be for
the benefit of Seller) shall be on such terms as are the best commercially
available for projects of similar type and capacity. Seller shall also use all
reasonable efforts to obtain such other warranties and guaranties from
contractors, vendors and manufacturers with respect to the Project as are the
best commercially available for projects of similar type and capacity. If the
Project or any item of machinery or equipment
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installed therein fails to comply with such warranties, Seller shall use all
reasonable efforts to enforce or cause to be enforced such warranties.
(d) Buyer shall have the right to (i) approve in advance all
architects, engineers and contractors for the Project, (ii) approve in advance
all subcontractors for the Project; provided, however, that if the general
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contractor warrants the work to be performed by the subcontractors, Buyer shall
only have the right to approve subcontractors for subcontracts in excess of
$25,000, (iii) inspect all materials and equipment to be incorporated into the
Project, (iv) review all successful bids, bidding instructions, schematic
drawings, plans and specifications, contracts, subcontracts and other
arrangements for the provision of materials and rendering of services in
connection with the construction of the Project, (v) inspect the Project site
and all work in progress, wherever located, and (vi) observe initial startup and
acceptance testing with respect to the Project. Seller shall provide or cause
to be provided to Buyer in a timely manner all construction progress reports,
schedules, inspection reports and other similar information in order that Buyer
may evaluate the progress of design and construction of the Project. Buyer and,
at Buyer's request, Buyer's Consulting Engineer shall be permitted access to
meetings of architects, engineers, contractors, subcontractors and Seller
regarding the design, engineering and construction of the Project. Seller shall
promptly take such actions as are appropriate, and shall cooperate fully with
Buyer, in order to implement the foregoing. Buyer shall not unreasonably
withhold or delay its response to any matters submitted to it for approval,
review, inspection or observation.
(e) As more specifically provided in Section 2.1(f), Seller shall
submit to Buyer, for Buyer's prior review, all Plans and Specifications and
budget projections for Project costs, and all changes or amendments to each
thereof, and shall make or cause to be made any and all changes to or revisions
of such Plans and Specifications and projections as may be reasonably requested
by Buyer from time to time in order to conform the design and construction of
the Project to the Design and Construction Standard. If Seller shall have
complied with the requirements of Section 2.1(f)(ii) and Buyer in its reasonable
discretion shall have determined that the design and construction of the Project
contemplated by the Plans and Specifications comply in all respects with the
Design and Construction Standard, then thereafter Seller (i) shall submit to
Buyer, in a timely manner, for its review all proposed changes in such Plans and
Specifications and projections in order that Buyer may determine whether such
changes conform to the Design and Construction Standard and (ii) shall not make
any changes in such Plans and Specifications and projections that cause the same
to fail to conform to the Design and Construction Standard. In the event of any
such proposal change, Buyer shall be considered to have
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approved the same in the absence of any notice of disapproval given within 15
days after the receipt by Buyer of such proposed change. Promptly after the
same become available, Seller shall furnish to Buyer five sets to each of Buyer
and Buyer's Consulting Engineer of the final working drawings and specifications
for the Project.
(f)(i) Within 180 days after the date hereof, but in any event no
later than 90 days prior to the Financing Closing Date, Seller shall furnish to
Buyer (x) such evidence of the qualifications and financial condition of the
architect or engineer selected by Seller to prepare (or supervise the
preparation of) the Plans and Specifications as Buyer may reasonably request,
together with a description of the scope of the work to be performed by such
architect or engineer, and (y) a true and complete copy of Seller's proposed
contract with the architect or engineer who shall prepare (or supervise the
preparation of) the Plans and Specifications. Buyer may disapprove such
architect or engineer or such contract, as the case may be, by notice to Seller
given on or before 30 days after the delivery to Buyer of such evidence or of
the copy of such contract. The notice of disapproval shall specify the grounds
for disapproval. Buyer shall be considered to have approved such architect or
engineer or contract, as the case may be, in the absence of any notice of
disapproval given within said 30-day period.
(ii) Within 270 days after the date hereof, but in any event no
later than 60 days prior to the Financing Closing Date, Seller shall deliver to
Buyer, for Buyer's review, the preliminary construction Plans and Specifications
for the Project, which preliminary construction Plans and Specifications shall
include without limitation detailed engineering drawings (general arrangement
drawings, layout drawings, single and three-line electrical drawings, process
and instrumentation drawings, etc.), system descriptions (including operating
philosophies covering all possible conditions) and specifications and accepted
vendor (technical) proposals for major equipment and services and shall be
accompanied by model studies, feasibility studies, computer analyses, power
production calculations, construction schedules (including critical path method
schedules and other scheduling networks), copies of all licenses, permits,
applications and correspondence with regulatory agencies having jurisdiction
over the design, construction or operation of the Project, and such other
information as Buyer may reasonably request. Such preliminary construction Plans
and Specifications and accompanying data shall, in form and content, be
sufficient to enable Buyer to make an informed judgment as to whether the design
and quality of construction of the Project complies with the Design and
Construction Standard, it being understood that mere conceptual engineering
shall be insufficient for these purposes. Within 30 days after the receipt by
Buyer of such preliminary construction Plans and Specifications and accompanying
data, Buyer shall
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furnish to Seller, in writing, its comments on and any objections it may have to
any aspect of such preliminary construction Plans and Specifications and
accompanying data. Buyer shall be considered to have approved such preliminary
construction Plans and Specifications and accompanying data upon the expiration
of such 30-day period without Buyer having furnished comments or stated any
objections. Seller shall not deliver working drawings or specifications to any
governmental authority for final approval in connection with any required permit
or other governmental or regulatory approval unless such drawings or
specifications have been reviewed by Buyer in accordance with the provisions of
this Section 2.1.
(iii) Within 300 days after the date hereof, but in any event no
later than 45 days prior to the Financing Closing Date, Seller shall furnish to
Buyer a copy of Seller's proposed contract with the general contractor whom
Seller wishes to construct the Project, together with such evidence of said
general contractor's qualifications and financial condition as Buyer may
reasonably request. Buyer may disapprove such construction contract and general
contractor by notice to Seller given within 30 days after the delivery to Buyer
of the copy of the construction contract and such evidence. The notice of
disapproval shall specify the grounds for disapproval. Buyer shall be considered
to have approved said construction contract and general contractor in the
absence of any notice of disapproval given within said 30-day period.
(iv) Promptly after the same become available, but in no event later
than 6 months after the Commencement Date, Seller shall furnish to Buyer three
sets of final as-built Plans and Specifications for the Project.
(g) All information required to be submitted to Buyer pursuant to
subparagraphs (d), (e) and f(ii) of this Section 2.1 shall be submitted to such
persons and entities, and in such numbers of copies, as Buyer may designate to
Seller from time to time and Buyer shall not be deemed to have received such
information unless and until each person and entity so designated by Buyer has
received such information at the address for such person or entity designated by
Buyer.
Section 2.2. Interconnection. (a) The Interconnection shall be
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made by Buyer at the sole cost and expense of Seller. Seller shall design,
construct, install and maintain the Interconnection Facilities as part of the
Project, and the Interconnection Facilities shall be specifically approved by
Buyer as suitable for parallel operation with Buyer's System prior to the
Interconnection being made. Seller shall reimburse Buyer, prior to Buyer's
making the Interconnection, for all reasonable costs and expenses, including
taxes, incurred by Buyer in readying or preparing Buyer's System for Buyer's
making of the Interconnection and accepting delivery of electric energy from the
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Project, including all substation additions, transformers, switchgear, controls
and relaying equipment and all engineering and design costs in connection
therewith, and Seller shall reimburse Buyer from time to time for all reasonable
costs and expenses, including taxes, if any, incurred by Buyer in operating and
maintaining said equipment and facilities in accordance with sound electric
utility practice. Buyer shall perform the physical activity involved in making
and energizing the Interconnection.
(b) The Interconnection Facilities shall be designed, constructed and
installed in compliance with the Design and Construction Standard, including the
interconnection standards set forth in Section 35 of the APS Engineering Manual,
the operating specifications set forth in the Operations Coordination Agreement,
the provisions of the National Electric Safety Code and the standards of the
Institute of Electrical and Electronics Engineers, the National Electrical
Manufacturers Association and the American National Standards Institute.
Section 2.3. Buyer's Action for Its Own Protection Only. Any
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action taken by Buyer in inspecting, reviewing, observing or approving the
Project or any aspect thereof, any work, materials or equipment, any contracts
or subcontracts, any contractors, subcontractors or suppliers, or the Plans and
Specifications or the taking of any other action authorized to be taken by Buyer
under this Article II, shall be for Buyer's protection only. Buyer shall not be
deemed to have assumed any responsibility to Seller or any other Person
(including the Project Lender or Lessor) with respect to any such action or with
respect to the proper construction, operation or maintenance of the Project,
performance of contracts or subcontracts, the qualifications of any contractor,
subcontractor or supplier, or the safety, capacity or reliability of any
materials or equipment, nor shall any such action or inaction of Buyer be relied
upon by, or give rise to any liability to, Seller or any third party.
Section 2.4. Financing of the Project. Seller may secure the
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initial construction financing of the Project by the Project Mortgage, may
convey the Project to Lessor, subject to the lien of the Mortgage, and, upon
such conveyance, the initial permanent financing of the Project may be secured
by the Project Mortgage and Seller may lease the Project back as lessee pursuant
to the lease, subject in each case to the provisions hereof and of the
Recognition Agreement relating to the Project Mortgage and the Lease. The terms
of the initial construction financing and initial permanent financing of the
Project, and of the Project Mortgage and the Lease, and the appropriate
insertions to be made in the blank spaces in the Recognition Agreement relating
thereto, shall be satisfactory to Buyer in its sole discretion. Neither Seller
nor Lessor may (a) amend or consent to any amendment of the terms of the initial
construction financing or the initial permanent financing of the Project, or of
the Project Mortgage or the Lease, unless such amendment is not prohibited by
Section 8.3
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of the Recognition Agreement, or (b) engage in any other financing of the
Project unless (i) such financing is permitted by Section 5.2(d) of the
Recognition Agreement, (ii) if the Lease and the indebtedness or other
obligations secured by the Project Mortgage are no longer outstanding, such
financing is reasonably acceptable to Buyer and is expressly subordinated to the
Mortgage, or (iii) such financing is not secured by a lien on or security
interest in the Project or any interest therein.
ARTICLE III
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OPERATION AND MAINTENANCE OF THE PROJECT
Section 3.1. Characteristics of Electric Power and the Delivery
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Thereof. The electric power to be delivered by Seller under this Agreement
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shall be three-phase, 60 hertz, alternating current at a nominal voltage of
46,000 volts, shall not adversely affect the voltage, frequency, waveshape or
power factor of power at the Interconnection and shall be delivered to Buyer at
the Interconnection in conformance with the interconnection standards set forth
in Section 35 of the APS Engineering Manual and the operating specifications set
forth in the Operations Coordination Agreement. In addition, all electric
generating equipment included in the Project shall be capable of delivering
power at the Interconnection at a power factor range of between 90% lagging and
110% leading.
Section 3.2. Compliance with Laws: Contest. (a) Seller shall keep,
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or cause to be kept, in full force and effect all licenses, permits and
governmental authorizations and agreements necessary for the ownership,
construction, leasing, operation, management or use of the Project and shall
comply with, or cause to be complied with, in a manner consistent with sound
electric utility practice, all Legal Requirements which at any time may be
applicable to Seller or to the Project, even if compliance therewith
necessitates structural changes or improvements or results in interference with
the use or enjoyment of the Project or any part thereof. Without limiting the
generality of the foregoing, (i) at all times during the term of this Agreement,
Seller shall maintain and keep in full force and effect, or cause to be
maintained and kept in full force and effect, an order of the FERC, in form and
substance satisfactory to Buyer, certifying, with respect to specifically
identified fuel sources for the Project and so long as such fuel sources are
used in the manner contemplated in the Plans and Specifications and in the
application for such order, that the primary energy source of the Project is
"waste" within the meaning of PURPA, that at least 75% of the "total energy
input" within the meaning of PURPA is from such primary energy source, and that
the use of oil, natural gas and coal by the Project (x) does not, in the
aggregate, exceed 25% of the "total energy input" within the meaning of PURPA of
the Project during any calendar year period and (y) is either a use permitted by
Section 3(17)(B) of the Federal Power Act or a use
-10-
that improves the efficiency of the assets which are necessary to the production
of power by means of the primary energy source of the Project, and (ii) Seller
shall not operate the Project in a manner that will cause it to cease to be, and
shall otherwise comply with all requirements necessary to maintain the Project
as, a "qualifying small power production facility" or "qualifying facility"
within the meaning of PURPA. Seller shall be liable for all fines, fees,
penalties or other costs arising as a result of or in connection with any
violation of applicable Legal Requirements in connection with the ownership,
construction, leasing, operation, management or use of the Project. Seller
shall promptly forward to Buyer copies of all notices relating to the Project
received by Seller from the FERC or any other governmental authority or agency.
If requested by Seller, Buyer shall reasonably cooperate with Seller by joining
in any applications that may be necessary for Seller to secure any required
licenses, permits or governmental authorizations necessary to own, construct,
lease, operate, maintain and use the Project.
(b) Seller shall have the right to contest or object to the validity
or applicability of any Legal Requirement in good faith by appropriate legal or
administrative proceedings, but this shall not be deemed or construed in any way
as relieving, modifying or extending Seller's obligation to perform and comply
with all Legal Requirements at the time and in the manner provided in this
Section 3.2, unless (i) Seller shall have given prior notice to Buyer of
Seller's intention so to contest or object to a Legal Requirement, (ii) the
legal or administrative proceedings shall conclusively operate to prevent the
enforcement of the Legal Requirement being contested or objected to prior to
final determination of such proceedings, and (iii) Seller's failure to perform
and comply with the Legal Requirement being contested or objected to shall not
constitute a violation of any other Legal Requirement and shall not constitute a
default under or permit the termination of the Project Mortgage, the Lease or
any other material agreement to which Seller or the Project is subject.
Section 3.3. Fuel Stockpiling. Seller shall maintain or cause to
------------ ----------------
be maintained (a) at the Project a fuel stockpile of a size sufficient to supply
fuel for the Project for not less than 4 days, and (b) at an off-site location,
to be identified not later than the Financing Closing Date, within 15 miles from
the Project sufficient to accommodate a 90-day fuel supply, a fuel stockpile of
a size consistent with sound electric utility practice (consistent with weather
and market conditions and available storage space at such location as of the
date of this Agreement) for electrical generating plants of similar size and
capacity to the Project (collectively, the "Fuel Inventory").
Section 3.4. Maintenance and Repair. (a) Seller shall at all
------------ ----------------------
times after the Commencement Date keep the Project, or cause the same to be
kept, in good operating condition consistent
-11-
with sound electric utility practice and, subject to the provisions of Section
3.2(b), with all applicable Legal Requirements, and shall make or cause to
be made all repairs (structural and nonstructural, extraordinary or ordinary,
foreseen or unforeseen) necessary to keep the Project in such condition.
(b) Seller shall pay or cause to be paid all costs and expenses
associated with maintaining the Project in the condition and repair required
under this Article III, including periodic overhauls thereof.
(c) Seller may serve as the operator of the Project so long as the
qualifications of the personnel assigned by Seller to be responsible for the
management and operation of the Project are reasonably satisfactory to Buyer.
Seller may, and, upon any failure by Seller to comply with any of the terms,
covenants or conditions hereof or of the Lease, at Buyer's request shall, employ
an independent contractor or contractors for the performance of any of Seller's
obligations relating to the operation of the Project as set forth in this
Article III, subject to Buyer's prior consent, which shall not be unreasonably
withheld, as to the identity of the independent contractor and the terms and
provisions of the contract or other arrangement with such independent
contractor; provided, however, that in the case of an emergency Buyer's prior
--------- -------
consent shall not be required and Seller shall promptly notify Buyer of the
nature of the work to be performed and of the identity of the contractor
employed by Seller to perform such work. Seller shall deliver to Buyer a copy
of any such proposed contract or other arrangement. Buyer shall be considered
to have approved any such contractor and the terms and provisions of such
contract or other arrangement in the absence of any notice of disapproval given
within 30 days after Buyer's receipt of such proposed contract or other
arrangement. To the extent permitted by law, Seller shall replace any
independent contractor engaged to operate the Project who becomes bankrupt or
insolvent.
Section 3.5. Operation. Seller shall at all times after the
------------ ---------
Commencement Date operate the Project in a manner consistent with sound electric
utility practice and with the operating specifications set forth in the
Operations Coordination Agreement so as to assure, to the extent reasonably
possible, uninterrupted output of Project Energy at the Contract Output. Seller
shall cooperate with Buyer in the scheduling of maintenance of and repairs to
the Project so that, to the extent reasonably possible, such maintenance and
repairs shall be performed during periods other than seasonal peak periods of
APS Demand, and so as to avoid any other detrimental impact on Buyer's System.
In addition, Seller shall use all reasonable efforts to supply Buyer with
continuous, reliable Project Energy during On-Peak Hours at a rate of generation
at least equal to that during Off-Peak Hours.
-12-
Section 3.6. Access: Financial Records; Operating Budget: Etc. (a) Buyer
----------- ------------------------------------------------
and its agents, representatives and authorized invitees, and representatives of
governmental and regulatory agencies having jurisdiction over Buyer, may visit
and inspect the Project at any reasonable time and upon reasonable advance
notice.
(b) Seller shall keep true records and books of account with respect
to the Project in which full and correct entries will be made of all its
business transactions with respect thereto. Buyer shall have the right to
examine, or cause an audit to be made of, such books and records and to make
copies or extracts thereof and to discuss the financial condition and operations
of the Project with Seller, all at such time or times during normal business
hours as Buyer may reasonably require.
(c) Seller shall treat as current income for tax purposes, on the
accrual method of accounting, all payments for Project Energy made by Buyer to
Seller pursuant to this Agreement. If Buyer changes its method of accounting for
purchases of Project Energy, it shall notify Seller of such change and Seller
shall accord the same tax accounting treatment to its sales of Project Energy
pursuant to this Agreement as Buyer utilizes for purchases of Project Energy.
(d) Seller shall prepare and submit, or cause to be prepared or
submitted, to Buyer not less than 90 days prior to the Commencement Date, and
thereafter not less than 90 days prior to the first day of each operating year
for the Project, a budget (the "Operating Budget") of Operating and Maintenance
Expenses and of projected deliveries of Project Energy for such operating year
(or shorter period), setting forth, in comparative form, actual Operating and
Maintenance Expenses and actual deliveries of Project Energy for the prior
operating year (or shorter period, as the case may be), and otherwise in such
form and detail as Buyer may require. Actual Operating and Maintenance Expenses
for each operating quarter shall be certified to Buyer within 30 days after the
end of each such operating quarter by the chief financial officer of Seller and
the chief financial officer of the operator of the Project, and, if requested by
Buyer, actual Operating and Maintenance Expenses for each operating year shall
be certified to Buyer by an independent certified public accountant reasonably
satisfactory to Buyer within 90 days after the end of each such operating year.
(e) Seller shall prepare and submit, or cause to be prepared and
submitted, to Buyer not less than 15 days after the end of each calendar
quarter, a report, certified by the President or chief operating officer of
Seller and the chief financial officer of the operator of the Project, as to the
occurrence, if any, of any Unavoidable Interruptions and scheduled maintenance
of and repairs to the Project during such calendar quarter, setting forth in
detail reasonably satisfactory to Buyer the nature and
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duration (or anticipated duration) of each such occurrence and the steps Seller
or such operator have taken or propose to take with respect thereto.
Section 3.7. Insurance; Damage or Destruction; Condemnation. (a)
------------ ----------------------------------------------
Seller shall (i) provide or cause to be provided insurance against loss or
damage with respect to the Project as provided in the Mortgage, and (ii) comply
with the provisions of the Mortgage in the event of any Damage to or
Condemnation of (as such terms are defined in Section 1.06 of the Mortgage) the
Project.
(b) During any period of restoration of the Project as required by
the Mortgage and after any partial restoration to a viable economic unit
following any partial Condemnation, or after any Damage or Condemnation if
Seller shall not be obligated, and shall not have elected, pursuant to Section
1.06 of the Mortgage to restore the Project following such Damage or
Condemnation, the amount of Project Energy to be delivered by Seller hereunder
shall be appropriately reduced and the Contract Output shall be adjusted, if
appropriate, to account for any reductions in expected deliveries of Project
Energy thereafter.
(c) If Seller shall not be obligated, and shall not have elected,
pursuant to Section 1.06 of the Mortgage to restore the Project following a
Damage or Condemnation, then Seller shall pay to Buyer, within 20 days after
demand therefor, an amount equal to the Capacity Replacement Charge computed as
of the date of demand in accordance with the formula set forth in Section
6.2(b), multiplied by a fraction, the numerator of which shall be the Contract
Output minus the average hourly deliveries of Project Energy during the 12
-----
calendar months immediately preceding such Damage or Condemnation from the
portion of the Project, if any, not so damaged or taken, and the denominator of
which shall be the Contract Output. Upon any such payment being made following
Damage to or Condemnation of the entire Project, this Agreement shall terminate
and neither party shall have any further liability to the other hereunder,
except for any liabilities which became due and payable, and remain unpaid, as
of the time of said termination. The amount of any payment required to be made
hereunder shall bear interest at the Applicable Rate from the date which is 20
days after the date of demand for such payment to the date on which Buyer
receives payment thereof in full.
Section 3.8. Maintenance of Reserve Fund. Seller shall establish
------------ ---------------------------
and maintain, for so long as this Agreement remains in effect, a separate
reserve fund (the "Reserve Fund"). The Reserve Fund shall be held by a
depositary satisfactory to Buyer (the "Reserve Fund Depositary") under a
depositary arrangement satisfactory to Buyer. In the event the moneys on
deposit in the Reserve Fund are less than the Minimum Reserve Fund Requirement,
including by reason of application of such moneys in whole or in part for the
purposes permitted by this Section 3.8, Seller shall
-14-
fund or replenish the Reserve Fund to the Minimum Reserve Fund Requirement by
depositing in the Reserve Fund within 30 days after the end of each month an
amount equal to the Stipulated Monthly Reserve Fund Payment for such month until
the Reserve Fund shall contain an amount not less than the Minimum Reserve Fund
Requirement. Moneys in the Reserve Fund may be invested in a manner satisfactory
to Buyer, and so long as no Event of Default as to Seller exists, any monies in
the Reserve Fund in excess of the Minimum Reserve Fund Requirement may be paid
to Seller upon its request. Moneys in the Reserve Fund may be used, to the
extent Seller lacks other available funds therefor, only for the purpose of
paying Operating and Maintenance Expenses with respect to the Project or to pay
for alterations, repairs, improvements, renewals and replacements with respect
to the Project which are necessary for the proper operation of the Project.
Seller shall keep accurate records with respect to the Reserve Fund and all
disbursements therefrom and shall, upon Buyer's request, supply a complete
accounting or independent audit thereof to Buyer.
ARTICLE IV
----------
METERING AND BILLING
Section 4.1. Metering Devices. The Project Energy delivered to
------------ ----------------
Buyer by Seller pursuant to this Agreement shall be measured by Metering
Devices, which shall be installed and maintained by Buyer at Seller's expense
and shall be owned by Buyer.
Section 4.2. Sealing of Metering Devices. The Metering Devices
------------ ---------------------------
shall be sealed. Buyer shall give Seller access to the Metering Devices at any
reasonable time upon reasonable notice. The seals shall be broken by Buyer only
when the Metering Devices are to be inspected, tested or adjusted, provided,
--------
however, that Seller shall receive prior notice thereof and shall have the right
- -------
to be present.
Section 4.3. Inspection and Testing; Retroactive Adjustments. (a)
------------ -----------------------------------------------
Buyer shall inspect and test all Metering Devices upon the installation thereof,
at Seller's cost and expense. In addition, upon request of Seller Buyer shall,
and from time to time Buyer may, inspect or test any Metering Device at any
other reasonable time and shall permit an authorized representative of Seller to
be present at any such inspection or test. The cost and expense of any such
inspection or test shall be paid by Seller unless, upon being inspected or
tested, a Metering Device is found to register inaccurately by more than 2% of
full scale, in which event the cost and expense of the requested inspection or
test shall be borne by Buyer. If a Metering Device is found to be defective or
inaccurate, it shall be adjusted, calibrated, repaired or replaced by Buyer at
Seller's cost and expense.
-15-
(b) If a Metering Device fails to register, or if the measurement
made by a Metering Device is found upon testing to be inaccurate (whether or not
within 2% of full scale), an adjustment shall be made correcting all
measurements of Project Energy made by the inaccurate or defective Metering
Device during (i) the actual period when inaccurate measurements were made, if
that period can be determined to the mutual satisfaction of the parties, or (ii)
if the actual period cannot be determined to the mutual satisfaction of the
parties, one-half of the period from the date of the last previous test of the
Metering Device to the date such failure is discovered or such test is made (the
period so applicable being herein called 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 (x) by
correcting the error if the percentage of error is ascertainable by calibration,
tests or mathematical calculation, or (y) if not so ascertainable, by estimating
on the basis of deliveries under similar conditions during periods when the
Metering Device was registering accurately. Promptly upon the determination of
the amount of any adjustment, Buyer shall pay to Seller any additional amounts
then due for deliveries of Project Energy during the Adjustment Period or Buyer
shall be entitled to a credit against any subsequent payments for deliveries of
Project Energy, as the case may be.
Section 4.4. Billing and Payment: Buyer's Records. Buyer shall read
------------ ------------------------------------
the Metering Devices within three business days of the end of each calendar
month and shall within 15 business days after such reading render to Seller an
itemized statement showing the Project Energy delivered to Buyer during such
month and the amount to be paid therefor by Buyer pursuant to Section 1.2. Each
statement shall set forth in reasonable detail Buyer's calculations of any
credits to which Buyer may be entitled and of the net payment due to Seller and
shall be accompanied by Buyer's payment of any amounts therein shown to be due.
Subject to Section 4.3(b), Seller shall be considered to have accepted such
statement in the absence of any objection to Buyer within 30 days of the
rendering thereof. Seller shall have the right to examine, or cause an audit to
be made of, Buyer's records relating to the matters covered by such statements
all at such time or times during normal business hours as Seller may reasonably
require. Each overdue payment under this Section 4.4 shall bear interest at the
Applicable Rate from the date such payment is due until paid. Seller shall
reimburse Buyer from time to time for all reasonable administrative costs and
expenses incurred by Buyer in performing its obligations under this Section 4.4.
Section 4.5. Buyer's Access to Metering Devices. Seller hereby
------------ ----------------------------------
grants to Buyer and its employees, agents and representatives, all licenses,
easements and rights of way, including adequate and continuing access rights on
Seller's properties, necessary for Buyer to install, construct, operate,
maintain, repair, test, inspect, replace and remove the Metering
-16-
Devices. Seller shall execute such deeds, documents or other instruments for
recording as Buyer may require with respect to the foregoing.
If any portion of the Metering Devices is to be installed or operated
on property owned by any person or entity other than Buyer or Seller, Seller
shall, if Buyer is unable to do so without cost to Buyer, obtain, at Seller's
cost and expense, from the owner of such property or such other appropriate
persons or entities all requisite licenses, easements or rights of way, in form
satisfactory to Buyer, for the installation, construction, operation,
maintenance, repair and replacement of such portion of the Metering Devices on
such property.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES;
CONDITIONS PRECEDENT TO SALE AND PURCHASE
Section 5.1. Representations and Warranties of Seller. Seller hereby
------------ ----------------------------------------
represents and warrants as follows:
(a) Seller (i) is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania with full
right, power and authority to enter into and perform its obligations under this
Agreement, the Mortgage and the Recognition Agreement and to consummate the
transactions contemplated hereby and thereby, (ii) is duly qualified, authorized
to do business and in good standing in each jurisdiction where the character of
its properties or the nature of its activities makes such qualification
necessary, (iii) has the power to carry on its business as now being conducted,
and (iv) possesses, with immaterial exceptions under local law unrelated to the
Project, all Federal, state and local permits and franchises currently required
for the maintenance and operation of its properties and business.
(b) This Agreement has been, and the Mortgage and the Recognition
Agreement will be, duly authorized, executed and delivered by Seller, and each
thereof constitutes or will constitute the legal, valid and binding obligation
of Seller enforceable in accordance with its terms, except as such
enforceability and the availability of certain rights and remedies provided for
therein may be limited by bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditors' rights or by general
principles of equity.
(c) Neither the execution and delivery of this Agreement, the
Mortgage or the Recognition Agreement, the consummation of any of the
transactions contemplated hereby or thereby nor performance or compliance with
the terms and conditions hereof or thereof will (i) result in the violation of
-17-
any present Legal Requirement to which Seller is subject, the violation of which
would have a material adverse effect on the ability of Seller to perform its
obligations under this Agreement, the Mortgage or the Recognition Agreement, or
(ii) conflict with or result in the breach of, or constitute a default under,
the Articles of Incorporation or By-Laws of Seller or any agreement or
instrument to which Seller is a party or by which it or its properties may be
bound or affected (except any such agreement or instrument a breach of which
would not have a material adverse effect on the ability of Seller to perform its
obligations under this Agreement, the Mortgage or the Recognition Agreement), or
result in the creation of any lien, charge, security interest or encumbrance
(except such that may arise (x) in favor of the Buyer in connection with this
Agreement and under the Mortgage, and (y) in favor of the Project Lender in
connection with and under the Project Mortgage upon any of Seller's properties
(including the Mortgaged Property (as defined in the Mortgage)), and Seller is
not in default under any term of any such agreement or instrument.
(d) Seller has obtained all authorizations, consents, approvals,
licenses, permits, exemptions and other actions by any governmental authorities
or regulatory bodies that are required in connection with Seller's execution and
delivery of this Agreement, the Mortgage and the Recognition Agreement; and
Seller (i) has obtained, or by the Financing Closing Date will have obtained,
all other governmental approvals, licenses and permits required to be obtained
on or prior to the Financing Closing Date, and (ii) is or will be entitled to
obtain in the ordinary course upon due application therefor all governmental
approvals, licenses and permits required to be obtained subsequent to the
Financing Closing Date, in each case for the consummation by Seller of the
transactions contemplated by, and the performance by Seller of, this Agreement,
the Mortgage and the Recognition Agreement.
(e) There are no pending, or to Seller's knowledge threatened,
actions, suits or proceedings before any court, governmental authority or
regulatory body, to which Seller is a party or by which it or its properties may
be bound, which will materially adversely affect Seller's financial condition,
business or operations or its ability to perform its obligations under this
Agreement, the Mortgage or the Recognition Agreement, nor is there any basis for
any such action, suit or proceeding.
(f) No Event of Default as to Seller and no event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default as to Seller has occurred and is continuing.
(g) The Project is, and as completed pursuant to Article II and
operated pursuant to Article III will be, a "qualifying small power production
facility" within the meaning of PURPA.
-18-
Section 5.2. Representations and Warranties of Buyer. Buyer hereby
----------- ---------------------------------------
represents and warrants as follows:
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania with full
right, power and authority to enter into and perform its obligations under this
Agreement and the Recognition Agreement and to consummate the transactions
contemplated hereby and thereby in accordance with the terms hereof following
fulfillment of the conditions set forth in Sections 5.3(g) and 5.3(h).
(b) This Agreement has been, and the Recognition Agreement will be,
duly authorized, executed and delivered by Buyer and each thereof constitutes
the legal, valid and binding obligation of Buyer enforceable in accordance with
its terms, except as such enforceability and the availability of certain rights
and remedies provided for therein may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity.
(c) Buyer has obtained, or by the Financing Closing Date upon
fulfillment of the conditions set forth in Sections 5.3(g) and 5.3(h) will have
obtained, all authorizations, consents, approvals, licenses, permits, exemptions
and other actions by any governmental authorities or regulatory bodies that are
required in connection with Buyer's execution and delivery of this Agreement or
the Recognition Agreement or for the consummation by Buyer of the transactions
contemplated by, and the performance by Buyer of, this Agreement and the
Recognition Agreement.
(d) Neither the execution and delivery of this Agreement or the
Recognition Agreement, the consummation of the transactions contemplated hereby
or thereby nor performance of or compliance with the terms and conditions hereof
or thereof will (i) result in the violation of any present Legal Requirement to
which Buyer is subject, the violation of which would have a material adverse
effect on the ability of Buyer to perform its obligations under this Agreement
or the Recognition Agreement, or (ii) conflict with or result in the breach of,
or constitute a default under, the Articles of Incorporation or By-Laws of Buyer
or any agreement or instrument to which Buyer is a party or by which it or its
properties may be bound or affected (except any such agreement or instrument a
breach of which would not have a material adverse effect on the ability of Buyer
to perform its obligations under this Agreement or the Recognition Agreement),
or result in the creation of any lien, charge, security interest or encumbrance
upon any of its properties, and Buyer is not in default under any term of any
such agreement or instrument.
-19-
(e) There are no pending, or to Buyer's knowledge threatened,
actions, suits or proceedings before any court, governmental authority or
regulatory body, to which Buyer is a party or by which it or its properties may
be bound, which might materially adversely affect Buyer's financial condition,
business or operations or its ability to perform its obligations under this
Agreement or the Recognition Agreement, nor is there any basis for any such
action, suit or proceeding.
(f) No Event of Default as to Buyer and no event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default as to Buyer has occurred and is continuing.
Section 5.3. Conditions Precedent to Buyer's Obligations as of
------------ -------------------------------------------------
Financing Closing Date. The obligation of Buyer to purchase Project Energy from
- ----------------------
Seller hereunder is subject to the fulfillment on and as of the Financing
Closing Date of each of the following conditions:
(a) All documents and instruments (other than the Operations
Coordination Agreement) relating to the ownership and operation of the Project
(including any contracts with independent contractors employed to perform
Seller's obligations under Article II and Article III with respect to the
construction and operation and maintenance of the Project), to the initial
construction financing of the Project and to the sale by Seller and the purchase
by Buyer of Project Energy which have been or are required by the Project Lender
to be executed and delivered on or prior to the Financing Closing Date shall be
reasonably satisfactory to Buyer, such documents shall have been duly
authorized, executed and delivered, and Buyer shall have received certified
copies of all such documents or other evidence as it may reasonably request in
order to establish the foregoing.
(b) The form of all documents and instruments to be executed and
delivered in connection with the sale and leaseback of Seller's interest in the
Project (including the Lease) and the initial permanent financing of the Project
shall be reasonably satisfactory to Buyer; Lessor and the Project Lender in
respect of the initial permanent financing shall have committed, in a writing
reasonably satisfactory to Buyer, that it will consummate such sale and
leaseback and such initial permanent financing within three months of the in-
service date of the Project for federal tax purposes, subject to such terms and
conditions as are set forth in said documents and instruments; and Buyer shall
have received certified copies of all such documents or other evidence as it may
reasonably request in order to establish the foregoing.
(c) The Mortgage, the Recognition Agreement and any documents related
thereto or contemplated thereby shall have been duly authorized, executed and
delivered by the parties thereto and shall have been duly filed and recorded in
all places required by
-20-
law in order to publish notice of and perfect the respective liens, rights,
titles, interests, remedies, powers, privileges and security interests created
thereby, and Buyer shall have received executed counterparts of such documents
and such evidence of filing and recording as Buyer may reasonably request.
(d) All representations and warranties by Seller in or under this
Agreement shall be true, with the same effect as though such representations and
warranties had been made on and as of the Financing Closing Date and no Event of
Default as to Seller or any event which with the giving of notice or lapse of
time or both would constitute an Event of Default as to Seller shall have
occurred and be continuing; and Buyer shall have received a certificate, dated
such date, signed by the President and a principal financial or accounting
officer of Seller to such effect.
(e) Buyer shall have received an opinion, dated the Financing Closing
Date, of Varnum, Riddering, Schmidt & Howlett, counsel to Seller, in form and
substance satisfactory to Buyer, as to the matters set forth in Exhibit A.
(f) Seller shall have applied for and obtained an order from the
FERC, which application and order shall be in form and substance satisfactory to
Buyer, (i) certifying, with respect to specifically identified fuel sources for
the Project and so long as such fuel sources are used in the manner contemplated
in the Plans and Specifications and in the application for such order, that the
primary energy source of the Project is "waste" within the meaning of PURPA,
that at least 75% of the "total energy input" within the meaning of PURPA is
from such primary energy source, and that the use of oil, natural gas and coal
by the Project (x) does not, in the aggregate, exceed 25% of the "total energy
input" within the meaning of PURPA of the Project during any calendar year
period and (y) is either a use permitted by Section 3(17)(B) of the Federal
Power Act or a use that improves the efficiency of the assets which are
necessary to the production of power by means of the primary energy source of
the Project, and (ii) certifying that the Project is a "qualifying facility"
within the meaning of PURPA, or such order shall have been deemed granted under
PURPA, in either case no later than the Financing Closing Date.
(g) The regulatory commissions having jurisdiction over Buyer with
respect to rate making shall have entered orders, in form and substance
satisfactory to Buyer, permitting the full pass-through to rate-payers of all
charges payable by Buyer under this Agreement, and such orders shall have been
entered, shall be in full force and effect and shall be final and no longer
subject to appeal.
(h) All regulatory commissions having jurisdiction over Buyer or any
of its Affiliates shall have given their approval of
-21-
Buyer's obligations under this Agreement, if any such approvals be required, and
such approvals shall be in full force and effect and, if applicable, shall be
final and no longer subject to appeal.
(i) The Pennsylvania Public Utility Commission shall have either (i)
promulgated rules or guidelines or (ii) entered an order, in either case which
shall have been published in the Pennsylvania Bulletin, shall be in full force
---------------------
and effect and shall be final and no longer subject to comment or appeal, and
which shall have established to Buyer's satisfaction that (x) the entry by Buyer
into this Agreement and the transactions contemplated hereby are in full
compliance with the law and public policy of the Commonwealth of Pennsylvania,
including that represented by Act No. 114; (y) the entry by Buyer into this
Agreement and the transactions contemplated hereby will not at any time during
the term of this Agreement result in the creation of, or be deemed to
constitute, "excess capacity" within the meaning of Act No. 114 in respect of
the Project itself or in respect of any or all of the existing generating
capacity of APS in generation or cold reserve, including the Bath County
Project, and (z) all amounts payable by Buyer under this Agreement, including
the Capacity Cost Rate, are consistent with the "economic benefits to
ratepayers" standard of Act No. 114 and will at all times be immediately and
fully passed through to Buyer's ratepayers.
Section 5.4. Conditions Precedent to Buyer's Obligations as of
------------ -------------------------------------------------
Commencement Date. The obligation of Buyer to purchase Project Energy from
- -----------------
Seller under the provisions hereof other than Section 1.2(a) is subject to the
fulfillment on and as of the Commencement Date of each of the following
conditions:
(a) All documents and instruments (including the Operations
Coordination Agreement) relating to the ownership and operation of the Project,
to the initial construction financing of the Project and to the sale by Seller
and the purchase by Buyer of Project Energy, other than those described in
Section 5.3(a), shall be reasonably satisfactory to Buyer, such documents shall
have been duly authorized, executed and delivered, and Buyer shall have received
certified copies of all such documents or other evidence as it may reasonably
request in order to establish the foregoing; and Buyer shall have received a
certificate, dated the Commencement Date, signed by the President and by a
principal financial or accounting officer of Seller, to the effect that the
documents and instruments submitted to and approved by Buyer pursuant to
Sections 5.3(a) and 5.3(b) and this Section 5.4(a) constitute the only documents
and instruments of the type described in Sections 5.3(a) and 5.3(b) and this
Section 5.4(a) and have not been supplemented or amended or superseded by any
other documents or instruments (other than supplements, amendments or other
agreements theretofore submitted to and approved by Buyer, which approval shall
not be unreasonably withheld).
-22-
(b) Construction of the Project shall have been substantially
completed in accordance with the Design and Construction Standard; Seller shall
have obtained the warranties described in Section 2.1(c); the Interconnection
shall have been effected in accordance with Section 2.2; and the Project shall
have generated, over a consecutive 720-hour period within the most recent 90
consecutive days preceding the Commencement Date, an average hourly output at
least equal to 36.5 megawatthours per hour; provided, however, that if no
--------- -------
generation occurs during any hour in such 720-hour period because of Force
Majeure or any suspensions of purchases by Buyer as provided in Section 1.3
("eliminated hours"), such 720-hour period shall be measured by including the
last 720 hours that were not eliminated hours within such 90-day period.
(c) Seller shall have obtained all easements, licenses and rights as
Buyer in its reasonable discretion may deem necessary or advisable for the
ownership, construction, operation, management and use of the Project in
accordance with this Agreement; title to the Mortgaged Property (as defined in
the Mortgage), including such easements, licenses and rights, shall be
satisfactory to Buyer in its reasonable discretion, and Seller shall have
delivered to Buyer a mortgagee's title insurance policy or an unconditional
undertaking to issue the same, in form and substance reasonably satisfactory to
Buyer, issued by a title insurance company reasonably satisfactory to Buyer,
insuring Seller's title to the Project and the lien of the Mortgage; Seller
shall have delivered to Buyer appropriate lien waivers or releases signed by all
contractors who have furnished labor or materials in connection with the
construction of the Project; and there shall be no liens, security interests,
charges or encumbrances affecting the Project, other than that created by the
Project Mortgage or otherwise approved by Buyer, prior to or on a parity with
the lien and security interest created by the Mortgage.
(d) Buyer shall have received evidence reasonably satisfactory to
Buyer that all material Legal Requirements applicable to the construction and
operation of the Project have been complied with.
(e) No Event of Default as to Seller or any event which with the
giving of notice or lapse of time or both would become an Event of Default as to
Seller shall have occurred and be continuing; provided, however, that no Event
--------- -------
of Default as to Seller arising under Section 6.1(e) by reason of failure to
comply with Section 2.1(a) shall be deemed to have occurred if the Project shall
have been substantially completed in accordance with the Design and Construction
Standard; and Buyer shall have received a certificate, dated such date, signed
by the President and a principal financial or accounting officer of Seller to
such effect.
-23-
Section 5.5. Conditions Precedent to Seller's Obligations as of
------------ --------------------------------------------------
Financing Closing Date. The obligation of Seller to sell Project Energy to Buyer
- ----------------------
hereunder is subject to the fulfillment on and as of the Financing Closing Date
of each of the following conditions:
(a) All documents and instruments relating to the sale by Seller and
the purchase by Buyer of Project Energy, and all actions taken by Buyer under
this Agreement in connection therewith, shall be reasonably satisfactory to
Seller, such documents shall have been duly authorized, executed and delivered,
and Seller shall have received certified copies of all such documents or other
evidence as it may reasonably request in order to establish the foregoing.
(b) All representations and warranties by Buyer in or under this
Agreement shall be true, with the same effect as though such representations and
warranties had been made on and as of the Financing Closing Date and no Event of
Default as to Buyer or any event which with the giving of notice or lapse of
time or both would constitute an Event of Default as to Buyer shall have
occurred and be continuing; and Seller shall have received a certificate, dated
such date, signed by the Chairman of the Board, President or a Vice President
and by a principal financial or accounting officer of Buyer to such effect.
(c) Seller shall have received an opinion, dated the Financing
Closing Date, of Reed Smith Shaw & McClay, counsel to Buyer, as to the matters
set forth in Exhibit B.
(d) Seller shall have purchased from Buyer the Site (as defined in
the Mortgage) and the improvements thereon, it being understood that nothing in
this Section 5.5(d) or in any other provision of this Agreement is intended to
be, or shall be construed as, a commitment or agreement by Buyer to sell such
property to Seller or to impose any duty whatsoever on Buyer with respect
thereto, all of which shall be the subject of a separate written agreement
between Seller and Buyer.
Section 5.6. Condition Precedent to Seller's Obligations as of
------------ -------------------------------------------------
Commencement Date. The obligation of Seller to sell Project Energy to Buyer
- -----------------
hereunder is subject to the fulfillment on and as of the Commencement Date of
the following condition: no Event of Default as to Buyer or any event which
with the giving of notice or lapse of time or both would constitute an Event of
Default as to Buyer shall have occurred and be continuing; and Seller shall have
received a certificate, dated such date, signed by the Chairman of the Board,
President or a Vice President and by a principal financial or accounting officer
of Buyer to such effect.
-24-
Section 5.7. Condition Precedent to Both Parties' Obligations. The
------------ ------------------------------------------------
obligation of Buyer to purchase from Seller, and of Seller to sell to Buyer,
Project Energy hereunder is subject to the condition that the Financing Closing
Date shall have occurred on or before September 1, 1988.
Section 5.8. Survival. All representations and warranties made by
------------ --------
Seller or Buyer in or under this Agreement shall survive the execution and
delivery of this Agreement and any action taken pursuant hereto.
ARTICLE VI
----------
DEFAULTS AND REMEDIES
Section 6.1. Events of Default as to Seller. Any of the following
------------ ------------------------------
shall constitute an "Event of Default as to Seller":
(a) the Commencement Date shall not occur prior to July 1, 1992;
(b) either (i) no deliveries of Project Energy to Buyer are made
during any consecutive 270-day period after the Commencement Date;
provided, however, that if no such deliveries are made during any days in
-------- -------
such period because of Unavoidable Interruptions, such 270-day period shall
be measured by including the last 270 days that were not days during which
an Unavoidable Interruption existed; or (ii) the average hourly deliveries
of Project Energy to Buyer during any consecutive 36 calendar months after
the Commencement Date (the "Test Period") shall fall below, or Buyer shall
establish that said deliveries during any such Test Period will fall below,
80% of the Contract Output; provided, however, that deliveries of Project
-------- -------
Energy to Buyer during any period of Unavoidable Interruptions shall be
deemed to be equal to the average hourly deliveries of Project Energy made
or deemed made to Buyer pursuant to this Agreement during the 180-day
period ending on the day preceding the beginning of such period of
Unavoidable Interruptions;
(c) Seller shall at any time fail to pay any sum due and payable to
Buyer hereunder, and such failure shall continue for 20 days after notice
thereof shall have been given to Seller by Buyer;
(d) any representation or warranty made by Seller herein, in the
Mortgage or in any certificate delivered to Buyer pursuant hereto or
thereto shall prove to be incorrect in any material respect when made,
unless (i) the fact, circumstance or condition that is the subject of such
representation or warranty is made true within 30 days after notice thereof
shall have been given to Seller by Buyer and (ii) such cure removes any
adverse affect on Buyer of such
-25-
fact, circumstance or condition being otherwise than as first represented,
or unless such fact, circumstance or condition being otherwise than as
first represented does not materially adversely affect Buyer;
(e) Seller shall at any time fail to discharge or perform any other
liability or obligation of Seller under this Agreement, and such failure
shall continue for a period of 30 days after notice thereof shall have been
given to Seller by Buyer; provided, however, that if such failure cannot be
-------- -------
remedied within such 30-day period and if Seller within such period of 30
days commences, and thereafter proceeds with all due diligence, to cure
such failure, said period shall be extended for such further period, not to
exceed 6 months after such notice to Seller by Buyer, as shall be necessary
for Seller to cure the same with all due diligence;
(f) a court having jurisdiction shall enter (i) a decree or order for
relief in respect of Seller in an involuntary case or proceeding under any
applicable Federal or state bankruptcy, insolvency, reorganization or other
similar law, or (ii) a decree or order adjudging Seller bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
Seller under any applicable Federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of Seller or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and any such decree
or order for relief or any such other decree or order shall continue
unstayed and in effect for a period of 60 consecutive days;
(g) Seller shall (i) commence a voluntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or any other case or proceeding to be adjudicated a
bankrupt or insolvent, or (ii) consent to the entry of a decree or order
for relief in respect of Seller in any involuntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or (iii) file any petition, answer or
consent seeking reorganization or relief under any applicable Federal or
state law, or (iv) consent to the filing of any petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of Seller or of any
substantial part of its property, or (v) make an assignment for the benefit
of creditors, or (vi) be unable, or admit in writing its inability, to pay
its debts as they become due, or (vii) take any action in furtherance of
any of the foregoing;
-26-
(h) in connection with any event described in clause (f) or (g) of
this Section 6.1, this Agreement shall be rejected within the meaning of
the Bankruptcy Reform Act of 1978, as amended; or
(i) an "Event of Default" (as defined in the Mortgage) shall occur
and be continuing.
Section 6.2. Rights of Buyer in Case of an Event of Default as to
------------ ----------------------------------------------------
Seller. If an Event of Default as to Seller shall occur and be continuing,
- ------
Buyer may, in its discretion, at the same or at different times, and to the
extent permitted by law, take one or more of the following actions, subject,
--------
however, to the provisions of the Recognition Agreement:
- -------
(a) proceed by appropriate proceedings, judicial, administrative or
otherwise, at law or in equity or otherwise, to protect and enforce its
rights, to recover any damages to which it may be entitled, and to enforce
performance by Seller, including specific performance of Seller's
obligations hereunder;
(b) recover, and Seller shall pay, for the loss of the benefit of
Buyer's bargain and not as a penalty, liquidated damages (it being
understood that the Capacity Cost Rate is based on the availability and
reliability of the Project Energy for the entire term of this Agreement,
that Buyer's actual damages are not susceptible of precise ascertainment
and that the following sum constitutes a fair and reasonable amount of
damages under the circumstances) equal to the sum (the "Capacity
Replacement Charge") of:
(i) an amount, intended to compensate Buyer for the loss of the
Project's capacity value attributable to Seller's failure to provide
available and reliable generating capacity at the Contract Output for
the entire term of this Agreement, equal to the Capacity Termination
Costs specified opposite the contract year in which such determination
is made on the schedule of Capacity Termination Costs set forth in
Exhibit C, appropriately adjusted in accordance with the formulas set
forth in such schedule in the event the Commencement Date occurs after
January 1, 1990, and
(ii) any other sums, if any, then due to Buyer under this
Agreement or the Mortgage;
(c) take any action, incur any expense or pay any amount as may be
necessary to cure any Event of Default as to Seller, to avoid any delay in
obtaining electric energy from the Project in accordance with this
Agreement or to avoid a default by Seller under any instrument or agreement
-27-
(including the Project Mortgage and the Lease) delivered in connection with
the transactions contemplated hereby, and Buyer may recover from Seller,
and Seller shall pay, or reimburse Buyer for, on demand any and all
expenses so incurred or amounts so paid by Buyer, together with interest
thereon at the Applicable Rate from the date such-expenses are incurred or
payments are made by Buyer, which interest shall be payable on the last day
of each month, in arrears, and to the extent not paid when due shall be
added to the balance of amounts expended or paid by Buyer on which interest
is computed;
(d) take possession of and operate the Project or take any other
action as may be permitted under the Mortgage; or
(e) terminate this Agreement by notice to Seller.
Attached hereto as Exhibit C is an example illustrating the computation of the
Capacity Replacement Charge. The Capacity Replacement Charge shall bear
interest at the Applicable Rate from the date as of which the Capacity
Replacement Charge is calculated to the date on which Buyer receives payment
thereof in full. Upon payment in full of the Capacity Replacement Charge and
all other sums that may be due to Buyer hereunder and under the Mortgage, this
Agreement shall terminate and neither party shall have any further liability to
the other hereunder. The rights and remedies herein provided in case of an
Event of Default as to Seller 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. No delay or omission of Buyer to
exercise any right or remedy accruing upon any Event of Default as to Seller
shall impair any such right or remedy or constitute a waiver of such event or an
acquiescence therein. Every right and remedy given by this Agreement or by law
to Buyer may be exercised from time to time, and as often as may be deemed
expedient, by Buyer.
Section 6.3. Events of Default as to Buyer. Any of the following
------------ -----------------------------
shall constitute an "Event of Default as to Buyer":
(a) Buyer shall fail to pay any amount due under Section 1.2 for the
purchase of Project Energy when due and such failure shall continue for a period
of 15 days after notice thereof shall have been given to Buyer by Seller;
(b) Buyer shall fail to accept and purchase Project Energy in
accordance with this Agreement as, if and when delivered to Buyer's System at
the Interconnection by Seller, and such failure shall (i) not arise from Buyer's
good faith and reasonable belief that it is entitled to suspend purchases of
Project Energy under the terms of this Agreement, and (ii) continue for a period
of 7 days after notice thereof shall have been given to Buyer by Seller; or
-28-
(c) Buyer shall fail to pay, discharge or perform any other liability
or obligation of Buyer under this Agreement and such failure shall continue for
a period of 30 days after notice thereof shall have been given to Buyer by
Seller or, if such failure cannot be remedied within such 30-day period and if
Buyer within such period of 30 days commences, and thereafter proceeds with all
due diligence, to cure such failure, such failure shall nevertheless continue
for more than the period, not to exceed 6 months after such notice to Buyer from
Seller, as shall be necessary for Buyer to cure the same with all due diligence.
Section 6.4. Rights of Seller in Case of an Event of Default as to
------------ -----------------------------------------------------
Buyer. If an Event of Default as to Buyer shall occur and be continuing, Seller
- -----
may, (a) by notice to Buyer, terminate its obligation hereunder to sell and
deliver Project Energy to Buyer until such failure is cured, and if such failure
continues for 10 days after such notice of termination, Seller may terminate
this Agreement by notice to Buyer, (b) proceed against Buyer by appropriate
proceedings, judicial, administrative or otherwise, at law or in equity or
otherwise, to protect and enforce its rights, to recover any damages to which it
may be entitled, and to enforce performance by Buyer, including specific
performance of Buyer's obligations, and (c) in addition to any other remedies
Seller may have hereunder or hereafter existing at law or in equity or
otherwise, require Buyer to, and in such event Buyer shall, transmit Project
Energy from the Interconnection to any electric utility, municipality or other
entity interconnected with Buyer (other than any such entities then being
supplied energy as a part of APS Demand) as Seller may designate, to the extent
sufficient transmission capacity is available and to the extent such
transmission is in compliance with the interconnection standards set forth in
Section 35 of the APS Engineering Manual, and is consistent with the operating
specifications set forth in the Operations Coordination Agreement, and is
consistent with APS Demand, whenever arising, Buyer's other third-party
transmission arrangements, whenever arising, and Buyer's service obligations
under Pennsylvania and Federal law; any such transmission pursuant to this
clause (c) in any event to be provided under rate and service conditions similar
to those applicable to Buyer's other third-party transmission arrangements,
whenever arising, or under such other rates and conditions as may be reasonable
under the circumstances, subject to the approval, if any be required, of all
regulatory agencies having jurisdiction over such transmission transactions.
Notwithstanding any Event of Default as to Buyer, Seller shall not under any
circumstances have any right to enter upon or, except as specifically provided
in the preceding sentence, take any action with respect to or affecting Buyer 5
System or any part thereof other than taking any action to disconnect the
Project from Buyer's System. The rights and remedies herein provided to Seller
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
-29-
equity or otherwise. No delay or omission of Seller to exercise any right or
remedy accruing upon any Event of Default as to Buyer 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 Seller may
be exercised from time to time, and as often as may be deemed expedient,-by
Seller.
ARTICLE VII
-----------
INDEMNIFICATION
Section 7.1. Seller's Indemnification of Buyer. (a) Seller shall
------------ ---------------------------------
indemnify and hold APS and its subsidiaries (including Buyer) and the officers,
directors, employees and agents of APS and each of such subsidiaries
(collectively, "Buyer's Indemnified Parties") harmless from and against all
damages, losses or expenses suffered or paid as a result of any and all claims,
demands, suits, causes of action, proceedings, judgments and liabilities to
third parties, including reasonable counsel fees incurred in litigation or
otherwise, assessed, incurred or sustained by or against Buyer's Indemnified
Parties any of them with respect to or arising out of or in any way connected
with, whether as a result of the negligence of Seller otherwise, the design,
construction, operation or maintenance of the Project, including the failure to
comply with any applicable Legal Requirements with respect thereto, unless
caused by the gross negligence or willful misconduct of Buyer's Indemnified
Parties; provided, however, that Seller shall not be liable, by reason of the
--------- -------
foregoing indemnity, to Buyer's Indemnified Parties or Buyer's customers for any
loss of revenues.
(b) Promptly after receipt by any of Buyer's Indemnified Parties of
any claim or notice of the commencement of any action or administrative or legal
proceeding or investigation as to which the indemnity provided for in
subparagraph (a) of this Section 7.1 may apply, Buyer shall notify Seller of
such fact. Seller shall have the right to assume the defense thereof with
counsel designated by Seller and reasonably satisfactory to the indemnified
party; provided, however, that if the defendants in any such action include both
--------- -------
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties .
(c) Should any of Buyer's Indemnified Parties be entitled to
indemnification under this Section 7.1 as a result of a claim by a third party,
and should Seller fail to assume the defense of such claim, such indemnified
party may at the expense
-30-
of Seller contest (or, with the prior consent of Seller, settle) such claim;
provided, however, that no such contest need be made, and settlement or full
- --------- -------
payment of any such claim may be made without the consent of Seller (with Seller
remaining obligated to indemnify such indemnified party under this Section 7.1),
if an Event of Default as to Seller exists or if, in the opinion of such
indemnified party's counsel, such claim is meritorious or the defendant has no
valid defense to such claim.
(d) In the event that Seller is obligated to indemnify and hold any
of Buyer's Indemnified Parties harmless under this Section 7.1, the amount owing
to the indemnified party shall be the amount of such indemnified party's actual
out-of-pocket loss net of any insurance or other recovery.
Section 7.2. Buyer's Indemnification of Seller. (a) Buyer shall
------------ ---------------------------------
indemnify and hold Seller, Project Lender and Lessor and the officers,
directors, employees and agents of Seller, Project Lender and Lessor
(collectively, "Seller's Indemnified Parties") harmless from and against all
damages, losses or expenses suffered or paid as a result of any and all claims,
demands, suits, causes of action, proceedings, judgments and liabilities to
third parties, including reasonable counsel fees incurred in litigation or
otherwise, assessed, incurred or sustained by or against Seller's Indemnified
Parties with respect to or arising out of the operation or maintenance of the
Project and caused by the gross negligence or willful misconduct of Buyer or its
agents or employees; provided, however, that Buyer shall not be liable, by
--------- -------
reason of the foregoing indemnity, to Seller's Indemnified Parties for any loss
of revenues. Notwithstanding anything to the contrary herein contained, Buyer
shall not be liable, and neither Seller nor any of Seller's Indemnified Parties
shall have any rights to claim or recover against Buyer's Indemnified Parties,
for loss of or damage to Seller's Indemnified Parties, the Project or any other
property under Seller's control from any cause to the extent insured against or
required to be insured against under the provisions of the Mortgage.
(b) Promptly after receipt by any of Seller's Indemnified Parties of
any claim or notice of the commencement of any action or administrative or legal
proceeding or investigation as to which the indemnity provided for in
subparagraph (a) of this Section 7.2 may apply, Seller shall notify or cause the
indemnified party to notify Buyer of such fact. Buyer shall have the right to
assume the defense thereof with counsel designated by Buyer and reasonably
satisfactory to the indemnified party; provided, however, that if the defendants
--------- -------
in any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assert such legal
-31-
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties.
(c) Should any of Seller's Indemnified Parties be entitled to
indemnification under this Section 7.2 as a result of a claim by a third party,
and should Buyer fail to assume the defense of such claim, such indemnified
party may at the expense of Buyer contest (or, with the prior consent of Buyer,
settle) such claim; provided, however, that no such contest need be made, and
-------- -------
settlement or full payment of any such claim may be made without the consent of
Buyer (with Buyer remaining obligated to indemnify such indemnified party under
this Section 7.2), if, in the opinion of such indemnified party's counsel, such
claim is meritorious or the defendant has no valid defense to such claim.
(d) In the event that Buyer is obligated to indemnify and hold any of
Seller's Indemnified Parties harmless under this Section 7.2, the amount owing
to the indemnified party shall be the amount of such indemnified party's actual
out-of-pocket loss net of any insurance or other recovery.
ARTICLE VIII
------------
ARBITRATION
Section 8.1. Compulsory Arbitration. Any dispute between the
------------ ----------------------
parties arising under this Agreement or the Mortgage shall, if the parties
cannot settle such dispute amicably, be resolved by arbitration pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. Unless
the parties otherwise agree, the arbitration shall be held in Pittsburgh,
Pennsylvania. The parties shall proceed with the arbitration expeditiously and
shall conclude all proceedings thereunder, including any hearing, in order that
a decision may be rendered within 90 days from the filing of the demand for
arbitration by the initiating party; provided, however, that if such matter
--------- -------
relates to Seller's compliance with the terms of Section 2.1, such decision
shall be rendered within 45 days after the filing of such demand; and provided,
---------
further, that if such matter relates to Buyer's compliance with the terms of
- -------
Section 1.2 or Seller's compliance with the terms of Section 3.8, such decision
shall be rendered within 30 days after the filing of such demand. The decision
of the arbitrator shall be final and binding on both parties and may be enforced
in any court having jurisdiction over the party against which enforcement is
sought. In the event the arbitrator finds a breach of the terms and conditions
of this Agreement or the Mortgage to have occurred and be continuing, the
arbitrator shall have express authority to order (a) specific performance, as
provided in Section 10.6, (b) the establishment of reasonable reserves, and (c)
the payment of damages to compensate the non-breaching party for any loss;
provided, however, that Seller shall have the right during any such arbitration
- --------- -------
proceeding to continue the design, construction or operation of the Project,
-32-
as the case may be, on such terms and according to such standards as Seller
reasonably believes comply with this Agreement, but in the event the arbitrator
finds Seller's actions to be in breach of the terms and conditions of this
Agreement, Seller shall promptly comply with the arbitrator's decision and order
(including, in the event the arbitrator orders specific performance, correcting
any action taken by Seller during such proceeding inconsistent with the
arbitrator's decision). Any payment of damages ordered by the arbitrator shall
bear interest at the Applicable Rate from the date as of which such damages are
calculated to the date on which the party entitled thereto receives payment
thereof in full.
Section 8.2. Performance During Proceeding. During the pendency of
------------ -----------------------------
such arbitration (i) Seller shall continue to perform its obligation hereunder
to sell and deliver Project Energy and Buyer shall continue to pay for Project
Energy all amounts not in dispute, without setoff during the pendency of such
arbitration of any amounts so disputed, and (ii) neither Buyer nor Seller shall
exercise any other remedies hereunder arising by virtue of the matters in
dispute.
ARTICLE IX
----------
DEFINITIONS AND RULES OF CONSTRUCTION
Section 9.1. Definitions. As used in this Agreement:
------------ -----------
"Act No. 114" means the Act of July 10, 1986, No. 114, 1986 Pa. Legis.
Serv. 184 (Purdon).
"Additional Project Energy" has the meaning specified in Section
1.1(c).
"Adjustment Period" has the meaning specified in Section 4.3(b).
"Affiliate" means, with respect to any Person, any other Person who
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person, or who holds or
beneficially owns 10% or more of the equity interest in such Person or 10% or
more of any class of voting securities of such Person.
"Applicable Rate" means a fluctuating rate of interest per annum
(computed on the basis of the actual number of days elapsed in a year of 365 or
366 days, as appropriate) equal to 120% of the interest rate per annum announced
from time to time by Mellon Bank, N.A., in Pittsburgh, Pennsylvania, as its
prime rate such fluctuating rate to change automatically from time to time
effective as of the effective date of each change in such prime rate.
-33-
"APS" means Allegheny Power System, Inc., a public utility holding
company registered as such under the Public Utility Holding Company Act of 1935
whose subsidiaries are currently engaged in the furnishing of electric service
in portions of Maryland, Ohio, Pennsylvania, Virginia and West Virginia, and its
successors and assigns.
"APS Demand" means the "Demand" of all "Participants" as provided, and
as such terms are defined, in the APS Power Supply Agreement.
"APS Engineering Manual" means the APS Engineering Manual, as the same
may be revised from time to time.
"APS Power Supply Agreement" means the Power Supply Agreement dated
January 1, 1968 among Buyer, The Potomac Edison Company and Monongahela Power
Company, as in effect on the date hereof.
"APS Proxy Units" means (a) until October 1, 1995, each of Units Nos.
1 and 2 at each of the Fort Martin and Pleasants Power Stations and Units Nos.
1, 2 and 3 at each of the Harrison and Hatfield's Ferry Power Stations, in each
case so long as the same shall be in commercial operation and shall be owned, in
whole or in part, by a regulated subsidiary of APS, and (b) thereafter, each of
the foregoing units, each of Coal #1, #2 and #3 and each of any other equivalent
base load generating units that are economically dispatched to supply APS
Demand, as determined by Buyer, in each case so long as the same shall be in
commercial operation and shall be owned, in whole or in part, by a regulated
subsidiary of APS.
"APS System" means any and all equipment and facilities comprising the
systems of Buyer, The Potomac Edison Company and Monongahela Power Company for
the generation, transmission and distribution of electricity, whether now owned
or hereafter acquired.
"Average Production Cost Rate" means, with respect to the generating
facilities and the period of time as to which the determination is being made,
the sum (expressed in cents per kilowatthour), as reasonably determined by Buyer
(it being understood that there may exist more than one reasonable method of
making such determination and that the method employed by Buyer, if reasonable,
shall not be subject to challenge on the basis that it is not the best method),
of:
(a) the accrued expense of Buyer and any other regulated
subsidiaries of APS in FERC Account 501 (fuel expense), or such other
appropriate similar account as the FERC may from time to time
establish for fuel expense for steam power generation, divided by the
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actual net generation in kilowatthours, exclusive of plant use, plus
(b) the accrued expenses of Buyer and any other regulated
subsidiaries of APS in FERC Accounts 500, 502-507, inclusive, and 510-
514, inclusive, or such other appropriate similar accounts as the FERC
may from time to time establish for power production expenses steam
power generation (other than fuel expense), divided by the product of
(i) 70% of the Net Generating Capability times (ii) the total number
of hours in the period for which such costs are being determined.
"Avoided Energy Cost Rate" means (a) until October 1, 1995, the
monthly Variable Energy Cost Rate, actually experienced, for all APS Proxy
Units, as determined by Buyer, and (b) thereafter, (i) until the first unit of
Coal #1, #2 and #3 is placed in service for commercial operation, the monthly
Average Production Cost Rate, actually experienced, for all APS Proxy Units, as
determined by Buyer, and (ii) after such unit has been placed in service for
commercial operation, the monthly Average Production Cost Rate, actually
experienced, for the station in which such unit is contained, as determined by
Buyer, provided, however, that if in any period for which such costs are being
--------- -------
determined the actual net generation in kilowatthours of such station is less
than 10% of its Net Generating Capability times the total number of hours in
such period, then the Avoided Energy Cost Rate for such period shall be the
weighted average of the monthly Average Production Cost Rate in effect for the
preceding six months in which the actual net generation of such station exceeded
10% of its Net Generating Capability.
"Billing Period" means the calendar month (or portion thereof) in
respect of which the price to be paid to Seller for the Project Energy sold and
delivered to Buyer during that month is being determined.
"Buyer's Consulting Engineer" means Stone & Webster Engineering
Corporation, or such other engineering firm as Buyer, in its sole discretion,
may select from time to time.
"Buyer's Indemnified Parties" has the meaning specified in Section
7.1(a).
"Buyer's System" means any and all equipment and facilities comprising
Buyer's system for the generation, transmission and distribution of electricity,
whether now owned or hereafter acquired.
"Capacity Cost Rate" means 3.3 cents per kilowatthour
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"Capacity Derate" means any decrease in the generating capacity of the
Project from its Net Generating Capability which is not attributable to an
outage of equipment.
"Capacity Replacement Charge" has the meaning specified in Section
6.2(b).
"Coal #1, #2 and #3" means collectively, all units of the next coal-
fired base load generating station constructed by Buyer or Buyer and any other
regulated subsidiaries of APS.
"Commencement Date" means the first day of the month following the
date on which the conditions precedent set forth in Sections 5.3 and 5.4 shall
be fulfilled; provided, however, that in no event shall the Commencement Date
--------- -------
occur prior to January 1, 1990.
"Contract Output" means the greater of (a) 36.5 megawatthours per hour
or (b) the maximum output specified by Seller pursuant to Section 1.1(b).
"Design and Construction Standard" has the meaning specified in
Section 2.1(a).
"Event of Default as to Buyer" has the meaning specified in Section
6.3.
"Event of Default as to Seller" has the meaning specified in Section
6.1.
"FERC" means the Federal Energy Regulatory Commission, or any
successor to said Commission in the performance of its regulatory functions
relating to the Project under the Federal Power Act, as amended.
"Financing Closing Date" means the date of the first closing of the
initial construction financing of the Project under the Project Loan Documents
(as defined in the Recognition Agreement).
"Force Majeure" means any cause or causes which the party asserting
the same is not, despite all reasonable efforts, able to prevent or overcome,
including, but not limited to, acts of God, strikes, lockouts or other labor
disputes, riots, civil strife, war, acts of a public enemy, lightning, fires,
explosions, storms or floods. Neither (a) Capacity Derates, (b) interruptions in
deliveries of Fuel Inventory during transportation from an off-site storage
location to the Project, nor (c) lack or unavailability of money or changes in
market conditions shall constitute Force Majeure.
"Fuel Inventory" has the meaning specified in Section 3.3.
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"Indenture" means the trust indenture to be executed and delivered by
Lessor in connection with the sale and leaseback of the Project to secure the
permanent financing of the Project.
"Index" means the Gross National Product Implicit Price Deflator as
presently issued by the Department of Commerce Bureau of Economic Analysis in
the publication entitled "Economic Indicators" published by the Government
Printing Office, or, if said historical index is no longer available or is
converted to a different standard reference base or is otherwise revised, such
historical index as Buyer may reasonably select that measures all goods and
services in the economy adjusted for real price change.
"Index Multiplier" means, for any calendar year, the algebraic sum of
(a) the Inflation Factor for the calendar year immediately preceding such
calendar year, and (b) 1.0.
"Inflation Factor" means, for any calendar year (the "test year"), the
quotient obtained by dividing (a) the Index for the test year, minus the Index
-----
for the calendar year immediately preceding the test year by (b) the Index for
the calendar year immediately preceding the test year.
"Interconnection" means the connection between the Project and Buyer's
System at a point to be designated by Buyer at Buyer's 46 kV Milesburg
Substation or as otherwise agreed to by Buyer and Seller, permitting the
transfer of electric energy in either direction.
"Interconnection Date" means the date the Interconnection is made
pursuant to Section 2.2; provided, however, that in no event shall the
--------- -------
Interconnection Date occur prior to October 1, 1989.
"Interconnection Facilities" means such lines, poles, switchgear and
all other materials, equipment and facilities as may be installed between the
point of Interconnection and the remainder of the Project in connection with, or
necessary or desirable for, making the Interconnection, together with all
improvements and additions thereto, substitutions therefor and replacements
thereof; the Interconnection Facilities shall constitute part of the Project.
"Internal Energy" means the electric energy consumed from time to time
by the Project for auxiliary equipment and other internal Project uses,
expressed in kilowatthours
Lease" means the lease agreement to be entered into between Lessor and
Seller pursuant to which Seller as lessee will lease the Project from Lessor for
an initial term of 15 years and providing, among other things, for the operation
and maintenance
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of the Project by Seller as lessee in the manner required by this Agreement, and
any amendments thereto permitted by Section 2.4.
"Legal Requirements" means all present and future laws, codes,
ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits,
approvals, agreements, regulations and requirements, even if unforeseen or
extraordinary, of every governmental authority or agency having jurisdiction
over the matter in question, whether Federal, state or local, and all covenants,
restrictions and conditions now or hereafter of record which may be applicable
to Seller or Buyer, respectively, as required by the context in which used, or
to the Project or any of the real or personal property comprising the Project,
or to the use, manner of use, occupancy, possession, operation, maintenance,
construction, acquisition, installation, alteration, improvement, replacement,
repair or reconstruction of the Project or any part thereof.
"Metering Devices" means any instrument or instruments used to
measure, or to measure and record, electric energy.
"Minimum Loading Condition" means a condition that exists when the APS
System load is being supplied only from one or more of the following sources:
(a) fossil-fueled steam generating units which, except to the extent required
for system security reasons, are operating at or near minimum output and which
are expected to be required to supply the estimated load during the following
day; (b) hydroelectric generating units which, except to the extent required for
system security reasons, are discharging at or near required minimum water
releases or releases related to maintenance of appropriate reservoir water
levels; (c) minimum power purchases required by contract provisions from other
electric utilities; (d) power purchases pursuant to contracts with facilities
which, on the date such contracts are entered into, are "qualifying facilities"
within the meaning of the Public Utility Regulatory Policies Act of 1978, as
amended; and (e) nuclear steam generating units operating at or below their
maximum capability.
"Minimum Reserve Fund Requirement" means (a) until December 31, 1990,
$5,000,000; and (b) for each calendar year thereafter, the Minimum Reserve Fund
Requirement for the calendar year immediately preceding such calendar year
multiplied by the Index Multiplier for such calendar year.
"Mortgage" means the Mortgage and Security Agreement from Seller to
Buyer, in the form annexed hereto as Exhibit D, encumbering the Project (it
being understood that the descriptions of the Mortgaged Property to be attached
thereto as Schedules I and II shall be satisfactory to Buyer in its sole
discretion) and securing the obligations of Seller to Buyer under this
Agreement.
"Net Generating Capability" means the maximum load which the
generating facilities in question can carry as demonstrated by
-38-
testing or as determined by actual operating experience, less power generated
and used for auxiliary equipment and other uses of such facilities.
"Net Project Cash Flow" means, for any month, all revenues realized
for such month from the sale of electricity generated by the Project, less (a)
----
all Operating and Maintenance Expenses paid in respect of such month (including
any payment on account of accruals of ad valorem or other property taxes,
insurance premiums, payments to the FERC or any other Operating and Maintenance
Expenses that are not payable monthly made into a trust account for later
payment of such Operating and Maintenance Expenses), (b) an amount equal to 1/12
of Seller's estimated Federal and State income tax liability in respect of
revenues generated from the sale of Project Energy under this Agreement for the
fiscal year in which such month occurs (but not, in the case of any fiscal year
occurring after the first fiscal year during the term of this Agreement, in
excess of 1/12 of Seller's actual Federal and State income tax liability in
respect of revenues from the sale of Project Energy under this Agreement for the
fiscal year preceding such fiscal year), and (c) prior to the fifteenth
anniversary of the Commencement Date, all debt service paid in respect of such
month pursuant to the Project Mortgage or rent paid in respect of such month
pursuant to the Lease (including any payment on account of accruals of debt
service or rent made into a trust account for later payment of such debt service
or rent).
"Off-Peak Hours" means all hours other than On-Peak Hours.
"On-Peak Hours" means the hours of 7 a.m. through 10 p.m. prevailing
Eastern time, Monday through Saturday, except when such days fall on New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
"Operating and Maintenance Expenses" means, with respect to Seller and
the Project, those costs which are defined in FERC Accounts 500-507, inclusive,
510-514, inclusive, and 560-573, inclusive, as of the date hereof, and shall
specifically include premiums on the insurance hereby required to be maintained
and Impositions (as defined in the Mortgage) required to be paid pursuant to the
terms of the Mortgage; provided, however, that no fees or other amounts paid or
--------- -------
payable to Seller, any of the shareholders, directors or officers of Seller, the
Project Lender, Lessor or their respective Affiliates, or the partners or agents
or the respective successors or assigns of any thereof shall constitute
Operating and Maintenance Expenses.
"Operating Budget" has the meaning specified in Section 3.6(d).
"Operations Coordination Agreement" means an agreement mutually
acceptable to Seller and Buyer setting forth
-39-
interconnection standards and operating specifications for the Project which are
consistent with the operation of Buyer's System.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government.
"Plans and Specifications" means the detailed plans and specifications
with respect to the construction of the Project, whether preliminary or final,
including any working or shop drawings made in furtherance of said plans and
specifications and all single line diagrams and control and protective relay
schemes relating to the Interconnection and the Interconnection Facilities, and
all changes and amendments thereto, including changes in engineering in the
field as a result of problems encountered during construction.
"Project" means the Project as defined in the recitals hereto,
together with all other buildings, structures, equipment, fixtures and
facilities (including the Interconnection Facilities) now or hereafter erected,
constructed or acquired with respect thereto, and together with all improvements
and additions thereto, substitutions therefor and replacements thereof.
"Project Energy" means all electric energy generated by the Project
minus all Internal Energy supplied by the Project's own generation, expressed in
- -----
kilowatthours; provided, however, that Project Energy shall not include any
-------- -------
energy generated solely from increased capacity above the maximum design
capacity of 36.5 to 43 megawatts anticipated in the Plans and Specifications
created as a result of additions or improvements to the Project except to the
extent such increased capacity supplies Internal Energy that was supplied prior
to such addition or improvement.
"Project Lender" means, collectively, all holders of notes or other
obligations or evidences of indebtedness entitled to the benefit and protection
of the Project Mortgage, and any trustee acting on their behalf (including the
trustee under the Indenture).
"Project Mortgage" means all mortgages, deeds of trust or other
indentures or security agreements entered into by Seller in accordance with
Section 2.4 in connection with the initial construction and permanent financing
of the Project, or in connection with any subsequent financing of the Project
permitted by this Agreement, and which shall constitute liens on the Project or
any part thereof, together with the notes or other obligations or evidences of
indebtedness secured thereby and any amendments thereto permitted by Section
2.4, and shall include the Indenture.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, and
the regulations of the FERC (and of any state agency having jurisdiction in the
premises) promulgated thereunder, in
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each case as the same is in effect on the Financing Closing Date or, in the case
of the criteria set forth in clause (i) of the second sentence of Section 3.2,
as the same is in effect at the time of the applicable FERC orders referred to
in such Section.
"Recognition Agreement" means the Recognition Agreement among Buyer,
Seller and the other parties identified therein, substantially in the form
annexed hereto as Exhibit E.
"Reserve Fund" has the meaning specified in Section 3.8.
"Seller's Indemnified Parties" has the meaning specified in Section
7.2(a).
"Scheduled Outage" means, with respect to Buyer, any period of planned
or scheduled maintenance of or repairs to Buyer's System which, under sound
electric utility practice, prevents Buyer from taking and using Project Energy.
"Stipulated Monthly Reserve Fund Payment" means, for any month, an
amount equal to the lesser of (a) Net Project Cash Flow for such month and (b)
the sum of (i) for any month occurring prior to the twelfth anniversary of the
Commencement Date, .2 cents per kilowatthour, and for any month thereafter, .35
cents per kilowatthour, times the number of kilowatthours of Project Energy
delivered to Buyer during such month (the "stipulated payment amount" for such
month) and (ii) the amount, if any, by which (x) the aggregate Stipulated
Monthly Reserve Fund Payments for all preceding months (other than any months
preceding the last month in which, on any day, the Reserve Fund contained an
amount at least equal to the Minimum Reserve Fund Requirement) were less than
(y) the aggregate stipulated payment amounts for such months.
"System Emergency" means, with respect to Buyer, any forced outage as
a result of Force Majeure, the negligence or willful misconduct of Buyer's
employees, a failure of equipment or facilities or any other cause affecting
Buyer's ability to accept and purchase Project Energy which, despite all
reasonable efforts (but without regard to lack or unavailability of money or
changes in market conditions), Buyer is unable to prevent or overcome and which
is not attributable to a failure by Buyer to comply with the provisions of this
Agreement, or any other condition of, on or affecting Buyer's System which is
likely to result in imminent significant disruption of service to Buyer's
customers or is imminently likely to endanger life or property.
"Test Period" has the meaning specified in Section 6.1(b).
"Unavoidable Interruptions" means interruptions in deliveries of
Project Energy to Buyer pursuant to this Agreement to the extent occasioned by
(a) any suspensions of purchases by Buyer pursuant to Section 1.3, (b) one or
more causes constituting
-41-
Force Majeure affecting Seller's ability to sell and deliver Project Energy as
provided in Section 1.4, (c) the effect, to the extent not inconsistent with
Seller's obligations under Section 3.2, on Seller's ability to sell and deliver
Project Energy as provided in Section 1.1 as a result of any action taken to
comply with any changes in Legal Requirements which occur after the Commencement
Date, or (d) the negligence or willful misconduct of Seller's employees, a
failure of equipment or facilities not constituting a Capacity Derate, or any
other cause not constituting either Force Majeure or an interruption in the
transportation of Fuel Inventory from an off-site storage location to the
Project, affecting Seller's ability to sell and deliver Project Energy as
provided in Section 1.1 which, despite all reasonable efforts (but without
regard to lack or unavailability of money or changes in market conditions),
Seller is unable to prevent or overcome and which is not attributable to a
failure by Seller to comply with the provisions of this Agreement.
"Variable Energy Cost Rate" means, with respect to the generating
facilities and the period of time as to which the determination is being made,
the sum (expressed in cents per kilowatthour), as reasonably determined by Buyer
(it being understood that there may exist more than one reasonable method of
making such determination and that the method employed by Buyer, if reasonable,
shall not be subject to challenge on the basis that it is not the best method),
of:
(a) the accrued expense of Buyer and any other regulated
subsidiaries of APS in FERC Account 501 (fuel expense), or such other
appropriate similar account as the FERC may from time to time
establish for fuel expense for steam power generation, divided by the
actual net generation in kilowatthours, exclusive of plant use, plus
(b) one-half of the accrued expenses of Buyer and any other
regulated subsidiaries of APS in FERC Accounts 510-514, inclusive, or
such other appropriate similar accounts as the FERC may from time to
time establish for maintenance expense for steam power generation,
divided by the actual net generation in kilowatthours, exclusive of
plant use.
Section 9.2. Rules of Construction. Unless the context shall
------------ ---------------------
otherwise indicate, words importing the singular number include the plural
number, and vice versa; the terms "hereof", "hereby", "hereto", "hereunder" and
similar terms refer to this entire Agreement; and the term "including" shall
mean "including without limitation". Each reference in this Agreement to a
Person includes its successors and assigns.
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ARTICLE X
---------
MISCELLANEOUS
Section 10.1. Force Majeure. Whenever any party hereto shall be
------------- -------------
excused from any delay in the performance of, or from its inability to perform,
any duties or obligations hereunder by reason of Force Majeure, (a) such party
shall give the other party prompt notice describing the particulars of the cause
or causes constituting such Force Majeure, (b) the suspension of performance
shall be of no greater scope and of no longer duration than is required by the
cause or causes constituting such Force Majeure, (c) no obligations of either
party which arose before the cause or causes constituting such Force Majeure
causing the suspension of performance shall be excused as a result of such Force
Majeure, and (d) the party whose performance is excused by such Force Majeure
shall use all reasonable efforts to remedy with all reasonable dispatch, all in
accordance with standard electric utility practice, the cause or causes
preventing such party from carrying out its duties or obligations; provided,
--------
however, that the settlement of strikes, lockouts and other labor disputes shall
- -------
be entirely within the discretion of such party, and such party shall not be
required to settle any strike, lockout or other labor dispute on terms which it
deems inadvisable.
Section 10.2. Term of this Agreement. Unless sooner terminated in
------------- ----------------------
accordance with the terms hereof, this Agreement shall expire on the 30th
anniversary of the Commencement Date. If the Financing Closing Date shall not
occur prior to September 1, 1988 for any reason whatsoever, including Force
Majeure, this Agreement shall automatically terminate, in which case neither
party shall have any further liability to the other hereunder. Notwithstanding
any other provision hereof, if the Commencement Date shall not occur prior to
July 1, 1991 for any reason whatsoever, including Force Majeure, Buyer may
terminate this Agreement, in which case neither party shall have any further
liability to the other hereunder; provided, however, that if Buyer exercises
-------- -------
such right to terminate, Seller may reinstate this Agreement and keep the same
in full force and effect so long as Seller pays to Buyer as liquidated damages,
in monthly installments, in advance, the sum of $35,000 per month on the first
day of each month or part thereof after June 30, 1991 that the Commencement Date
shall not have occurred; and provided, further, that if the Commencement Date
-------- -------
shall not occur prior to July 1, 1992 for any reason whatsoever, including Force
Majeure, Seller shall have no further right to reinstate this Agreement and
Buyer may terminate this Agreement effective at any time prior to the occurrence
of the Commencement Date, in which case neither party shall have any further
liability to the other hereunder. Upon any termination of this Agreement prior
to the 30th anniversary of the Commencement Date, Buyer shall not be obligated,
pursuant to PURPA or otherwise to pay for any electric energy thereafter
generated by the Project at a rate per kilowatthour greater than the price
specified in Section 8.5 of
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the Recognition Agreement (the provisions of which are incorporated herein by
reference and made a part hereof, whether or not the Recognition Agreement shall
be in effect at such time), and, at Buyer 5 request, Seller shall, and shall
cause any Successor (as defined in the Recognition Agreement) to Seller's
interest in the Project to, execute and deliver an instrument in form and
substance reasonably satisfactory to Buyer confirming the foregoing, and this
provision shall survive any such termination of this Agreement.
Section 10.3. Survival of Obligations. Except as otherwise
------------- -----------------------
specifically provided in this Agreement, termination of this Agreement for any
reason shall not relieve Buyer or Seller of any obligations of either such party
accruing prior to such termination .
Section 10.4. Confidentiality. During the term of this Agreement,
------------- ---------------
it may become necessary or desirable, from time to time, for either party to
provide 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 party desiring to
protect any such information (the "labelling party") may label such information
as either confidential or proprietary and thereafter 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 for any purpose
without the consent of the labelling party. In disclosing confidential or
proprietary information to governmental authorities, the disclosing party or
parties shall cooperate with the labelling party in minimizing the amount of
such information furnished. At the specific request of the labelling party, the
disclosing party or parties shall endeavor to secure the agreement of such
governmental authorities to maintain specified portions of such information in
confidence.
Section 10.5. Further Assurances. If either party determines that
------------- ------------------
any further instruments or any other things are reasonably necessary or
desirable to carry out the terms of this Agreement, the other party will execute
and deliver all such instruments and assurances and do all such things as the
first party reasonably deems necessary or desirable to carry out the terms of
this Agreement.
Section 10.6. Specific Performance and Injunctive Relief. In
------------- ------------------------------------------
addition to any other remedies provided in this Agreement, Buyer shall be
entitled to a decree compelling specific performance, and, without the necessity
of filing any bond, to the restraint by injunction of any actual or threatened
violation, of Seller's obligations under this Agreement, it being understood
that monetary damages are not an adequate remedy for the breach of Seller's
obligations hereunder and that such remedies are specifically contemplated and
consented to by the parties hereto.
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Section 10.7. Entire Agreement; Severability. This Agreement and the
------------ ------------------------------
documents delivered pursuant hereto contain the entire agreement between the
parties and supersede all prior negotiations and understandings with respect to
the subject matter hereof. Neither of the parties shall be bound by or be deemed
to have made any representations, warranties or commitments except those
contained herein or in the documents delivered pursuant hereto. This Agreement
and the documents delivered pursuant hereto, and the obligations of Seller and
Buyer hereunder and thereunder, shall not be affected by any dispute or
controversy between Buyer (or any Affiliate of Buyer) and Seller with respect to
the terms, provisions or performance of either of them under any other contract
entered into between them. If any term or provision of this Agreement or the
application thereof to any Person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to Persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
Section 10.8. Counterparts, Assigns, Governing Law and Amendments.
------------- ---------------------------------------------------
This Agreement:
(a) may be executed in any number of counterparts and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement;
(b) shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns;
(c) subject to applicable Federal law and the requirements of any
governmental authorities by which Buyer is regulated, shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania; and
(d) may not be amended, terminated or discharged, nor any provision
hereof waived, except in each case by a writing signed by the party against whom
enforcement of any such amendment, termination, discharge or waiver is sought.
Section 10.9. Assignment. Buyer may assign all or any portion of
------------- ----------
its rights hereunder with Seller's prior written consent, which consent shall
not be unreasonably withheld or delayed; provided, however, that Seller's
-------- -------
consent shall not be required for any assignment by Buyer to APS or to a direct
or indirect majority-owned subsidiary of APS. No such assignment shall release
Buyer from any of its obligations hereunder. No assignment of this Agreement or
any interest herein may be made or
-45-
granted by Seller except to the Project Lender pursuant to the Project Mortgage
and Lessor pursuant to the Lease, but only if such assignees are parties to or
otherwise bound by the Recognition Agreement. No such assignment to the Project
Lender or Lessor shall relieve Seller of any of its obligations under this
Agreement.
Section 10.10. Headings. The Table of Contents and headings used in
------------- --------
this Agreement are for convenience of reference only and shall not affect the
construction of any of the terms or provisions of this Agreement.
Section 10.11. Notices. All notices or other communications which
------------- -------
are required or permitted hereunder (collectively, "notices") shall, unless the
context otherwise requires, be in writing and shall be deemed sufficiently given
if sent by tested telex (charges prepaid), delivered personally or sent by
registered or certified mail, postage prepaid, to the party for whom intended,
addressed as follows:
if to Seller: Milesburg Energy, Inc.
P.O. Box 38
Blossburg, Pennsylvania 16912
Attention: President
if to Buyer: West Penn Power Company
800 Cabin Hill Drive
Greensburg, Pennsylvania 15601
Attention: The Secretary
with a copy to:
Allegheny Power Service Corporation
800 Cabin Hill Drive
Greensburg, Pennsylvania 15601
Attention: Legal Department
or, as to either party, to such other person or address as such party may
specify in a notice duly given to the other party as provided herein. All
notices shall be deemed to have been given as of the date received if telexed or
personally delivered or three days after the date mailed.
Section 10.12. No Implied Waiver. No delay in exercising, failure to
------------- -----------------
exercise or course of dealing in respect of any rights hereunder on the part of
any party, nor any partial or single exercise thereof, shall constitute a waiver
of such rights or of any other rights hereunder by such party.
Section 10.13. No Rights Conferred on Others. Nothing in this
-------------- -----------------------------
Agreement shall be construed as giving any person, firm, corporation or other
entity, other than the parties hereto, their
-46-
successors and permitted assigns, any right, remedy or claim under or in respect
of this Agreement or any provision hereof. Without limiting the generality of
the foregoing, nothing herein contained shall be deemed or construed to
constitute Buyer as a guarantor or surety with respect to any obligation of
Seller under the Project Mortgage.
Section 10.14. Costs and Expenses. Except as otherwise provided
------------- ------------------
herein or as heretofore otherwise agreed to by the parties in writing, each
party to this Agreement shall pay its own costs and expenses (including, without
limitation, the fees and expenses of its agents, representatives, counsel and
accountants) necessary for its performance of and compliance with this
Agreement.
Section 10.15. PURPA. (a) The absence of any statutory requirement
------------- -----
under PURPA or otherwise that Buyer purchase electric energy from qualifying
small power production facilities shall not relieve either Buyer or Seller of
their respective obligations hereunder, nor shall such obligations be affected
by any amendments to or repeal of PURPA which may become effective subsequent to
the execution and delivery of this Agreement, except as expressly provided
herein.
(b) Although not presently contemplated, during the term of this
Agreement it may be appropriate for Seller, with the consent of Buyer, to
operate the Project as a "qualifying cogeneration facility" within the meaning
of PURPA. In such event, Seller shall execute and deliver such amendments to
this Agreement as Buyer in its sole discretion may require, including such
provisions as Buyer may require to assure that Seller's obligations under any
steam sale or other use arrangements as Seller may enter into so as to cause the
Project to be a "qualifying cogeneration facility" are consistent with Seller' 5
obligation to deliver Project Energy to Buyer at the Contract Output and with
Seller's other obligations to Buyer under this Agreement. All such amendments
shall be subject to the approval, if any be required, of all regulatory
commissions having jurisdiction over Buyer and its Affiliates, which approvals,
if applicable, shall be in full force and effect and final and no longer subject
to appeal prior to the effectiveness of such amendments.
Section 10.16. Limitation of Liability. No recourse for the payment
------------- -----------------------
of any sums or the performance of any obligations hereunder, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, shareholder, partner, officer or director, as such, past, present
or future, of Seller or of any successor partnership or corporation, or against
any direct or indirect parent corporation of Seller or any other subsidiary of
any such direct or indirect parent corporation or any incorporator, shareholder,
officer or director, as such, past, present or future, of any such parent or
other subsidiary, whether
-47-
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, it being understood that Seller is a
special purpose corporation formed for the purpose of the transactions
contemplated in this Agreement on the express understanding aforesaid. Nothing
contained in this Section 10.16 shall be construed to limit the exercise or
enforcement, in accordance with the terms of this Agreement or the Mortgage, of
rights and remedies against Seller or the assets of Seller, including the
Project.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its officer thereunto duly authorized
as of the date and year first above written.
MILESBURG ENERGY, INC.
By /s/ Neil W. Hedrick
------------------------
Title: President
WEST PENN POWER COMPANY
By /s/ Stan Garnett
------------------------
Title: Vice President
-48-
EXHIBIT A
---------
TO
ELECTRIC ENERGY
PURCHASE AGREEMENT
Matters to be Covered
by Opinion of Varnum, Riddering,
Schmidt & Howlett
(Counsel to Seller)
-----------------
[Unless otherwise indicated, all capitalized terms used and not
otherwise defined in this Exhibit A shall have the meanings given such terms in
the Agreement to which this Exhibit A is attached.]
1. Seller (i) is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania with full
power and authority to enter into and perform its obligations under the
Agreement, the Mortgage, the Recognition Agreement and the Operative Documents
(as defined in the Recognition Agreement) to which it is a party and to
consummate the transactions contemplated thereby, (ii) is duly qualified,
authorized to do business and in good standing in Pennsylvania and in each other
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary, (iii) has the corporate power to
carry on its business as now being, or intended to be, conducted, and (iv)
possesses all Federal, State and local permits and franchises currently required
for the maintenance and operation of its properties and business.
2. The Agreement, the Mortgage, the Recognition Agreement and the
Operative Documents to which Seller is a party have been duly authorized,
executed and delivered by Seller and constitute legal, valid and binding
obligations of Seller enforceable in accordance with their respective terms,
except as such enforceability and the availability of certain rights and
remedies provided for therein may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity.
3. Neither the execution and delivery of the Agreement, the
Mortgage, the Recognition Agreement or any Operative Documents to which Seller
is a party, the consummation of the transactions contemplated thereby nor
performance or compliance with the terms and conditions thereof will (i) result
in the violation of any present Legal Requirement to which Seller is subject,
the violation of which would have a material adverse affect on the ability of
Seller to perform its obligations thereunder, or (ii) conflict with or result in
the breach of, or constitute a default
A-1
under, the Articles of Incorporation or By-laws of Seller or any agreement or
instrument to which Seller is a party or by which it or its properties may be
bound or affected (except any such agreement or instrument a breach of which
would not have a material adverse effect on the ability of Seller to perform its
obligations under the Agreement, the Mortgage, the Recognition Agreement or any
Operative Document to which it is a party), or result in a creation of any lien,
charge, security interest or encumbrance (except such that may arise (x) in
favor of Buyer in connection with the Agreement and under the Mortgage, and (y)
in favor of the Project Lender in connection with the Project Mortgage) upon any
of the properties of Seller, and Seller is not in default under any term of any
such agreement or instrument.
4. No authorization, consent, approval, license, permit, exemption or
other action by any governmental authority or regulatory body is required in
connection with Seller's execution and delivery of the Agreement, the Mortgage,
the Recognition Agreement or any Operative Document to which it is a party; and
Seller (i) has obtained all governmental approvals, licenses and permits
required to be obtained on or prior to the Financing Closing Date, and (ii) is
or will be entitled to obtain in the ordinary course upon due application
therefor all governmental approvals, licenses and permits required to be
obtained subsequent to the Financing Closing Date, in each case for the
consummation by it of the transactions contemplated by, and the performance by
it of, the Agreement, the Mortgage, the Recognition Agreement and the Operative
Documents to which it is a party.
5. There are no pending, or to the knowledge of such counsel,
threatened, actions, suits, or proceedings before any court, governmental
authority or regulatory body, to which Seller is a party or by which it or its
properties may be bound, which might adversely affect its financial condition,
business or operations or materially adversely affect its ability to perform its
obligations under the Agreement, the Mortgage, the Recognition Agreement or any
Operative Document to which it is a party, nor to the knowledge of such counsel
is there any basis for any such action, suit or proceeding.
6. The Project is, and as completed and operated in accordance with
the Purchase Agreement will be, a "qualifying facility" within the meaning of
PURPA as of the date hereof.
7. The Site (as defined in the Mortgage) may be lawfully used for the
construction and operation of the Project without need for any variance or
special exception under any applicable zoning, building or other law, statute,
ordinance, regulation or restriction. To the best knowledge of such counsel
(after diligent search of governmental records and due inquiry), there is no
violation of any zoning, building or other law, statute, ordinance, regulation
or restriction concerning the Site or the proposed use thereof.
A-2
8. The Mortgage and the Recognition Agreement have been duly recorded
in the Office of the Recorder of Deeds of Centre County, Pennsylvania (the
"Recorder's Office"), and Financing Statements with respect thereto, naming
Seller as Debtor and Buyer as Secured Party, have been duly filed pursuant to
the Pennsylvania Uniform Commercial Code (the "PaUCC") in the Office of the
Secretary of the Commonwealth of Pennsylvania, in the Recorder's Office as a
"fixture filing," and in the Office of the Prothonotary of Centre County,
Pennsylvania, which are all the offices in which filing or recording is required
by law in order to publish notice of, establish and perfect the respective
liens, rights, titles, interests, remedies, powers, privileges and security
interests created by the Mortgage and by the Recognition Agreement. No refiling
or rerecording of or with respect to the Mortgage or the Recognition Agreement
is necessary to continue the perfection of the respective liens, rights, titles,
interests, remedies, powers, privileges and security interests created thereby,
except for the filing of continuation statements under Section 9403 of the
PaUCC.
9. The Mortgage creates a valid and direct mortgage lien on the Site,
the Improvements (as defined in the Mortgage) and on that portion of the
Equipment (as defined in the Mortgage) which under the real estate law of
Pennsylvania becomes subject to the lien of the Mortgage without regard to the
PaUCC, subject only to Permitted Encumbrances (as defined in the Mortgage), and
prior to all other liens which may be perfected on or which may arise or attach
to the interest of Seller in the Site, the Improvements and such portion of the
Equipment subsequent to the recording of the Mortgage.
10. The Mortgage creates a valid and perfected security interest in
that portion of the Mortgaged Property (as defined in the Mortgage) (other than
that referred to in paragraph 9 above) in which a security interest may be
perfected by the filing of financing statements under the PaUCC, prior to all
other security interests which may be perfected in such manner, subject only to
Permitted Encumbrances and to liens, encumbrances and other security interests
which may have a priority or parity under the PaUCC or other applicable statute
by virtue of matters or circumstances other than the chronological order of
filings of financing statements.
A-3
EXHIBIT B
---------
TO
ELECTRIC ENERGY
PURCHASE AGREEMENT
Matters to by Covered by Opinion of
Reed Smith Shaw & McClay (Counsel to Buyer)
-------------------------------------------
[Unless otherwise indicated, all capitalized terms used and not
otherwise defined in this Exhibit B shall have the meanings given such terms in
the Agreement to which this Exhibit B is attached.]
1. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania with full
right, power and authority to enter into and perform its obligations under the
Agreement and the Recognition Agreement and to consummate the transactions
contemplated thereby.
2. The Agreement and the Recognition Agreement have been duly
authorized, executed and delivered by Buyer and constitute legal, valid and
binding obligations of Buyer enforceable in accordance with their respective
terms, except as such enforceability and the availability of certain rights and
remedies provided for therein may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity.
3. No authorization, consent, approval, license, permit, exemption
or other action by any governmental authority or regulatory body (other than
such as has been obtained) is required in connection with Buyer's execution and
delivery of the Agreement or the Recognition Agreement or for the consummation
by Buyer of the transactions contemplated by, and the performance by Buyer of,
the Agreement and the Recognition Agreement.
4. Neither the execution and delivery of the Agreement or the
Recognition Agreement, nor the consummation by Buyer of the transactions
contemplated by, nor Buyer's performance of or compliance with the terms and
conditions of, either of the foregoing will (i) violate any law or regulation to
which Buyer is subject, or (ii) conflict with or result in a breach of, or
constitute a default under, the Articles of Incorporation or By-Laws of Buyer.
B-1
EXHIBIT C
---------
TO
ELECTRIC ENERGY
PURCHASE AGREEMENT
Computation of Capacity Replacement Charge - Example
----------------------------------------------------
C-1
Capacity Termination Costs - Milesburg Project Exhibit C
- --------------------------------------------------------------------------------
Definitions:
CO = Contract Output = 320,178 Mwh
d = Discount rate = 12.70%
e = Escalation rate = 6.00%
QS = QF start date = 1990.00 = 01-Jan-90
QE = QF contract expiration date = 2020.00 = 01-Jan-2020 Expected contract term = 30.00 years
PS = APS plant start date = 1995.75 = 01-Oct-95
PL = APS plant life = 33.00 years
US = PV factor of uniform series = (1-(1+d) UP-PL)/d = 7.7217
ES = PV factor of uniform escalating series to infinity = 1/(1-((1+e)/(1+d)) UP PL) = 1.1525
Column 2 = d/(1-(1+d) UP-T) [Levelizing factor over QF term]
Column 3 = 1-((1+e)/(1+d) UP (QS+T-PS) if QS+T greater than PS else 0 [Factor for overlap with APS capacity need]
Column 4 = Column 2 * Column 3 * US * ES [Contract Term Adjustment]
Column 5 = Column 4 / last value in Column 4 [Percent of value received]
Column 8 = Column 5 * last value in Column 7
Column 9 = Column 7 - Column 8
Column 10 = the greater of 0 or the current value of Column 9 annuity
------------- mills/kwh --------------------------- Capacity
Contract Capacity Capacity Levelized Levelized Levelized Termination
Contract Levelizing Replacement Term Value Cost Rate Capacity Capacity Cost/Value Costs
Term (T) Factor Factor Adjustment Factor (CCR) Cost Rate Value Rate Difference (current $)
- --(1)--- ----(2)---- ----(3)---- ----(4)---- ----(5)---- ----(6)---- ----(7)---- ----(8)---- ----(9)---- ----(10)----
1 1.1270 0.0000 0.0000 0.0% 33.00 33.0000 0.0000 33.0000 $ 10,565,874
2 0.5971 0.0000 0.0000 0.0% 33.00 33.0000 0.0000 33.0000 $ 22,473,614
3 0.4214 0.0000 0.0000 0.0% 33.00 33.0000 0.0000 33.0000 $ 35,893,637
4 0.3341 0.0000 0.0000 0.0% 33.00 33.0000 0.0000 33.0000 $ 51,018,003
5 0.2822 0.0000 0.0000 0.0% 33.00 33.0000 0.0000 33.0000 $ 68,063,163
6 0.2481 0.0152 0.0336 3.7% 33.00 33.0000 1.2316 31.7684 $ 84,015,914
7 0.2240 0.0738 0.1470 16.3% 33.00 33.0000 5.3941 27.6059 $ 91,118,352
8 0.2063 0.1288 0.2364 26.3% 33.00 33.0000 8.6749 24.3251 $ 98,274,791
9 0.1927 0.1806 0.3097 34.4% 33.00 33.0000 11.3636 21.6364 $ 105,441,211
10 0.1821 0.2293 0.3716 41.3% 33.00 33.0000 13.6337 19.3663 $ 112,564,944
11 0.1736 0.2751 0.4251 47.3% 33.00 33.0000 15.5953 17.4047 $ 119,583,402
12 0.1667 0.3182 0.4721 52.5% 33.00 33.0000 17.3217 15.6793 $ 126,422,613
13 0.1610 0.3588 0.5141 57.2% 33.00 33.0000 18.8632 14.1368 $ 132,995,579
14 0.1563 0.3969 0.5521 61.4% 33.00 33.0000 20.2559 12.7441 $ 139,200,397
15 0.1524 0.4327 0.5867 65.2% 33.00 33.0000 21.5260 11.4740 $ 144,918,138
16 0.1490 0.4665 0.6185 68.8% 33.00 33.0000 22.6930 10.3070 $ 150,010,436
17 0.1461 0.4982 0.6479 72.0% 33.00 33.0000 23.7721 9.2279 $ 154,316,765
18 0.1437 0.5280 0.6753 75.1% 33.00 33.0000 24.7748 8.2252 $ 157,651,346
19 0.1416 0.5561 0.7008 77.9% 33.00 33.0000 25.7103 7.2897 $ 159,799,648
20 0.1398 0.5825 0.7246 80.6% 33.00 33.0000 26.5859 6.4141 $ 160,514,426
21 0.1382 0.6073 0.7470 83.1% 33.00 33.0000 27.4078 5.5922 $ 159,511,241
22 0.1369 0.6306 0.7681 85.4% 33.00 33.0000 28.1808 4.8192 $ 156,463,389
23 0.1357 0.6526 0.7879 87.6% 33.00 33.0000 28.9091 4.0909 $ 150,996,161
24 0.1346 0.6732 0.8067 89.7% 33.00 33.0000 29.5962 3.4038 $ 142,680,357
25 0.1337 0.6927 0.8244 91.7% 33.00 33.0000 30.2451 2.7549 $ 131,024,955
26 0.1329 0.7109 0.8411 93.5% 33.00 33.0000 30.8586 2.1414 $ 115,468,816
27 0.1322 0.7281 0.8569 95.3% 33.00 33.0000 31.4388 1.5612 $ 95,371,317
28 0.1316 0.7443 0.8719 96.9% 33.00 33.0000 31.9880 1.0120 $ 70,001,760
29 0.1311 0.7595 0.8860 98.5% 33.00 33.0000 32.5078 0.4922 $ 38,527,414
30.00 0.1306 0.7738 0.8994 100.0% 33.00 33.0000 33.0000 0.0000 $ 0
Notes: "*" indicates multiplication, "/" indicates division, "UP" indicates
exponentiation,
">" indicates greater than, "PV" means Present Value, "QF" refers to this
project.
EXHIBIT D
---------
TO
ELECTRIC ENERGY
PURCHASE AGREEMENT
(This document constitutes, among other things, a security agreement and a
fixture filing within the meaning of the Uniform Commercial Code - Secured
Transactions, Title 13, Sections 9313 and 9402, of the Pennsylvania Consolidated
Statutes. The record owner of the real estate described herein is Milesburg
Energy, Inc.)
================================================================================
MORTGAGE AND SECURITY AGREEMENT
Dated as of __________ ___, 1987
MILESBURG ENERGY, INC., as Mortgagor
and
WEST PENN POWER COMPANY, as Mortgagee
================================================================================
Record and Return to:
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Attention: W. Franklin Reed, Esq.
TABLE OF CONTENTS
PAGE
----
INTRODUCTION AND PARTIES......................................................... 1
RECITALS......................................................................... 1
GRANTING CLAUSE.................................................................. 2
I. PARTICULAR COVENANTS AND AGREEMENTS OF MORTGAGOR
1.01 Title; Etc.......................................................... 4
1.02 Compliance with Laws; Etc........................................... 4
1.03 Maintenance and Repair; Replacement of Equipment; Etc............... 5
1.04 Required Insurance.................................................. 5
1.05 Delivery of Policies or Other Evidence; Payment of Premiums......... 8
1.06 Damage or Condemnation.............................................. 9
1.07 Application of Insurance Proceeds and Condemnation Awards........... 10
1.08 Succession to Policies Upon Foreclosure............................. 12
1.09 Indemnification; Costs of Enforcement............................... 12
1.10 Taxes and Impositions; Contests..................................... 13
1.11 Liens; Etc.......................................................... 14
1.12 Litigation Affecting Mortgaged Property............................. 14
1.13 Actions by Mortgagee to Preserve Mortgaged Property................. 15
1.14 Right of Entry...................................................... 15
1.15 Limitations of Use.................................................. 15
1.16 Estoppel Certificates............................................... 16
II. EVENTS OF DEFAULT; REMEDIES
2.01 Nature of Events of Default......................................... 16
2.02 Remedies............................................................ 17
2.03 Application of Proceeds............................................. 21
2.04 Right to Sue........................................................ 21
2.05 Powers of Mortgagee................................................. 22
2.06 Remedies Cumulative................................................. 22
2.07 Waiver of Stay, Extension, Moratorium Laws; Equity of Redemption.... 22
III. MISCELLANEOUS
3.01 Notices............................................................. 23
3.02 Security Agreement.................................................. 23
3.03 Further Assurances.................................................. 24
3.04 Amendments, Waivers, Etc............................................ 24
3.05 Successors and Assigns.............................................. 24
3.06 Interpretation...................................................... 24
3.07 Invalidity of Certain Provisions.................................... 25
D-i
3.08 Severability........................................................ 25
3.09 Limitation of Liability............................................. 25
3.10 Governing Law....................................................... 26
3.11 Recognition Agreement............................................... 26
EXECUTION........................................................................ 26
SCHEDULE I - Legal Description of the Site
SCHEDULE II - List of Specific Items of Machinery and Equipment included in
Mortgaged Property
D-ii
MORTGAGES AND SECURITY AGREEMENT (this "Mortgage") dated as of
_______________, 1987 made by MILESBURG ENERGY, INC., a Pennsylvania corporation
having an office at 24B Main Street, Blossburg, Pennsylvania 16912
("Mortgagor"), to WEST PENN POWER COMPANY, a Pennsylvania corporation having an
office at BOO Cabin Hill Drive, Greensburg, Pennsylvania 15601 ("Mortgagee").
W I T N E S S E T H
WHEREAS, Seller desires to construct, equip, maintain and operate, or
cause to be constructed, equipped, maintained and operated, a waste coal-fired
plant consisting of a circulating fluidized bed boiler and related facilities
having an expected capacity of 36.5 to 43 megawatts and to be located at Buyer's
retired Milesburg Power Station in the Borough of Milesburg in Centre County,
Pennsylvania (the "Project"); and
WHEREAS, upon completion of the construction and equipping of the
Project, Mortgagor intends to convey the Project, subject to the lien and
security interest created by the Project Mortgage and the lien and security
interest created hereby, to Lessor and to lease the Project from Lessor pursuant
to the Lease; and
WHEREAS, Mortgagor and Mortgagee have entered into an Electric Energy
Purchase Agreement dated as of February 25, 1987 (said Electric Energy Purchase
Agreement, as the same has been or hereafter may be supplemented or amended,
being herein called the "Agreement"; terms not otherwise defined having the
meanings ascribed thereto in the Agreement) pursuant to which Mortgagor has
agreed to sell, and Mortgagee has agreed to purchase, Project Energy generated
by the Project; and
WHEREAS, pursuant to the terms of the Agreement, Mortgagee will pay
for Project Energy delivered to it during each monthly Billing Period at a rate
per kilowatthour equal to the sum of a fixed Capacity Cost late and a variable
Energy Cost Rate, as more particularly described in the Agreement; and
WHEREAS, the Capacity Cost Rate is based on the availability and
reliability of Project Energy during the entire term of the Agreement, and
Mortgagor is accordingly required under the Agreement, in the event there is any
cessation or prolonged reduction in deliveries of Project Energy for reason
other than any Unavoidable Interruptions, or in the event certain other "Events
of Default as to Seller" (as defined in the Agreement) shall occur and be
continuing, to make certain payments to Mortgagee to compensate Mortgagee for
the loss of the benefit of its bargain as a result of the reduced deliveries of
Project Energy occasioned thereby; and
D-1
WHEREAS, the execution and delivery of this Mortgage as security for
the payment of such amounts and the performance by Mortgagor of its other
obligations under the Agreement is a condition to Mortgagee's obligation to
purchase Project Energy in accordance with the terms of the Agreement;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid
to Mortgagor by Mortgagee, the mutual covenants and agreements set forth in the
Agreement and this Mortgage, and other good and valuable consideration, the
receipt of which is hereby acknowledged, and in order to secure (i) the payment
by Mortgagor of all amounts from time to time owing to Mortgagee in accordance
with the terms of the Agreement and the performance and observance by Mortgagor
of all of the covenants and agreements on the part of Mortgagor to be performed
or observed under the Agreement, (ii) the payment of all other monies secured
hereby, and (iii) the performance or observance by Mortgagor of the covenants
and agreements hereinafter set forth (all of the foregoing being hereinafter
collectively called the "Obligations Secured Hereby"), Mortgagor, intending to
be legally bound, does hereby grant, bargain, sell, convey, warrant, assign,
transfer, mortgage, pledge, grant a security interest in, set over and confirm
unto Mortgagee, and its successors and assigns, all of its estate, right, title,
interest, property, claim and demand, now or hereafter arising, in and to the
following property and rights (all of Mortgagor's estate and interests therein,
now or hereafter arising, being hereinafter collectively called the "Mortgaged
Property"):
(a) the lands and premises more particularly described in Schedule I
hereto, together with all and singular the tenements, hereditaments and
appurtenances thereunto belonging or in anywise appertaining, and also (i)
any land lying within the right-of-way of any streets, open or proposed,
adjoining the same, (ii) any easements, rights-of-way and rights used in
connection therewith or as a means of access thereto, and (iii) any and all
sidewalks, alleys, strips and gores of land adjacent thereto or used in
connection therewith (all of the foregoing being hereinafter collectively
called the "Site");
(b) all buildings, structures and other improvements now or hereafter
erected on the Site (collectively, the "Improvements");
(c) all machinery, apparatus, equipment, fittings, fixtures and other
articles of personal property, including all goods and all goods which
become fixtures now owned or hereafter acquired by Mortgagor and now or
hereafter located on, attached to or used in connection with the Site and
the Improvements, including the items described in Schedule II hereto and
all replacements thereof, additions thereto and
D-2
substitutions therefor (all of the foregoing being hereinafter collectively
called the "Equipment");
(d) all licenses, permits, authorizations and agreements now or
hereafter obtained by Mortgagor from any governmental authorities having
jurisdiction over the ownership, operation, management or use of the Site,
the Improvements and the Equipment or the construction of the Project or
any Improvements thereto;
(e) all contracts, easements, licenses or agreements to which
Mortgagor now or hereafter is a party, either directly or indirectly, by
assignment or otherwise, relating to the ownership, operation, management
or use of the Site, the Improvements and the Equipment or the construction
of the Project or any Improvements thereto;
(f) all cash and investments now or hereafter held in any reserve
accounts established pursuant to the Operative Documents (as defined in the
Recognition Agreement), and all interest and investment earnings thereon
and all cash and non-cash proceeds thereof, SUBJECT, HOWEVER, to the right
of Mortgagor to receive and use the same in accordance with the provisions
of the Operative Documents unless and until an Event of Default (as
hereinafter defined) shall occur and be continuing;
(g) all cash and investments now or hereafter held in the Reserve
Fund established pursuant to Section 3.7 of the Agreement, and all interest
and investment earnings thereon, and all cash and non-cash proceeds
thereof, SUBJECT, HOWEVER, to the right of Mortgagor to receive and use the
same in accordance with said Section 3.8 unless and until an Event of
Default shall occur and be continuing;
(h) all the remainder or remainders, reversion or reversions, rents,
revenues, issues, profits, royalties, income and other benefits derived
from any of the foregoing, all of which are hereby assigned to Mortgagee,
who is hereby authorized to collect and receive the same, to give proper
receipts and acquittances therefor and to apply the same to the payment of
the Obligations Secured Hereby, notwithstanding the fact that the same may
not then be due and payable, SUBJECT, HOWEVER, to the right of Mortgagor to
receive and use the same unless and until an Event of Default shall occur
and be continuing; and
(i) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including all proceeds of
the insurance required to be maintained by this Mortgage and the Operative
Documents and all awards or other compensation heretofore or hereafter made
to Mortgagor as the result of any Condemnation (as
D-3
hereinafter defined), including any awards for changes of the grades of
streets and any awards for severance damages, all of which are hereby
assigned to Mortgagee, who is hereby authorized to collect and receive the
proceeds thereof, to give proper receipts and acquittances therefor and to
apply the same to the payment of the Obligations Secured Hereby,
notwithstanding the fact that the same may not then be due and payable.
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, its
successors and assigns, forever, SUBJECT, HOWEVER, to Prior Liens (as
hereinafter defined);
PROVIDED, HOWEVER, that if Mortgagor shall pay, perform and discharge
the Obligations Secured Hereby in full according to the terms and provisions of
the Agreement and this Mortgage and shall perform and observe each and every
covenant and agreement on the part of Mortgagor to be performed or observed
contained in the Agreement and this Mortgage, then this Mortgage and the estate
hereby granted shall cease, terminate and become void.
AND, Mortgagor hereby covenants and agrees with Mortgagee as follows:
ARTICLE I
Particular Covenants and Agreements of Mortgagor
------------------------------------------------
Section 1.01 Title; Etc. Mortgagor has the rights in and to the
----------
Site, has good title to the Site and has good title to the Improvements and to
all Equipment and other property and rights comprising the Mortgaged Property,
subject to no prior mortgage, lien, pledge, charge, security interest or other
encumbrance or adverse claim of any nature, other than the Project Mortgage and
any other exceptions to title listed in the title policy insuring the lien or
estate created by this Mortgage (collectively, "Prior Liens"). Mortgagor has
full power and lawful authority to grant, bargain, sell, convey, warrant,
assign, transfer, mortgage, pledge, grant a security interest in, set over and
confirm unto Mortgagee, and its successors and assigns, the Mortgaged Property.
Mortgagor will forever warrant and defend the title to the Mortgaged Property
and the validity and priority of the lien or estate created hereby against the
claims and demands of all persons whomsoever.
Section 1.02 Compliance with Laws; Etc.
-------------------------
(a) Mortgagor shall keep, or cause to be kept, in full force and
effect all licenses, permits and governmental authorizations and agreements
necessary for the ownership, operation, management or use of the Site, the
Improvements and the Equipment or for the construction of the Project or any
Improvements thereto.
D-4
(b) Mortgagor shall comply with, or cause to be complied with, in a
manner consistent with sound electric utility practice, but subject to the
provisions of Section 3.2(b) of the Agreement, all Legal Requirements which at
any time may be applicable to the Mortgaged Property, and shall comply with, or
cause to be complied with, the requirements of all policies of insurance
required by this Mortgage, and of the insurers under such policies.
Section 1.03 Maintenance and Repair; Replacement of Equipment; Etc.
-----------------------------------------------------
Mortgagor shall at all times keep the Improvements and the Equipment in the
condition required by the Agreement, or cause the same to be kept in such
condition, and shall make or cause to be made, at its sole cost and expense, all
repairs thereto required by the Agreement. Mortgagor shall not remove, demolish
or substantially alter any of the Improvements; provided, however, that
--------- -------
Mortgagor may make any replacements, alterations or improvements thereof or
thereto which are required by law or which would not, in the judgment of
Mortgagor, reasonably exercised, materially impair the value of the
Improvements. Mortgagor shall not remove any Equipment from the Mortgaged
Property, except such portions or items as are consumed or worn out in ordinary
usage or become obsolete or unnecessary for operations; provided, however, that
--------- -------
Mortgagor shall not remove any such Equipment from the Mortgaged Property unless
either (a) such Equipment is promptly replaced with Equipment of a value,
utility and useful life at best equal to the value, utility and estimated useful
life of the replaced Equipment immediately prior to the time such replaced
Equipment became consumed, worn out or obsolete, or (b) such removal does not,
in the judgment of Mortgagee, reasonably exercised, materially impair the value
of the Project. All replacements, alterations and improvements made by Mortgagor
pursuant to this Section 1.03 shall be performed in accordance with the Design
and Construction Standard.
Section 1.04 Required Insurance. Mortgagor shall at all times effect,
------------------
maintain and keep in force, or cause to be effected, maintained and kept in
force, insurance with respect to the Project against such hazards, in such form
(subject to the provisions of Section 1.05) and with such insurers as shall be
approved by Mortgagee (which approval shall not be unreasonably withheld), and
in such amounts as Mortgagor would in the prudent management of its property
maintain, or as would be maintained by others similarly situated in respect of
property similar to the Project; provided, however, that from and after the
--------- -------
Commencement Date, such insurance shall include the following;
(a) insurance against physical loss or damage to the Improvements and
the Equipment by fire and any of the risks covered by insurance of the type
now known as "all risk" coverage (including collapse and transit coverage
and coverage against lightning, windstorm, explosion, riot, riot attending
a strike, civil commotion, action of civil or
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military authority, damage from aircraft and vehicles, electrical injury,
flood, earthquake and volcanic eruption and vandalism and malicious
mischief), in an amount not less than 100% of the full insurable value
thereof or, if such amount is not reasonably available in the commercial
insurance market, such other amount as may be acceptable to Mortgagee and
is reasonably available in the commercial insurance market, but in any
event in an amount sufficient to prevent Mortgagor from becoming a co-
insurer, with not more than $100,000 deductible from the loss payable for
any single casualty or occurrence; the term "full insurable value" shall
mean the full replacement value of such Improvements and Equipment,
including contingent liability from operation of building laws, demolition
cost and any increased cost of construction to comply with governmental
regulations and requirements, without deduction for physical depreciation,
as determined not less frequently than is required by the "agreed amount
clause" endorsement (which shall be attached to the policy) by an insurance
appraiser selected by Mortgagee and approved by Mortgagor (which approval
shall not be unreasonably withheld), it being understood that no omission
by Mortgagee to request such determination shall relieve Mortgagor of its
obligation to maintain such insurance;
(b) comprehensive general liability insurance against claims for
"personal injury" including, without limitation, bodily injury, death or
property damage occurring on, in or about the Improvements and the
adjoining streets, sidewalks and passageways, such insurance to afford
$1,000,000 "single limit" coverage with respect to personal injury or death
to any one or more persons or damage to property, with such increases
therein as shall be reasonably requested by Mortgagee from time to time,
or, if such amount is not reasonably available in the commercial insurance
market, such other amount as may be acceptable to Mortgagee and is
reasonably available in the commercial insurance market, and any such
policy to contain the "broad form" endorsement covering products and
completed operations, contractual liability (including the indemnity
contained in Section 7.1 of the Agreement), broad form property damage,
contractor's protective liability and explosion, collapse and underground
hazards;
(c) comprehensive automobile liability insurance against claims for
bodily injury, death or property damage arising out of the use of all
owned, non-owned and hired motor vehicles by Mortgagor's agents and
employees, including loading and unloading, such insurance to afford
$1,000,000 "single limit" coverage with respect to personal injury or death
to any one or more persons or damage to property, with such increases
therein as shall be reasonably requested by Mortgagee from time to time,
or, if such amount is not
D-6
reasonably available in the commercial insurance market, such other amount
as may be acceptable to Mortgagee and is reasonably available in the
commercial insurance market;
(d) where exposures involving watercraft or aircraft are expected to
be present, comprehensive watercraft and aircraft liability (including
passengers' liability) insurance against claims for bodily injury, death or
property damage arising out of the use of all owned, non-owned and hired
watercraft or aircraft by Mortgagor's agents and employees, including
loading and unloading, such insurance to afford $10,000,000 "single-limit"
coverage with respect to personal injury or death to any one or more
persons or damage to property, with such increases therein as shall be
reasonably requested by Mortgagee from time to time, or, if such amount is
not reasonably available in the commercial insurance market, such other
amount as may be acceptable to Mortgagee and is reasonably available in the
commercial insurance market;
(e) workers' compensation insurance including employer's liability
insurance of not less than $100,000 or such higher limit as may be
reasonably requested by Mortgagee, or, if such amount is not reasonably
available in the commercial insurance market, such other amount as may be
acceptable to Mortgagee and is reasonably available in the commercial
insurance market) for all employees of Mortgagor engaged in or with respect
to work on or about the Site, the Improvements or the Equipment in such
amount as is reasonably satisfactory to Mortgagee or, if such limit is
established by law, in such amount;
(f) boiler and machinery insurance covering, to the extent that the
Improvements contain equipment of such nature, all insurable objects,
including pressure vessels, motors, air tanks, boilers, machinery, pressure
piping, heating, air conditioning equipment, elevator and escalator
equipment or similar apparatus and insurance against loss of occupancy or
use arising from breakdown of any of the foregoing, in an amount not less
than 100% of the full insurable value thereof (determined as set forth
above), or, if such amount is not reasonably available in the commercial
insurance market, such other amount as may be acceptable to Mortgagee and
is reasonably available in the commercial insurance market, but in any
event in an amount sufficient to prevent Mortgagor from becoming a co-
insurer, with not more than $100,000 deductible from the loss payable for
any single casualty or occurrence, except that the deductible for insurance
against loss of occupancy or use arising from breakdown shall be no more
than a 180-day deductible;
(g) comprehensive crime insurance against claims for theft by
Mortgagor's agents and employees, money and
D-7
securities and forgery or a1teration of checks or other written promises to
pay, such insurance to afford $1,000,000 "single limit" coverage with
respect to any occurrence, with such increases therein as shall be
reasonably requested by Mortgagee from time to time, or, if such amount is
not reasonably available in the commercial insurance market, such other
amount as may be acceptable to Mortgagee and is reasonably available in the
commercial insurance market; and
(h) excess "umbrella" insurance (against risks of the types described
in clauses (b), (c) and (d) above and in excess of the employer's liability
insurance described in clause (e) above) in an amount not less than
$24,000,000 for any occurrence and not less than $24,000,000 in the
aggregate, with such increases therein as shall be reasonably requested by
Mortgagee from time to time, or, if the combined amount of primary and
excess insurance required hereby is not reasonably available in the
commercial insurance market, such other insurance as may be acceptable to
Mortgagee and is reasonably available in the commercial insurance market.
In the event any insurance hereby required to be maintained shall not
be reasonably available in the commercial insurance market, Mortgagee shall not
unreasonably withhold its agreement to waive such requirement to the extent the
maintenance thereof is not so available; provided, however, that (i) Mortgagor
--------- -------
shall first request any such waiver in writing, which request shall be
accompanied by written reports prepared by two independent insurance advisers of
recognized national standing certifying that such insurance is not reasonably
available in the commercial insurance market for electric generating plants of
similar type and capacity and explaining in detail the basis for such
conclusion, such insurance advisers and the form and substance of such reports
to be reasonably acceptable to Mortgagee; (ii) at any time after the granting of
any such waiver, but not more often than twice a year, Mortgagee may request,
and Mortgagor shall furnish to Mortgagee within 30 days after such request,
supplemental reports reasonably acceptable to Mortgagee from such insurance
advisers updating their prior reports and reaffirming such conclusion; and (iii)
any such waiver shall be effective only so long as such insurance shall not be
reasonably available in the commercial insurance market, it being understood
that the failure of Mortgagor to timely furnish any such supplemental report
shall be conclusive evidence that such condition no longer exists, but that such
failure is not the only way to establish such non-existence.
Section 1.05 Delivery of Policies or Other Evidence; Payment of
--------------------------------------------------
Premiums. All policies of insurance required under the provisions of Section
- --------
1.04 shall name Mortgagee, Allegheny Power System, Inc. and Allegheny Power
Service Corporation as additional insureds as their interests may appear, and
all such policies covering risks of physical loss shall have attached thereto a
D-8
standard non-contributory lender's loss payable endorsement in scope and form
satisfactory to Mortgagee. Mortgagor shall furnish Mortgagee with originals of
all such policies or certificates thereof. At least 30 days prior to the
expiration of any policy of insurance, Mortgagor shall furnish Mortgagee with
evidence satisfactory to Mortgagee of the payment of the premium for, and the
reissuance of a policy continuing, such insurance as required by this Mortgage.
All policies of insurance required under the provisions of Section 1.04 shall
contain an endorsement by the insurer that any loss shall be payable in
accordance with the terms of such policy notwithstanding any act or negligence
of Mortgagor which might otherwise give rise to a defense by the insurer to its
payment for such loss and a waiver by the insurer of all rights of subrogation
to any rights of Mortgagee and of all rights of setoff, counterclaim or
deduction against the insureds other than Mortgagor. All such policies shall
also contain a provision to the effect that any cancellation of or amendment to
such insurance, including any reduction in the scope or limits of coverage,
shall not be effective as to Mortgagee without at least 60 days' prior written
notice to Mortgagee. Copies of all certificates of insurance and notices
required to be submitted to Mortgagee pursuant to this Section 1.05 shall also
be sent to Allegheny Power Service Corporation, 800 Cabin Hill Drive,
Greensburg, PA 15601, Attention of Manager of Insurance. Mortgagor shall not
take out separate insurance with respect to the Improvements or the Equipment
concurrent in form or contributing in the event of loss with that required by
this Mortgage unless the same shall contain a standard non-contributory lender's
loss payable endorsement in scope and form satisfactory to Mortgagee, with loss
payable to Mortgagee, Allegheny Power System, Inc. and Allegheny Power Service
Corporation, as their interests may appear.
Section 1.06 Damage or Condemnation.
----------------------
(a) In the event of any damage to or destruction of the Improvements
and the Equipment or any part thereof as a result of any casualty ("Damage"), or
in the event the Site, the Improvements and the Equipment, or any part thereof
are taken or damaged as the result of the exercise of the power of eminent
domain, or as the result of any other governmental action for which compensation
shall be given by any governmental authority ("Condemnation"), or if Mortgagor
shall receive any notice or advice of any Condemnation proceedings, Mortgagor
shall give prompt notice thereof to Mortgagee. Mortgagor shall, in the event of
any Damage or Condemnation and whether or not the proceeds of insurance or any
awards or other compensation payable as a result of such Condemnation are
sufficient for the purpose, promptly restore or cause to be restored the
Improvements and the Equipment so damaged, or in the case of a Condemnation, if
such Condemnation is not of such nature as to preclude the restoration of the
portion thereof not so taken to a viable economic unit, restore the portion
thereof not so taken, in a good and workmanlike manner
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as nearly as possible to the value and condition thereof immediately prior to
such Damage, or in the case of a Condemnation, to a viable economic unit;
provided, however, that if the Project Mortgage shall have been paid and
- --------- -------
discharged in full and a partial Damage or Condemnation shall occur which
results in the reduction of Contract Output to not less than kilowatthours per
year, Mortgagor shall not be so obligated to restore the Improvements and the
Equipment so damaged or the portion thereof not so taken, unless (i) the
proceeds of insurance or any awards or other compensation payable as a result of
such Condemnation are sufficient for the purpose or (ii) Mortgagor shall have
elected, by notice given to Mortgagee within 90 days after the occurrence of
such Damage Or receipt of notice to such Condemnation, to so restore the same;
and provided, further, that if such Damage or Condemnation occurs during the
--------- -------
last two years of the stated term of the Agreement, Mortgagor shall have no
obligation to so restore the same.
(b) Mortgagee shall have the right, and is hereby authorized and
empowered, to join in settling, adjusting or compromising any claims by any
insureds for Damage under any policy or policies of insurance required to be
maintained by this Mortgage and the Operative Documents or any claims for awards
or other compensation payable in connection with any Condemnation in excess of
$100,000.
Section 1.07 Application of Insurance Proceeds and Condemnation
--------------------------------------------------
Awards.
- ------
(a) All proceeds of the insurance required to be maintained by this
Mortgage and the Operative Documents payable in connection with any Damage, and
all awards or other compensation payable in connection with any Condemnation,
shall be deposited with a bank or trust company selected by Mortgagor having an
office in the City of Pittsburgh and having a combined capital and surplus
aggregating at least $100,000,000 (the "Depositary"), except that any such
proceeds or awards aggregating less than $100,000 shall not be required to be so
deposited. Except to the extent required by Section 1.07(d), such proceeds or
awards or other compensation (after deducting therefrom all costs and expenses,
including attorneys' fees incurred by the Depositary in connection with the
collection thereof regardless of the particular nature thereof and whether
incurred with or without suit) shall be paid by the Depositary to or for the
account of Seller for application to the payment of the costs of restoring the
Improvements and the Equipment so damaged (or restoring the portion thereof not
so taken to a viable economic unit), and shall be applied to pay or reimburse
the restoring party for expenditures made in restoring the Improvements and
Equipment so damaged (or restoring the portion thereof not so taken to a viable
economic unit) as the work progresses, against receipt by the Depositary of
proof satisfactory to it that (i) the requirements of Section 1.07(b) have been
complied with, (ii) the work, to the
D-10
extent performed, has been satisfactorily accomplished, (iii) amount requested
has been paid by or on behalf of Mortgagor justly due to the restoring party or
other persons who have rendered services or furnished materials in connection
with work, (iv) no mechanic's, materialmen's or similar statutor other liens or
charges have been filed against the Mortgage Property, and (v) there are no
amounts then due and payable persons who have rendered services or furnished
materials in connection with such work other than such as will be discharged
full from the amounts requested. The Depositary shall not ? required to apply
such proceeds or awards as aforesaid unless ? or the Independent Engineer
referred to in Section 1.07(b) ? (determines that the amount thereof remaining
after payment of amount requested (together with anticipated interest and
investment earnings thereon) will be sufficient to pay in full the completion of
such restoration, and Mortgagor shall ? deposit or cause to be deposited with
the Depositary the ? any deficiency, to be held and disbursed by the Depositary
in accordance with the provisions of this Section 1.07.
(b) All restoration work following any Damage or Condemnation
pursuant to this Mortgage shall be subject to the following terms and
conditions:
(i) no work shall be undertaken unless Mortga shall have
procured and paid for all required governmental permits and
authorizations of any governmental authorities having jurisdiction in
connection therewith;
(ii) all work shall be designed, constructed and completed in
accordance with plans and specifications prepared by an architect or
engineer selected by Mortgagor and satisfactory to Mortgagee and an
independent engineering consultant selected by Mor (the "Independent
Engineer") and otherwise in accordance with the Design and
Construction Standard, and shall be performed by contractors selected
by Mortgagor and approved by the Independent Engineer;
(iii) no work involving an estimated cost of $500,000 or more
shall be undertaken unless the Independent Engineer shall have
certified in writing (which certification shall be given only after
consultation with Mortgagee) that the Improvements Equipment so
damaged (or the portion thereof not so taken) can be restored
substantially to the value a condition thereof immediately prior to
such Damage, in the case of a Condemnation, to a complete, viable
economic unit; and
(iv) no work involving an estimated cost of $500,000 or more
shall be undertaken unless such work
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done pursuant to guaranteed maximum or fixed price contracts
reasonably satisfactory to Mortgagee.
(c) Upon receipt by the Depositary of a certificate of the architect
or engineer selected by Mortgagor pursuant to Section 1.07(b) and of the
Independent Engineer certifying the completion of such restoration and the
payment of the cost thereof in full, the balance of any monies not required to
be disbursed pursuant to Section 1.07(a) shall be disbursed to Mortgagor or as
Mortgagor may direct.
(d) If an Event of Default shall occur and be continuing prior to the
time for receipt of any such proceeds or awards by Mortgagor, or in the event
Mortgagor shall not be obligated to so restore the Improvements and the
Equipment pursuant to Section 1.06 and Mortgagor shall not have elected to so
restore the same, such proceeds or awards shall be paid by the Depositary to or
for the account of Mortgagee upon Mortgagee's direction so to do for application
to the payment of the Obligations Secured Hereby in such order as Mortgagee
shall determine until the same have been paid in full, and any balance thereof
remaining after such payment shall be paid to Mortgagor, or to whosoever shall
be legally entitled thereto, or as a court of competent jurisdiction may direct.
(e) Any monies held by the Depositary pursuant to this Section 1.07
shall be invested in a manner satisfactory to Mortgagee. The Depositary shall
have the right to deduct from any such proceeds or awards its reasonable charges
for acting as Depositary hereunder.
Section 1.08 Succession to Policies Upon Foreclosure. In the event
---------------------------------------
of a foreclosure sale pursuant to this Mortgage or other transfer of title or
assignment of the Mortgaged Property in extinguishment, in whole or in part, of
the Obligations Secured Hereby, to the extent permitted by law, all right, title
and interest of Mortgagor in and to all policies of insurance required under the
provisions of Section 1.04 shall inure to the benefit of and pass to the
successor in interest of Mortgagor or the purchaser or grantee of the Mortgaged
Property or any part thereof so transferred.
Section 1.09 Indemnification: Costs of Enforcement. If Mortgagee is
-------------------------------------
made a party defendant to any litigation concerning this Mortgage or the
Mortgaged Property or the occupancy thereof by Mortgagor, then Mortgagor shall,
except to the extent otherwise provided in the Agreement, indemnify, defend and
hold Mortgagee harmless from and against all liability by reason of said
litigation, including reasonable attorneys' fees and expenses in any such
litigation, whether or not any such litigation is prosecuted to judgment. If
Mortgagee commences an action or proceeding (including any proceeding under
Article VIII
D-12
of the Agreement) against Mortgagor to enforce any of the terms hereof or for
the recovery of any Obligations Secured Hereby following any breach by Mortgagor
of any of the terms hereof, Mortgagor shall, to the extent permitted by law, pay
to Mortgagee its reasonable attorneys' fees and expenses, and the right to such
attorneys' fees and expenses shall be deemed to have accrued on the commencement
of such action or proceeding, and shall be enforceable whether or not such
action or proceeding is prosecuted to judgment. If Mortgagor breaches any term
of the Agreement or this Mortgage, Mortgagee may employ an attorney or attorneys
to protect its rights hereunder and thereunder, and in the event of such
employment following any breach by Mortgagor, Mortgagor shall, to the extent
permitted by law, pay the reasonable attorneys' fees and expenses incurred by
Mortgagee, whether or not an action is actually commenced against Mortgagor by
reason of such breach.
Section 1.10 Taxes and Impositions; Contests.
-------------------------------
(a) Mortgagor shall pay, or cause to be paid, prior to delinquency,
all real property taxes and assessments, general and special, and all other
taxes and assessments of any kind or nature whatsoever, which are now or
hereafter assessed or imposed upon the Mortgaged Property or Mortgagor or become
due and payable and which create a lien upon the Mortgaged Property (all such
taxes, assessments and other charges of like nature being herein collectively
called "Impositions"); provided, however, that if by law any Imposition is
--------- -------
payable, or may at the option of the taxpayer be paid, in installments,
Mortgagor may pay the same, or cause the same to be paid, together with any
accrued interest on the unpaid balance thereof, in installments as the same
become due and before any fine, penalty, interest or cost may be added thereto
for the nonpayment thereof.
(b) Subject to the provisions of Section 1.10(c), Mortgagor shall
furnish to Mortgagee, as soon as reasonably possible, official receipts of the
appropriate taxing or other authority, or other proof satisfactory to Mortgagee,
evidencing the payment of any Imposition.
(c) Mortgagor shall have the right before any delinquency occurs to
contest or object to the amount or validity of any Imposition in good faith by
appropriate legal proceedings, but this shall not be deemed or construed in any
way as relieving, modifying or extending Mortgagor's covenant to pay any
Imposition at the time and in the manner provided in this Section 1.10,
D-13
unless (i) Mortgagor shall have given prior notice to Mortgagee of Mortgagor's
intention so to contest or object to an Imposition, (ii) the legal proceedings
shall conclusively operate to prevent the sale of the Mortgaged Property to
satisfy such Imposition prior to final determination of such proceedings, (iii)
Mortgagor shall have deposited with Mortgagee a bond or other security
satisfactory to Mortgagee in such amount as Mortgagee shall reasonably require,
and (iv) Mortgagor shall have provided a good and sufficient undertaking as may
be required by law to accomplish a stay of any proceedings to sell the Mortgaged
Property to satisfy such Imposition.
Section 1.11 Liens; Etc.
----------
(a) Mortgagor shall promptly discharge, or cause to be discharged,
all liens, encumbrances and charges upon the Mortgaged Property, other than
Prior Liens and any other liens, encumbrances and charges expressly permitted
herein or in the Agreement or expressly consented to in writing by Mortgagee
(collectively, "Permitted Encumbrances"). Notwithstanding the foregoing,
Mortgagor shall have the right to contest in good faith by appropriate
proceedings the validity of any such lien, encumbrance or charge which is junior
to the lien hereof; provided, however, that Mortgagor shall first deposit with
--------- -------
Mortgagee a bond or other security satisfactory to Mortgagee in such amount as
Mortgagee shall reasonably require and shall thereafter diligently proceed to
cause such lien, encumbrance or charge to be removed and discharged.
(b) Mortgagor shall promptly pay, or cause to be paid, any
indebtedness secured by any Permitted Encumbrance (other than the Lease),
including the Project Mortgage, promptly as the same becomes due and payable and
shall perform or observe, or cause to be performed or observed, all covenants,
agreements and conditions, if any, on its part to be performed or observed under
any such Permitted Encumbrance.
(c) Mortgagor shall promptly notify Mortgagee of any default or event
which with notice or lapse of time or both would become such a default under any
Permitted Encumbrance entitling the holder or beneficiary thereof to foreclose,
sell or otherwise terminate Mortgagor's estate or rights in, or to exclude
Mortgagor from possession of, the Mortgaged Property or the part thereof 80
affected by the Permitted Encumbrance, promptly after such default or event
becomes known to Mortgagor.
Section 1.12 Litigation Affecting Mortgaged Property. Mortgagor
---------------------------------------
shall appear in and contest any action or proceeding purporting to affect the
security hereof or the rights or powers of Mortgagee, and shall pay within a
reasonable time after demand therefor all costs and expenses, including costs of
evidence of title and attorneys' fees, in any such action or proceeding in which
Mortgagee may appear.
D-14
Section 1.13 Actions by Mortgagee to Preserve Mortgaged Property. If
---------------------------------------------------
Mortgagor shall fail to (a) effect, maintain and keep in force, or cause to be
effected, maintained and kept in force, the insurance required under the
provisions of Section 1.04, (b) make, or cause to be made, the payments required
by Section 1.10 or 1.11, or (c) pay, perform or observe, or cause to be paid,
performed or observed, any other obligations required by the Agreement or this
Mortgage to be paid, performed or observed by Mortgagor, then Mortgagee may
effect, maintain, keep in force, pay, perform or observe the same. In connection
therewith, Mortgagee shall have the right, but not the obligation, (i) to enter
upon and take possession of the Site, the Improvements and the Equipment; (ii)
to make such additions, alterations, repairs and improvements to the
Improvements or the Equipment as Mortgagee may consider necessary or proper to
keep the same in good condition and repair; (iii) to appear and participate in
any action or proceeding affecting or which may affect the security hereof or
the rights or powers of Mortgagee hereunder; (iv) to contest or compromise any
lien, encumbrance or charge which in the judgment of Mortgagee may affect or
appear to affect the security of this Mortgage or be prior or superior hereto,
or to discharge the same, either by paying the amount claimed to be due or
depositing in court a bond for the amount claimed or otherwise giving security
for such claim, or in such other manner as is or may be prescribed by law; and
(v) in exercising such powers, to pay necessary expenses including the fees and
expenses of attorneys and all necessary or desirable consultants. All sums so
expended by Mortgagee or expended to sustain the lien or estate created by this
Mortgage or its priority, or to protect or enforce any of the rights of
Mortgagee under the terms of the Agreement or this Mortgage, or to recover or
enforce any of the Obligations Secured Hereby or otherwise to secure the
performance of any obligation of Mortgagor under the Agreement or this Mortgage,
shall be a lien on the Mortgaged Property, shall be deemed secured by this
Mortgage, and shall be paid by Mortgagor within 5 days after demand with
interest at the Applicable Rate. In any action or proceeding to foreclose this
Mortgage, or to recover, collect or enforce the Obligations Secured Hereby, the
provisions of law respecting the recovery of costs, disbursements and allowances
shall prevail unaffected by this covenant.
Section 1.14 Right of Entry. Mortgagee, and its agents,
--------------
representatives and employees, are authorized to enter at any reasonable time
upon any part of the Site, the Improvements and the Equipment for the purpose of
inspecting the same and for the purpose of performing any of the acts they are
authorized to perform under the terms of this Mortgage.
Section 1.15 Limitations of Use. Mortgagor shall not initiate, join
------------------
in or consent to any change in any private restrictive covenant, zoning
ordinance or other public or private restriction which would materially detract
from, or limit, the value of the Mortgaged Property.
D-15
Section 1.16 Estoppel Certificates. Mortgagor within 10 days after
---------------------
being given notice by mail, and within 5 days after being given notice by hand,
but not more frequently than every 6 months, shall furnish to Mortgagee a
statement stating the amount of any Obligations Secured Hereby which are
liquidated in amount and stating whether any offsets or defenses exist against
the Obligations Secured Hereby.
ARTICLE II
Events of Default; Remedies
---------------------------
Section 2.01 Nature of Events of Default. Any of the following shall
-----------------------------
constitute an "Event of Default":
(a) an "Event of Default as to Seller" (as defined in the Agreement)
shall occur and be continuing;
(b) Mortgagor shall fail to perform or observe, or cause to be
performed or observed, any of its covenants or agreements contained in
Sections 1.04, 1.05, 1.10, 1.11(a) and 1.15, and such failure shall
continue for a period of 20 days after notice thereof shall have been given
to Mortgagor by Mortgagee.
(c) a Project Loan Default (as defined in the Recognition Agreement)
shall occur and be continuing, and the Project Lender (as defined in the
Recognition Agreement) shall have given notice of such Project Loan Default
to Mortgagee pursuant to Section 3.1(a) of the Recognition Agreement;
(d) Mortgagor shall fail to perform or observe, or cause to be
performed or observed, any covenant or agreement contained or referred to
in this Mortgage (other than any covenant or agreement with respect to
which clauses (a) to (c), inclusive, of this Section 2.01 apply), and such
failure shall continue for a period of 30 days after notice thereof shall
have been given to Mortgagor by Mortgagee; provided, however, that if such
-----------------
failure cannot be remedied within such 30-day period and if Mortgagor
within such period of 30 days commences, and thereafter proceeds with all
due diligence, to cure such failure, such period shall be extended for such
further period (not to exceed 6 months after such notice by Mortgagee) as
shall be necessary for Mortgagor to cure the same with all due diligence;
(e) Mortgagor shall sell, lease or otherwise convey, directly or
indirectly, in a single transaction or in a series of related transactions,
or by operation of law, all or substantially all of the Mortgaged Property,
except as permitted by Section 2.4 of the Agreement; or
D-16
(f) Mortgagor shall mortgage, pledge, hypothecate or grant a security
interest in the Mortgaged Property to any entity other than Mortgagee,
except as permitted by Section 2.4 of the Agreement.
Section 2.02 Remedies.
--------
(a) If an Event of Default shall occur and be continuing, Mortgagee
may declare the Obligations Secured Hereby to be forthwith due and payable,
whereupon the same shall become due and payable without presentment, notice of
dishonor or protest thereof, all of which are expressly waived by Mortgagor,
and. in addition, Mortgagee may exercise any right, power or remedy available to
it by law. Without limiting the generality of the foregoing, Mortgagee may:
(i) enter and take possession of the Site, the Improvements and the
Equipment or any part thereof, exclude Mortgagor and all persons claiming
under Mortgagor whose claims are junior to the lien of this Mortgage wholly
or partly therefrom, and operate, use, manage and control the same, or
cause the same to be operated by a person or entity selected by Mortgagee,
either in the name of Mortgagor or otherwise, and upon such entry, from
time to time, at the expense of Mortgagor and of the Mortgaged Property,
make all such repairs, replacements, alterations, additions or improvements
thereto as Mortgagee may deem proper, and collect and receive the rents,
revenues, issues, profits, royalties, income and benefits thereof and apply
the same, to the extent permitted by law, to the payment of all expenses
which Mortgagee may be authorized to incur under the provisions of this
Mortgage and applicable law, the remainder to be applied to the payment,
performance and discharge of the Obligations Secured Hereby in such order
as Mortgagee may determine until the same have been paid in full;
(ii) with respect to any failure by Mortgagor to design, engineer and
construct the Project and place the same in service, or to maintain and
repair the same, as provided in the Agreement, enter and take possession of
the Site, the Improvements and the Equipment, complete the construction and
equipping, or maintenance and repair, of the Project and take such action
as Mortgagee may deem appropriate to fulfill the obligations of Mortgagor
under the Agreement and hereunder, including the right either to avail
itself and procure performance of existing construction or maintenance
contracts or to enter into other contracts with the same contractors or
others; without limiting the generality of the foregoing, Mortgagor hereby
appoints and constitutes Mortgagee its lawful attorney-in-fact with full
power of substitution in the premises (it being understood and agreed that
this power is coupled with an interest and cannot be revoked) to complete
construction and equipping, or maintenance and
D-17
repair, of the Project in the name of Mortgagor, to use unadvanced funds
under the Project Mortgage, if any, or funds that may be otherwise
available to, or reserved, escrowed or set aside by or for, Mortgagor in
respect of the construction and equipping, or maintenance and repair, of
the Project, or to advance Mortgagee's own funds, to complete the Project,
and to do any and every act that Mortgagor might do in its own behalf in
respect of the construction and equipping, or maintenance and repair, of
the Project;
(iii) personally, or, to the extent permitted by law, by agents, with
or without entry, if Mortgagee shall deem it advisable,
(A) sell the Mortgaged Property to the highest bidder or bidders
at public auction at a sale or sales held at such place or places and
time or times and upon such notice and otherwise in such manner as may
be required by law, or in the absence of any such requirement, as
Mortgagee may deem appropriate, and from time to time adjourn such
sale by announcement at the time and place specified for such sale or
for such adjourned sale or sales without further notice except such as
may be required by law; or
(B) take all steps to protect and enforce the rights of
Mortgagee under this Mortgage by suit for specific performance of any
covenant herein contained, or in aid of the execution of any power
herein granted, or for the foreclosure of this Mortgage and the sale
of the Mortgaged Property pursuant to the judgment or decree of a
court of competent jurisdiction, or for the enforcement of any other
rights as Mortgagee shall deem most effectual for such purpose; or
(iv) exercise any or all of the remedies available to a secured
party under the Uniform Commercial Code (the "UCC") as in effect in the
applicable jurisdiction in which the Mortgaged Property or the portion
thereof in question is located or by which this Mortgage is governed,
including
(A) either personally or by means of a court appointed receiver,
take possession of all or any of the Equipment and exclude therefrom
Mortgagor and all others claiming under Mortgagor, and thereafter
hold, store, operate, use, manage, maintain and control, make repairs,
replacements, alterations, additions and improvements to and exercise
all rights and powers of Mortgagor in respect of the Equipment or any
part thereof, or cause the same to be operated by a person or entity
selected by Mortgagee; and in the event the Mortgagee demands or
attempts to take possession of the Equipment in the exercise of any
rights hereunder or
D-18
under the Agreement, Mortgagor shall promptly turn over and deliver
complete possession thereof to Mortgagee;
(B) without notice to or demand upon Mortgagor, make such
payments and do such acts as Mortgagee may deem necessary to protect
the security interest granted hereby in the Equipment, including
paying, purchasing, contesting or compromising any encumbrance, charge
or lien which is prior or superior thereto, and in exercising any such
powers or authority to pay all expenses incurred in connection
therewith;
(C) require Mortgagor to assemble the Equipment, or any portion
thereof, at a place designated by Mortgagee and reasonably convenient
to both parties, and promptly to deliver such Equipment to Mortgagee,
or an agent or representative designated by it, it being understood
that Mortgagee, and its agents, representatives and employees, shall
have the right to enter upon any or all of Mortgagor's premises and
property to exercise Mortgagee's rights hereunder;
(D) sell, lease or otherwise dispose of the Equipment at public
or private sale, with or without having the Equipment at the place of
sale, and upon such terms and in such manner as Mortgagee may
determine, and Mortgagee may be a purchaser at any such sale; and
(E) unless the Equipment is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized
market, give Mortgagor at least 10 days' prior notice of the time and
place of any public sale of the Equipment or other intended
disposition thereof.
As to any personal property subject to Article 9 of the UCC included in the
Mortgaged Property, including accounts, contract rights and general
intangibles, Mortgagee may proceed under the UCC or proceed as to both real
and personal property in accordance with the provisions of this Mortgage
and the rights and remedies that Mortgagee may have at law or in equity, in
respect of real property, and treat both the real and personal property
included in the Mortgaged Property as one parcel or package of security.
Mortgagor shall have the burden of proving that any sale pursuant to this
Section 2.02(a) was conducted in a commercially unreasonable manner.
(b) In any action to foreclose this Mortgage, Mortgagee, to the
extent permitted by law, shall be entitled as a matter of right to the
appointment of a receiver of the Site, the Improvements and the Equipment and
the rents, revenues, issues, profits, royalties, income and benefits thereof,
without notice or demand, and without regard to the adequacy of the security for
the
D-19
Obligations Secured Hereby or the solvency of Mortgagor. In the event Mortgagor
fails or refuses to surrender possession of the Mortgaged Property after any
sale thereof, Mortgagor shall be deemed a tenant at sufferance, subject to
eviction by means of forcible entry and detainer proceedings, provided that this
remedy is not exclusive or in derogation of any other right or remedy available
to Mortgagee or any purchaser of the Mortgaged Property under any provision of
this Mortgage or pursuant to any judgment or decree of court.
(c) If an Event of Default shall occur and be continuing, Mortgagor
shall, to the extent permitted by law, pay monthly in advance to Mortgagee or to
any such receiver, as the case may be, the fair and reasonable rental value for
the use and occupancy of the Site, the Improvements and the Equipment or such
part thereof as may be in the possession of Mortgagor. Upon default in the
payment thereof, Mortgagor shall vacate and surrender possession of the Site,
the Improvements and the Equipment or of such part thereof to Mortgagee or such
receiver, as the case may be, and upon a failure so to do may be evicted by
means of forcible entry and detainer proceedings.
(d) In any sale under any provision of this Mortgage or pursuant to
any judgment or decree of court, the Mortgaged Property, to the extent permitted
by law, may be sold in one or more parts or parcels or as an entirety and in
such order as Mortgagee may elect, without regard to the right of Mortgagor, or
any person claiming under it, to the marshalling of assets.
(e) The purchaser at any such sale shall tender the entire purchase
price in cash on the day of the sale and shall take title to the Mortgaged
Property or the part thereof so sold free and discharged of the estate of
Mortgagor therein, the purchaser being hereby discharged from all liability to
see to the application of the purchase money. Any person, including Mortgagee,
may purchase at any such sale, and, subject to the provisions of the Recognition
Agreement, in lieu of paying cash Mortgagee may make settlement for the purchase
price by crediting upon the Obligations Secured Hereby the net sales price after
deducting therefrom the expenses of such sale and any other sums which may be
deducted under this Mortgage or applicable law. Mortgagee is hereby irrevocably
appointed the attorney-in-fact of Mortgagor in its name and stead to make all
appropriate transfers and deliveries of the Mortgaged Property or any portions
thereof so sold and, for this purpose, Mortgagee may execute all appropriate
instruments of transfer, and may substitute one or more persons with like power,
Mortgagor hereby ratifying and confirming all that its said attorneys or such
substitute or substitutes shall lawfully do by virtue hereof. Nevertheless,
Mortgagor shall ratify and confirm, or cause to be ratified and confirmed, any
such sale or sales by executing and delivering, or by causing to be executed and
delivered, to Mortgagee or to such purchaser or purchasers all such instruments
as may be advisable,
D-20
in the judgment of Mortgagee, for the purpose, and as may be designated, in such
request. Any sale or sales made under or by virtue of this Mortgage, to the
extent not prohibited by law, shall operate to divest all the estate, right,
title, interest, property, claim and demand whatsoever, whether at law or in
equity, of Mortgagor in, to and under the Mortgaged Property, or any portions
thereof so sold, and shall be a perpetual bar both at law and in equity against
Mortgagor, its successors and assigns, and against any and all persons claiming
or who may claim the same, or any part thereof, by, through or under Mortgagor,
or its successors or assigns. The powers and agency herein granted are coupled
with an interest and are irrevocable.
(f) All rights of action under this Mortgage or the Agreement may be
enforced by Mortgagee without the possession of the Agreement or other evidences
of the Obligations Secured Hereby and without the production thereof at any
trial or other proceeding relative thereto. Any recovery of judgment in any such
suit or proceeding shall be for the benefit of Mortgagee.
Section 2.03 Application of Proceeds. The proceeds of any sale made
-----------------------
either under the power of sale hereby given or under a judgment, order or decree
made in any action to foreclose or to enforce this Mortgage, shall, unless
otherwise provided by law, be applied:
(a) first to the payment of (i) all costs and expenses of such sale,
including reasonable attorneys' fees, and (ii) all charges, expenses and
advances incurred or made by Mortgagee in order to protect the lien or
estate created by this Mortgage or the security afforded hereby including
any expenses of entering and taking possession of the Mortgaged Property;
(b) then to the payment of the Capacity Replacement Charge and any
other Obligations Secured Hereby in such order as Mortgagee may determine
until the same have been paid in full; and
(c) any balance thereof shall be paid to Mortgagor, or to whosoever
shall be legally entitled thereto, or as a court of competent jurisdiction
may direct.
Section 2.04 Right to Sue. If an Event of Default shall occur and be
------------
continuing, Mortgagee shall have the right from time to time to cause a sale of
the Mortgaged Property under the provisions of this Mortgage or to sue for any
sums required to be paid by Mortgagor under the terms of this Mortgage as the
same respectively become due, without regard to whether or not the Obligations
Secured Hereby shall be due and without prejudice to the right of Mortgagee
thereafter to cause any such sale or to bring any action or proceeding of
foreclosure or otherwise, or to
D-21
take other action, in respect of any Event of Default existing at the time such
earlier action or proceeding was commenced.
Section 2.05 Powers of Mortgagee. Mortgagee may at any time or from
-------------------
time to time renew or extend this Mortgage or alter or modify the same in any
way, or waive any of the terms, covenants or conditions hereof in whole or in
part, and may release any portion of the Mortgaged Property or any other
security, and grant such extensions and indulgences in relation to the
Obligations Secured Hereby as Mortgagee may determine without the consent of any
junior lienor or encumbrancer and without any obligation to give notice of any
kind thereto and without in any manner affecting the priority of the lien of
this Mortgage on any part of the Mortgaged Property.
Section 2.06 Remedies Cumulative.
-------------------
(a) No right or remedy herein conferred upon or reserved to Mortgagee
is intended to be exclusive of any other right or remedy, and each and every
such right and remedy shall be cumulative and in addition to any other right or
remedy of Mortgagee under the Agreement or this Mortgage, or at law or in
equity. The failure of Mortgagee to insist at any time upon the strict
observance or performance of any of the provisions of this Mortgage, or to
exercise any right or remedy provided for herein or in the Agreement, shall not
impair any such right or remedy nor be construed as a waiver or relinquishment
thereof. Every right and remedy given by this Mortgage or the Agreement to
Mortgagee may be exercised from time to time and as often as may be deemed
expedient by Mortgagee.
(b) Mortgagee shall be entitled to enforce payment and performance of
any Obligations Secured Hereby and to exercise all rights and powers under the
Agreement or this Mortgage, or at law or in equity, notwithstanding that such
Obligations Secured Hereby may now or hereafter be otherwise secured. Neither
the acceptance of this Mortgage nor its enforcement, whether by court action or
pursuant to the power of sale or other powers herein contained, shall prejudice
or in any manner affect Mortgagee's right to realize upon or enforce any other
security now or hereafter held by Mortgagee in such order and manner as
Mortgagee in its sole discretion may determine. Every power or remedy given by
this Mortgage or the Agreement to Mortgagee or to which Mortgagee may be
otherwise entitled, may be exercised from time to time and as often as Mortgagee
may deem expedient, and Mortgagee may pursue inconsistent remedies.
Section 2.07 Waiver of Stay, Extension, Moratorium Laws; Equity of
-----------------------------------------------------
Redemption. To the extent permitted by law, Mortgagor shall not at any time (a)
- ----------
insist upon, or plead, or in any manner whatever claim or take any benefit or
advantage of any applicable present or future stay, extension or moratorium law,
which may affect observance or performance of any Obligations
D-22
Secured Hereby, or (b) claim, take or insist upon any benefit or advantage of
any present or future law providing for the valuation or appraisal of the
Mortgaged Property prior to any sale or sales thereof which may be made under or
by virtue of the provisions of Section 2.02; and Mortgagor, to the extent that
it lawfully may, hereby waives all benefit or advantage of any such law or laws.
Mortgagor, for itself and all who may claim under it, hereby waives, to the
extent permitted by applicable law, any and all rights and equities of
redemption from sale under the power of sale created hereunder or from sale
under any order or decree of foreclosure of this Mortgage and all notice or
notices of seizure, and all right to have the Mortgaged Property marshalled upon
any foreclosure hereof. Mortgagee shall not be obligated to pursue or exhaust
its rights or remedies as against any part of the Mortgaged Property before
proceeding against any other part thereof and Mortgagor hereby waives any right
or claim of right to have Mortgagor proceed in any particular order.
ARTICLE III
Miscellaneous
-------------
Section 3.01 Notices. All notices, demands, requests, consents and
-------
other communications hereunder (collectively, "notices") shall be in writing and
shall be effective only if delivered by hand or mailed by registered mail,
postage prepaid, return receipt requested, addressed to the party for whom
intended at the address of such party set forth at the beginning of this
Mortgage and also, if to Mortgagee, with a copy to Allegheny Power Service
Corporation, 800 Cabin Hill Drive, Greensburg, Pennsylvania 15601, Attention:
Legal Department. Any party may at any time change its address for notices by
giving to the other party hereto, as aforesaid, a notice of such change.
Section 3.02 Security Agreement. This Mortgage constitutes both a
------------------
real property and chattel mortgage and a "security agreement" within the meaning
of the UCC, and the Mortgaged Property includes both real and personal property
and all other rights and interests, whether tangible or intangible in nature, of
Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this
Mortgage has granted to Mortgagee, as security for the Obligations Secured
Hereby, a security interest in the personal property comprising the Mortgaged
Property. If an Event of Default shall occur and be continuing, Mortgagee, in
addition to any other rights and remedies which it may have, shall have and may
exercise immediately and without demand, any and all rights and remedies granted
to a secured party upon default under the UCC, including the right to take
possession of such personal property or any part thereof, and to take such other
measures as the Mortgagee may deem necessary for the care, protection and
preservation of such personal property.
D-23
Section 3.03 Further Assurances.
------------------
(a) Mortgagor shall execute, acknowledge and deliver, from time to
time, such further instruments as Mortgagee may require to accomplish the
purposes of this Mortgage.
(b) Mortgagor immediately upon the execution and delivery of this
Mortgage, and thereafter from time to time, shall cause this Mortgage, any
supplements hereto, any financing statements and each instrument of further
assurance to be filed, registered or recorded and refiled, reregistered or
recorded in such manner and in such places as may be required by any present
or future law in order to publish notice of and perfect the lien and security
interest or estate created by this Mortgage on or in the Mortgaged Property.
(c) Mortgagor shall pay all filing, registration and recording fees,
all refiling, reregistration and rerecording fees, and all expenses incident to
the execution and acknowledgment of this Mortgage, the Agreement, the
Recognition Agreement, any supplements hereto or thereto, any financing and
continuation statements and any instruments of further assurance, and all
Federal, State, county and municipal stamp taxes and other taxes, assessments
and charges arising out of or in connection with the execution and delivery of
this Mortgage, the Agreement, the Recognition Agreement any supplements hereto
or thereto, any financing and continuation statements and any instruments of
further assurance.
(d) A carbon, photographic or other reproduction of this Mortgage or
of any financing statement signed by Mortgagor in connection herewith shall be
sufficient as a financing statement and may be filed to perfect the security
interest created hereby.
Section 3.04 Amendments, Waivers, Etc. This Mortgage cannot be
------------------------
amended, modified, waived, changed, discharged or terminated except by an
instrument in writing signed by the party against whom enforcement of such
amendment, modification, waiver, change, discharge or termination is sought.
Section 3.05 Successors and Assigns. This Mortgage shall run with
----------------------
the land and shall apply to, inure to the benefit of and bind each of the
parties hereto and their respective successors and assigns.
Section 3.06 Interpretation. Unless the context otherwise requires,
--------------
(a) any reference in this Mortgage to "Mortgagor," "Mortgagee" or any other
entity shall include its successors and assigns, (b) any reference to an Article
or Section shall refer to the specified Article or Section of this Mortgage, (c)
words importing the singular number include the plural number, and vice versa,
(d) the terms "hereof", "hereby", "hereto", "hereunder" and similar terms refer
to this entire Mortgage, (e)
D-24
the term "including" shall mean "including without limitation", and (f) any
reference to the Mortgaged Property shall refer to the Mortgaged Property or any
part thereof or any estate or interest therein. The captions or headings at the
beginning of each Article and Section hereof are for the convenience of the
parties and are not a part of this Mortgage.
Section 3.07 Invalidity of Certain Provisions. If the security
--------------------------------
interest, lien or estate created by this Mortgage is invalid or unenforceable as
to any part of the Obligations Secured Hereby, or as to any part of the
Mortgaged Property, the unsecured or partially secured portion thereof shall be
completely paid prior to the payment of the remaining and secured or partially
secured portion thereof, and all payments made thereon, whether voluntary or
pursuant to foreclosure sale or other enforcement action or procedure, shall be
considered to have been first paid on and applied to the full payment of that
portion thereof which is not secured or fully secured by this Mortgage.
Section 3.08 Severability. If any term or provision of this
------------
Mortgage or the application thereof to any person, entity or circumstance shall
to any extent be invalid or unenforceable, the remainder of this Mortgage, or
the application of such term or provision to persons, entities or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Mortgage shall be valid
and enforceable to the fullest extent permitted by law.
Section 3.09 Limitation of Liability. No recourse for the payment
-----------------------
of the Obligations Secured Hereby, or for any claim based thereon or otherwise
in respect thereof, shall be had against any incorporator, shareholder, officer
or director, as such, past, present or future, of Mortgagor or of any partner
thereof or any successor corporation, or against any direct or indirect parent
corporation of Mortgagor or any other subsidiary of any such direct or indirect
parent corporation or any incorporator, shareholder, officer or director, as
such, past, present or future, of any such parent or other subsidiary, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, it being understood that Mortgagor is a
special purpose corporation formed for the purpose of the transactions
contemplated by the Agreement on the express understanding aforesaid; provided,
---------
however, that nothing in this Section 3.09 shall relieve any of the foregoing
- -------
persons or entities from liability for such person's or entity's gross
negligence or willful misconduct. Nothing contained in this Section 3.09 shall
be construed to limit the exercise or enforcement, in accordance with the terms
of this Mortgage or the Agreement, of rights and remedies against Mortgagor or
the assets of Mortgagor, including the Mortgaged Property.
D-25
Section 3.10 Governing Law. This Mortgage shall be governed by, and
-------------
construed in accordance with, the laws of the Commonwealth of Pennsylvania.
Section 3.11 Recognition Agreement. This Mortgage is subject in all
---------------------
respects to the provisions of the Recognition Agreement, and in the event of any
inconsistency with the provisions of this Mortgage, the provisions of the
Recognition Agreement shall control.
IN WITNESS WHEREOF, this Mortgage has been duly executed this ____ day
of ___________, 1987, effective as of the day and year first above written.
MILESBURG ENERGY, INC.
[Seal] By_______________________________________
Title:___________________________________
Attest:
Certificate of Residence of Mortgagee
-------------------------------------
WEST PENN POWER COMPANY, Mortgagee herein named, hereby certifies that
its principal place of business is at 800 Cabin Hill Drive, Greensburg,
Pennsylvania 15601.
WEST PENN POWER COMPANY
By_______________________________________
This Mortgage was prepared by:
W. Franklin Reed, Esq.
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
D-26
COMMONWEALTH OF PENNSYLVANIA )
)
COUNTY OF ALLEGHENY )
On this, the _____ day of __________, 1987, before me,
_______________________, the undersigned officer, personally appeared
_____________________, known to me (or satisfactorily proven) to be the person
whose name is subscribed to the within instrument, who acknowledged that he is
the _______________ of Milesburg Energy, Inc., a _____________ corporation, and
acknowledged that as such officer he executed the within instrument for and on
behalf of said corporation for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[Seal]
___________________________________
Notary Public
My Commission Expires:
SCHEDULE I
[Metes, bounds and title reference description of Site to be added]
SCHEDULE II
[List of specific items of machinery and equipment, if appropriate, to
be added ]
EXHIBIT E
---------
TO
ELECTRIC ENERGY
PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RECOGNITION AGREEMENT
Dated as of ___________, 1987
among
WEST PENN POWER COMPANY, as Buyer,
MILESBURG ENERGY, INC., as Seller,
__________________________, as Construction Lender,
________________________________, as Owner Trustee,
______________________________, as Permanent Lender
and
____________________, as Indenture Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Record and Return to:
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Attention: W. Franklin Reed, Esq.
TABLE OF CONTENTS
Page
INTRODUCTION AND PARTIES................................................. 1
RECITALS................................................................. 1
ARTICLE 1 DEFINITIONS
Section 1.1 Certain Definitions.................................. 3
Section 1.2 Rules of Interpretation.............................. 10
ARTICLE 2 CERTAIN COMMUNICATIONS
Section 2.1 Construction Lender's
Communications..................................... 11
Section 2.2 Lessor's Communications.............................. 11
Section 2.3 Permanent Lender's Communications.................... 11
Section 2.4 Buyer's Communications............................... 11
Section 2.5 Other Communications................................. 11
ARTICLE 3 BUYER'S RIGHTS UPON LOAN DEFAULT
Section 3.1 Buyer's Right to Cure Project
Loan Defaults...................................... 12
ARTICLE 4 FINANCING PARTY'S RIGHTS UPON SELLER'S DEFAULT
Section 4.1 Financing Party's Right to
Cure Seller's Defaults............................. 14
Section 4.2 Financing Party's Right to
Suspend Buyer's Remedies........................... 17
Section 4.3 Permanent Lender's Right to
Redeem Project Owner's Equity...................... 19
ARTICLE 5 RIGHTS UPON SUCCESSION EFFECTED BY A FINANCING PARTY
Section 5.1 Recognition of Operative
Documents.......................................... 20
Section 5.2 Financing Party's Right to Modify
Purchase Agreement................................. 22
Section 5.3 Application of Net Proceeds.......................... 24
Section 5.4 Nature of Obligations................................ 27
Section 5.5 Construction Lender's Right to
Reject Buyer's Documents........................... 28
ARTICLE 6 RIGHTS UPON SUCCESSION EFFECTED BY BUYER
Section 6.1 Recognition of Permanent Loan
Documents.......................................... 29
E-i
Page
Section 6.2 No Duty to Recognize Other
Operative Documents................................ 31
Section 6.3 Operation of the Project by Buyer.................... 31
Section 6.4 Application of Net Proceeds.......................... 32
Section 6.5 Nature of Obligations................................ 36
ARTICLE 7 DAMAGE AND CONDEMNATION
Section 7.1 Application of Proceeds to
Restoration........................................ 36
Section 7.2 No Restoration....................................... 40
ARTICLE 8 MISCELLANEOUS
Section 8.1 Determination of Encumbered Value.................... 43
Section 8.2 Notices.............................................. 44
Section 8.3 Amendments to Operative Documents.................... 44
Section 8.4 Relative Priorities.................................. 46
Section 8.5 Termination of Purchase Agreement.................... 46
Section 8.6 No Amendments, Etc................................... 47
Section 8.7 Further Assurances................................... 47
Section 8.8 Term................................................. 47
Section 8.9 Successors and Assigns............................... 47
Section 8.10 Headings............................................. 48
Section 8.11 Severability......................................... 48
Section 8.12 Immunities........................................... 48
Section 8.13 Counterparts......................................... 49
Section 8.14 Governing Law........................................ 49
EXECUTION ............................................................. 49
EXHIBIT A Legal Description of Project Site
EXHIBIT B Schedule of Stipulated Loss Value
EXHIBIT C Schedule of Maximum Semi-Annual Rent and Debt Service
E-ii
RECOGNITION AGREEMENT
---------------------
RECOGNITION AGREEMENT dated as of the _____ day of ________ , 1987,
among WEST PENN POWER COMPANY, a Pennsylvania corporation having its principal
place of business at 800 Cabin Hill Drive, Greensburg, Pennsylvania 15601
("Buyer"), MILESBURG ENERGY, INC., a Pennsylvania corporation having an office
at 248 Main Street, Blossburg, Pennsylvania 16912 ("Seller"), [Construction
Lender/Owner Participant], a _______________ corporation having an office at
_____________________________________ ( " " ) , __________________, a
___________________ corporation having its corporate trust office at ___________
___________ as trustee under the Owner Trust Agreement referred to below ("Owner
Trustee"), [Permanent Lender], a _______________ corporation having an office at
_____________________ (" "), and _______________, a ____________________
corporation having its corporate trust office at _____________________________,
as trustee under the Trust Indenture referred to below ("Indenture Trustee").
W I T N E S S E T H:
-------------------
WHEREAS, Seller and Buyer have entered into an Electric Energy
Purchase Agreement dated as of February 25, 1987 (the "Purchase Agreement"), a
memorandum of which is intended to be recorded in the Office of the Recorder of
Deeds of Centre County, Pennsylvania (the "Recorder's Office"), providing for
the construction, equipping and operation by Seller of the Project, consisting
of a circulating fluidized bed boiler and related facilities having an expected
generating capacity of 36.5 to 43 megawatts, including a _____ mile transmission
line and auxiliary facilities, to be located at Buyer's retired Milesburg Power
Station in the Borough of Milesburg in Centre County, Pennsylvania (the "Project
Site"), which Project Site is more particularly described in Exhibit A hereto,
and providing for the sale by Seller and purchase by Buyer of all electric
energy generated by the Project (the "Project Energy") on the terms and
conditions therein set forth; and
WHEREAS, as security for Seller's obligations to Buyer under the
Purchase Agreement, Seller has executed and delivered to Buyer a Mortgage and
Security Agreement dated as of _____________, 1987 (the "Buyer Mortgage"),
intended to be recorded in the Recorder's Office; and
WHEREAS, in order to finance the construction of the Project, Seller
has entered into a Construction Loan Agreement dated as of ___________, 1987
(the "Construction Loan Agreement") with ____, as construction lender
("Construction Lender"); and
WHEREAS, as security for Seller's obligations to Construction Lender
under the Construction Loan Agreement, Seller has executed and delivered to
Construction Lender a
_________________ dated as of ________________ 1987 (the "Construction
Mortgage"), intended to be recorded in the Recorder's Office, pursuant to which
Seller has granted to Construction Lender a lien on and security interest in,
among other things, the Project; and
WHEREAS, upon substantial completion of construction of the Project,
Seller and Owner Trustee intend to engage in a sale and leaseback transaction
pursuant to which Seller will sell the Project to Owner Trustee, and Owner
Trustee, as lessor ("Lessor"), will lease the Project to Seller, as lessee
("Lessee"), for an initial term of 15 years pursuant to a Lease Agreement (the
"Original Lease" ), a memorandum of which is intended to be recorded in the
Recorder's Office; and
WHEREAS, in order to finance a portion of Lessor's cost of acquisition
of the Project from Seller and to cover certain possible initial operating and
financing costs, Lessor may issue certain notes, loan certificates or other
evidences of indebtedness for borrowed money (the "Permanent Notes") to
________________ (herein, together with any other holders from time to time of
the Permanent Notes, being collectively called the "Noteholders") and, in order
to provide for the issuance of and security for the Permanent Notes, Lessor may
enter into a Trust Indenture (the "Trust Indenture") dated as of the Lease
Closing Date (as defined in the Participation Agreement) with Indenture
Trustee, pursuant to which Lessor will, if the Permanent Notes are issued, grant
to Indenture Trustee, as security for the Permanent Notes, a lien on and
security interest in the Original Lease and, subject to Lessee's rights under
the Original Lease, the Project; and
WHEREAS, the execution and delivery by the parties hereto of this
Agreement is a condition to Buyer's obligation to purchase Project Energy under
the Purchase Agreement, a condition to Construction Lender's obligation to make
advances under the Construction Loan Agreement, a condition to Owner Trustee's
obligation to purchase the Project from Seller and to lease the same to Lessee
pursuant to the Original Lease and a condition to the issuance of the Permanent
Notes; and
WHEREAS, the parties hereto desire to establish the relative rights
and priorities of the parties and their successors and assigns under the
agreements and instruments described above;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and for other good and valuable consideration, the receipt whereof is
hereby acknowledged, and in order to induce Buyer to purchase Project Energy
pursuant to the Purchase Agreement and to induce Construction Lender, Owner
Trustee and Indenture Trustee to engage in the transactions described above, the
parties hereto, intending to be legally bound, hereby agree as follows:
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ARTICLE 1
Definitions
Section 1.1. Certain Definitions. As used in this Agreement:
-------------------
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person, or who holds or
beneficially owns 10% or more of the equity interest in such Person or 10% more
of any class of voting securities of such Person.
"Buyer Mortgage" has the meaning specified in the recitals hereto.
"Buyer's Documents" means, collectively, the Purchase Agreement and
the Buyer Mortgage.
"Condemnation" has the meaning specified in Section 7.1(a).
"Construction Loan Agreement" has the meaning specified in the
recitals hereto.
"Construction Loan Default" means a default in the performance or
observance of any of the terms, covenants and conditions to be performed or
observed under the Construction Loan Documents, which default shall continue
beyond any applicable grace period set forth in the construction Loan Documents
and shall not be cured or waived.
"Construction Loan Default" means, collectively, the Construction Loan
Agreement, the Construction Mortgage, any instrument evidencing the loans
advanced under the Construction Loan Agreement and any other security agreement
or financing statement entered into in connection therewith.
"Construction Mortgage" has the meaning specified in the recitals
hereto.
"Conversion Proceeds" has the meaning specified in Section 7.1(a).
"Damage" has the meaning specified in Section 7.1(a).
"Defaulting Party" means Seller, Lessor or Lessee, as the case may be,
following any default by any such Person in the performance of any of its
obligations under any Operative Document to which it is a party.
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"Encumbered Value of the Project" means the fair market sales value,
in cash, obtainable for the Project in an arm's length sale, between an
informed and willing seller (under no compulsion to sell) and an informed and
willing purchaser (under no compulsion to purchase), determined on the basis
that (a) the Project shall be sold subject to Buyer's Documents and this
Agreement and Buyer's rights thereunder and hereunder, but free and clear of
Project Owner's interest in the Project and of the Operative Documents (other
than Buyer's Documents), (b) the purchaser shall have and be entitled to
exercise the benefits and rights of Seller under Buyer's Documents and this
Agreement, as fully as if named as the Seller therein, (c) the purchaser shall
become subject to (but not personally liable for) the obligations of Seller
under Buyer ' Documents, (d) the Project shall remain subject to the Buyer
Mortgage, and (e) Buyer's Documents and this Agreement shall be in full force
and effect and no Seller's Default shall exist.
"Financing Party" has the meaning specified in Section 4.1(a).
"Incremental Weighted Cost of Capital" means Buyer's incremental
weighted cost of capital as of any date of determination (the "Determination
Date"), computed as follows:
(a) Buyer's actual capital structure, exclusive of short-term debt,
and the ratio of each component thereof to the total shall be determined as
of the end of the last full calendar quarter preceding the Determination
Date.
(b) Rates for each component shall be determined as follows:
Debt - The interest rate for debt shall be the average yield on
----
outstanding electric utility bonds of the same Moody's rating category
as Buyer's determined by averaging the weekly yields as published by
Moody's (or such other nationally recognized financial information
service the parties shall agree upon) for the last full calendar
quarter preceding the Determination Date.
Preferred - The dividend rate for preferred stock equity shall be
---------
the average yield on outstanding electric utility preferred stocks of
the same Moody's rating category as Buyer's determined by averaging
the weekly yields as published by Moody's (or such other nationally
recognized financial information service the parties shall agree upon)
for the last full calendar quarter preceding the Determination Date.
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Common - The rate of return on common equity shall be the greater
------
of (i) the return on common equity allowed in Buyer's last rate case
for its primary regulatory jurisdiction preceding the Determination
Date or (ii) the actual earned rate of return on Buyer's common equity
for the last full calendar quarter preceding the Determination Date.
If no rate of return on common equity was specified in such rate case,
for purposes of such formula an imputed return on common equity rate
(as reasonably determined by Buyer, it being understood that there may
exist more than one reasonable method of determining such imputed
return on common equity rate and that the method employed by Buyer, if
reasonable, shall not be subject to challenge on the basis that it
is not the best method) shall be used.
(c) Buyer's Incremental Weighted Cost of Capital shall be determined
by multiplying the capitalization ratio of each component of Buyer's
capital structure by the interest rate, dividend rate or rate of return, as
the case may be, and summing the three components.
"Independent Operator" means any Person, other than Lessor or an
Affiliate of Lessor, that is operating the Project or causing the same to be
operated pursuant to an Operating Agreement between Lessor and such Person.
"Lease" means the Original Lease and any other lease of the Project or
any part thereof entered into by Lessor.
"Lease Default" means a default in the performance or observance of
any of the terms, covenants and conditions to be performed or observed under the
Lease, which default shall continue beyond any applicable grace period set forth
in the Lease and shall not be cured or waived.
"Lease Rate" means the Rate (as defined in the Lease) or, if no Lease
is in effect, the Rate specified in the last Lease in effect.
"Lessee" has the meaning specified in the recitals hereto.
"Lessor" has the meaning specified in the recitals hereto, and
includes the trust created by the Owner Trust Agreement.
"Lessor's Cost" has the meaning specified in the Participation
Agreement; provided, however, that Lessor's Cost in no event shall exceed
-------- -------
$__________.
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"Lessor' s Net Economic Return" means the Net Economic Return (as
defined in the Participation Agreement) or, if no Lease is in effect, the Net
Economic Return specified in the last Lease in effect; provided, however, that
-------- -------
in no event shall Lessor's Net Economic Return include the residual value of
Lessor's interest in the Project at the expiration of Lessor's Preference
Period, as anticipated by ____ on the date this Agreement is executed.
"Lessor's Preference Period" means the period commencing on the first
day of the term of the Original Lease and expiring on the fifteenth anniversary
of the Commencement Date.
"Moody's" means Moody's Investors Service, Inc.
"Net Proceeds" means all proceeds of whatever kind obtained in
connection with the exercise of remedies under any Operative Document, including
from a sale or transfer of the Project or any interest therein, less the
reasonable costs and expenses incurred in connection therewith (but excluding
any indemnities payable to any party under any Operative Document).
"Nondefaulting Party" means any party to an Operative Document, other
than the Defaulting Party, following any default by the Defaulting Party in the
performance of any of its obligations under such Operative Document.
"Noteholders" has the meaning specified in the recitals hereto.
"Notional Cash Flow" has the meaning specified in Section 6.3(b).
"Notional Cash Flow Account" has the meaning specified in Section
6.3(b).
"Operating Agreement" means an independent contract between Lessor and
an Independent Operator under which the Independent Operator is obligated to
make payments of rent or other consideration to Lessor which are fixed in amount
and not computed by reference to the cash flow or economic performance of the
Project (the Independent Operator thereby bearing the economic risks of, and
realizing the economic benefits from, the Project in a manner comparable to
Lessee); provided, however, that such independent contract may provide for a
-------- -------
different compensation arrangement (which may include payments by Lessor to the
Independent Operator) so long as any net cash flow (after payment or
reimbursement of all costs and expenses in any way relating to the Project,
including debt service payments) realized by Lessor from the operation of the
Project is applied solely to maintain Lessor's Net Economic Return.
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"Operative Documents" means, collectively, the Project Documents, the
Construction Loan Documents, the Lease, the Permanent Loan Documents and Buyer's
Documents.
"Original Lease" has the meaning specified in the recitals hereto.
"Owner Trust Agreement" means the Trust Agreement dated as of ____,
1987, between ____ and Owner Trustee.
"Participation Agreement" means the Participation Agreement dated
________, 1987, among Seller, __________, Owner Trustee, __________ , the bank
or trust company identified therein as the "Paying Agent" and Indenture Trustee.
"Permanent Lender" means, collectively, the Noteholders, whether
acting directly or through Indenture Trustee, and Indenture Trustee.
"Permanent Loan Default" means a default in the performance or
observance of any of the terms, covenants and conditions to be performed or
observed under the Permanent Loan Documents, which default shall continue beyond
any applicable grace period set forth in the Permanent Loan Documents and shall
not be cured or waived.
"Permanent Loan Documents" means, collectively, the Participation
Agreement, the Trust Indenture, the Permanent Notes and any other loan or
security agreement or financing statement entered into in connection therewith,
and may include a purchase of notes and other instruments from Construction
Lender and the restatement thereof in their entirety on terms substantially
equivalent to that contemplated by the Participation Agreement.
"Permanent Notes" has the meaning specified in the recitals hereto.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government.
"Project Documents" means, collectively, all documents relating to the
ownership, construction, operation, management or use of the Project, other than
this Agreement, Buyer's Documents, the Construction Loan Documents, the Lease
and the Permanent Loan Documents.
"Project Energy" has the meaning specified in the recitals hereto.
"Project Lender" means (a) prior to the Commencement Date,
Construction Lender, and (b) after the Commencement Date, until the indebtedness
outstanding under the Construction Loan
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Agreement is paid in full, Construction Lender, and thereafter Permanent Lender.
"Project Loan Default" means (a) prior to the Commencement Date, a
Construction Loan Default, and (b) after the Commencement Date, until the
indebtedness outstanding under the Construction Loan Agreement is paid in full,
a Construction Loan Default, and thereafter a Permanent Loan Default.
"Project Loan Documents" means (a) prior to the Commencement Date, the
Construction Loan Documents, and (b) after the Commencement Date, until the
indebtedness outstanding under the Construction Loan Agreement is paid in full,
the Construction Loan Documents, and thereafter the Permanent Loan Documents.
"Project Owner" means Seller as owner of the Project.
"Project Site" has the meaning specified in the recitals hereto.
"Purchase Agreement" has the meaning specified in the recitals hereto.
"Recorder's Office" has the meaning specified in the recitals hereto.
"Restoration Costs" has the meaning specified in Section 7.1(b).
"Restoring Party" has the meaning specified in Section 7.1(c).
"Seller's Default" means any Event of Default as to Seller (as defined
in Section 6.1 of the Purchase Agreement) or Event of Default (as defined in
Section 2.01 of the Buyer Mortgage) which shall not be cured or waived.
"Stipulated Loss Value" means, at any time, an amount equal to (a) the
Stipulated Loss Value (as defined in the Lease), determined at such time as
provided in the Lease (but in no event shall the same exceed the product of
Lessor's Cost multiplied by the percentage set forth in Exhibit B hereto
applicable at such time), or (b) if no Lease is in effect at such time, the
product of Lessor's Cost multiplied by the percentage set forth in Exhibit B
hereto applicable at such time.
"Succession" means (a) when used with respect to Project Owner's
interest in the Project,
(i) any succession to Project Owner's interest in the Project by
Construction Lender, Permanent Lender, Buyer or any other Successor by
reason of any such Person's in any manner taking over the
construction,
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ownership, management or operation of the Project or otherwise
succeeding to the interest of Project Owner in the Project pursuant to
a judgment of foreclosure, acceptance of a deed in lieu of foreclosure
or any other means, whether by exercise of remedies under the
Construction Loan Documents, the Permanent Loan Documents, the Buyer
Mortgage or otherwise, or
(ii) any other Successor's succession to Project Owner's interest
in the Project by reason of any sale, lease or other transfer of
Project Owner's interest in the Project or any part thereof by Project
Owner or any other Successor; and
(b) when used with respect to Lessee's interest in the Project,
(i) any succession to Lessee's interest in the Project by
Lessor, Permanent Lender or any other Successor by reason of any such
Person's in any manner taking over the construction, ownership,
management or operation of the Project or otherwise succeeding to the
interest of Lessee in the Project pursuant to a termination of the
Lease, acceptance of a surrender of the Lease, ejectment or any other
means, whether by exercise of remedies under the Lease or otherwise,
or
(ii) any other Successor's succession to Lessee's interest in the
Project by reason of any sale, lease or other transfer of Lessee's
interest in the Project or any part thereof by Lessee or any other
Successor.
"Succession Undertaking" means a written instrument confirming the
undertaking of a Person to perform or cause to be performed the obligations
required by this Agreement or an Operative Document to be performed in
connection with a Succession, in form and substance reasonably satisfactory to
the party or parties to whom such obligations are owed.
"Successor" means, when used with respect to any Person's interest in
the Project, any other Person succeeding to such interest by reason of a
Succession.
"Total Loss" means (a) Damage or Condemnation to an extent that
renders this Project incapable of being restored to a condition that will permit
the use of the same for the purposes for which intended, or (b) results in the
settling, adjusting or compromising of any insurance on the basis of a total
loss of the Project.
"Trust Indenture" has the meaning specified in the recitals hereto.
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Section 1.2. Rules of Interpretation. (a) Unless the context shall
-----------------------
otherwise require, any reference in this Agreement to "Project Owner" or
"Lessee" shall include any Successor to such Person's interest in the Project,
any reference to "Seller", and, if the Project has been sold by Seller to
Lessor, "Lessor", shall include Project Owner, any reference to a Succession to
any Person's interest in the Project shall include such Person's rights under
any Operative Documents, and any reference in this Agreement to a Person shall
include its successors and assigns.
(b) Following any termination of the Lease by operation of law as a
result of any Succession, any reference to the "Lease" shall include any new
lease permitted by Section 5.2(d), any reference to "Lessor" shall include the
lessor under such new lease and any reference to "Lessee" shall include the
lessee under such new lease or, if Lessor enters into an Operating Agreement
contemplated by Section 5.3(d), 6.4(e) or 7.2(c), the Independent Operator under
such Operating Agreement. Following any discharge of the Construction Loan
Documents or the Permanent Loan Documents by operation of law as a result of any
Succession, any reference to the "Construction Loan Documents" or the "Permanent
Loan Documents", as the case may be, shall include any instrument creating a
lien on and security interest in Project Owner's interest in the Project
permitted by Section 5.2(e) and all agreements, notes and other instruments
executed and delivered in connection with, or as further security for, the
indebtedness and other obligations secured thereby, and any reference to
"Permanent Lender" shall include any holders of such notes or other instruments.
(c) If any indebtedness outstanding under the Project Loan Documents
is held by Seller, Lessor or any of their respective Affiliates, any reference
to "Construction Lender" or "Permanent Lender'" shall not include Seller, Lessor
or any of their respective Affiliates.
(d) Any reference to any Operative Document or other agreement or
contract shall include all supplements and amendments thereto to the extent
permitted by this Agreement.
(e) Any reference to an Article or Section shall refer to the
specified Article or Section of this Agreement, unless the context otherwise
requires.
(f) Unless the context otherwise requires, words importing the
singular number include the plural number, and vice versa; the terms "hereof",
"hereby", "hereto", "hereunder" and similar terms refer to this entire
Agreement; and the term "including" shall mean "including without limitation".
(g) Unless the context otherwise requires or as otherwise expressly
provided in this Agreement, terms defined in the Purchase Agreement (including
"Applicable Rate", "APS Demand",
--------------- ----------
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"Buyer's System", "Capacity Cost Rate", "Capacity Replacement Charge",
-------------- ------------------ ---------------------------
"Commencement Date". "Contract Output", "Design and Construction Standard",
----------------- --------------- --------------------------------
"Energy Cost Rate", "Event of Default as to Buyer", "FERC", "Interconnection",
---------------- ---------------------------- ---- ---------------
"Operating and Maintenance Expenses", "Operations Coordination Agreement",
---------------------------------- ---------------------------------
"Project", "PURPA", "Reserve Fund", "Test Period" and "Variable Energy Cost
------- ----- ------------ ----------- --------------------
Rate") shall have, when used in this Agreement, the meanings respectively
- ----
assigned thereto in the Purchase Agreement as in effect on the date hereof.
ARTICLE 2
Certain Communications
Section 2.1. Construction Lender's Communications. Construction
------------------------------------
Lender shall provide to Buyer and Permanent Lender a copy of any notice which
Construction Lender may send to Seller with respect to the performance or
nonperformance of Seller's obligations under the Construction Loan Documents,
including any notice of a Construction Loan Default.
Section 2.2. Lessor's Communications. Lessor shall provide to
-----------------------
Permanent Lender and Buyer a copy of any notice which Lessor may send to Lessee
with respect to the performance or nonperformance of Lessee's obligations under
the Lease, including any notice of a Lease Default.
Section 2.3. Permanent Lender's Communications. Permanent Lender
---------------------------------
shall provide to Buyer a copy of any notice which Permanent Lender may send to
Lessee with respect to the performance or nonperformance of Lessee's obligations
under the Lease, including any notice of a Lease Default, or which Permanent
Lender may send to Lessor with respect to the performance or nonperformance of
Lessor's obligations under the Permanent Loan Documents, including any notice of
a Permanent Loan Default.
Section 2.4. Buyer's Communications. Buyer shall provide to
----------------------
Construction Lender, Lessor and Permanent Lender a copy of any notice which
Buyer may send to Seller with respect to the performance or nonperformance of
Seller's obligations under Buyer's Documents, including any notice of a Seller's
Default.
Section 2.5. Other Communications. Construction Lender, Lessor,
--------------------
Permanent Lender and Buyer shall each promptly advise each other of any
amendment or proposed amendment to or any material consent or waiver of
performance of Seller's, Lessor's or Lessee's obligations under any Operative
Document.
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ARTICLE 3
Buyer's Rights Upon Loan Default
Section 3.1. Buyer's Right to Cure Project Loan Defaults. (a)
-------------------------------------------
Notwithstanding any right Project Lender may have under the Project Loan
Documents, at law, in equity or otherwise, but subject to Section 3.1(d),
Project Lender shall not terminate its commitment to make advances or exercise
any other remedy under the Project Loan Documents, or at law or in equity, by
reason of any Project Loan Default unless and until Project Lender has given
Buyer notice of such Project Loan Default and neither Buyer nor any other Person
has cured the same (i) in the case of (A) a Construction Loan Default or (B) a
Permanent Loan Default that may be immediately cured by the payment of money
(including by discharging or bonding any lien, charge or encumbrance not
permitted by the Project Loan Documents), within 30 days after the giving of
such notice, it being understood that any Project Loan Default arising by reason
of the existence of any lien, charge or encumbrance not permitted by the Project
Loan Documents may be cured by discharging or bonding the same in a manner
reasonably satisfactory to Project Lender, and (ii) in the case of any other
Permanent Loan Default, within 120 days after the giving of such notice;
provided, however, that Construction Lender may suspend its obligations to make
- -------- -------
advances under the Construction Loan Agreement if any condition precedent
therefor is not satisfied and such condition precedent pertains to the status of
the collateral securing Seller's obligations under the Construction Loan
Agreement.
(b) Notwithstanding anything to the contrary contained in Section
3.1(a), if, in the case of any Project Loan Default other than a Project Loan
Default that may be immediately cured by the payment of money (including by
discharging or bonding any lien, charge or encumbrance not permitted by the
Project Loan Documents), Buyer shall, within the applicable cure period
specified in Section 3.1(a), or, if applicable, within the time permitted by
Section 5.5(a), (i) notify Project Lender of its election to exercise its
remedies under Buyer's Documents, pursuant to any right to do so set forth
therein, and to effect a Succession to Project Owner's interest in the Project,
(ii) pay or cause to be paid to Project Lender (A) all payments due under the
Project Loan Documents that were specified in Project Lender's notice pursuant
to Section 3.1(a) and (B) all payments which became due and payable under the
Project Loan Documents after such notice but prior to the exercise of Buyer's
rights under this Section 3.1(b), other than any such sums which become due and
payable (by acceleration or otherwise) solely upon and by reason of the
occurrence of such Project Loan Default, and (iii) execute and deliver to
Project Lender a Succession Undertaking, wherein Buyer shall agree
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(A) until Buyer has effected such Succession, to pay or cause to be
paid to Project Lender all sums from time to time becoming due to Project
Lender under the Project Loan Documents as such sums become due, and
(B) promptly after Buyer has effected such Succession, subject to
Sections 6.1 and 6.2, to perform or cause to be performed all obligations
of Seller or Lessor, as the case may be, under the Project Loan Documents,
except such of Seller's or Lessor's obligations as Seller or Lessor failed
to perform prior to such Succession and which cannot with the exercise of
due diligence be performed by Buyer, it being understood that the time for
Buyer to perform or cause to be performed such obligations as Seller or
Lessor failed to perform prior to such Succession shall be extended for
such period of time as may be necessary for Buyer with the exercise of due
diligence to perform the same or cause the same to be performed,
then Project Lender shall postpone any election to terminate its commitment to
make advances or to exercise any other remedy it may have under the Project Loan
Documents, or at law or in equity, by reason of such Project Loan Default for
such period of time as may be necessary for Buyer with the exercise of due
diligence to effect such Succession and to perform or cause to be performed,
pursuant to such Succession Undertaking, such of Seller's or Lessor's
obligations under the Project Loan Documents as Seller or Lessor failed to
perform prior to such Succession and which can with the exercise of due
diligence, be performed by Buyer, it being understood that upon full compliance
by Buyer with such Succession Undertaking any obligations under the Project Loan
Documents which Seller or Lessor failed to perform prior to such Succession and
which Buyer cannot, with the exercise of due diligence, perform or cause to be
performed shall thereupon be deemed waived.
(c) Once Buyer has, with the exercise of due diligence, effected such
Succession and so performed or caused to be performed such obligations of Seller
or Lessor pursuant to such Succession Undertaking, then, notwithstanding
anything to the contrary contained in the Project Loan Documents, Project Lender
shall no longer have the right to terminate its commitment to make advances or
to exercise any other remedy by reason of such Project Loan Default, and such
Succession Undertaking shall be of no further force and effect, but nothing
herein contained shall affect the right of Project Lender upon the subsequent
occurrence of any Project Loan Default to exercise any right or remedy it may
have under the Project Loan Documents consequent thereon, subject to the
provisions of this Agreement.
(d) Notwithstanding anything to the contrary contained in this
Section 3.1, (i) Project Lender may at any time following the occurrence of any
Project Loan Default and prior to the
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execution and delivery of a Succession Undertaking by Buyer pursuant to Section
3.1(b), exercise any remedy it may have to obtain specific performance by the
Defaulting Party of its obligations under any of the Operative Documents or to
enforce the obligations of, or exercise remedies against, any contractor,
subcontractor or supplier for the Project (including the obligations of a
bonding company under any payment or performance bond) to the exclusion of any
other remedies, without restriction, and (ii) Project Lender shall not be
required to postpone any election to terminate its commitment to make advances
or to exercise any other remedy it may have under the Project Loan Documents, or
at law or in equity, by reason of any Project Loan Default, and Buyer shall not
be required to perform any obligations pursuant to any Succession Undertaking
delivered by it to Project Lender, if Project Lender shall have executed and
delivered to Buyer a Succession Undertaking pursuant to Section 4.1 or 4.2.
(e) Notwithstanding anything to the contrary contained in this
Section 3.1, Buyer may not cure any Construction Loan Default pursuant to
Section 3.1(a), other than a Construction Loan Default that may be cured by the
payment of money or that does not relate to the construction of the Project,
unless Buyer executes and delivers to Construction Lender a Succession
Undertaking pursuant to Section 3.1(b). In the event Buyer executes and delivers
to Construction Lender a Succession Undertaking pursuant to Section 3.1(b) at
any time prior to the Commencement Date, Buyer shall be deemed to have
personally assumed, and Construction Lender shall have full recourse to Buyer
for, the performance of all of Buyer's obligations under such Succession
Undertaking; provided, however, that (i) Buyer shall not be bound by any of the
-------- -------
Project Documents, notwithstanding anything to the contrary contained in the
Construction Loan Documents, (ii) Buyer shall not be bound by any amendment or
modification of the Construction Loan Documents made without its consent unless
permitted by Section 8.3, and (iii) notwithstanding anything to the contrary
contained in this Agreement, such Succession Undertaking and Buyer's personal
assumption thereof shall continue in full force and effect until payment in full
of all amounts payable under the Construction Loan Documents. If requested by
Construction Lender, Buyer shall execute and deliver to Construction Lender an
instrument, in form and substance satisfactory to Construction Lender,
confirming the foregoing assumption of obligations.
ARTICLE 4
Financing Party's Rights Upon Seller's Default
Section 4.1. Financing Party's Right to Cure Seller's Defaults. (a)
-------------------------------------------------
Notwithstanding any right Buyer may have under Buyer's Documents, at law, in
equity or otherwise, but subject to Section 4.1(d), Buyer shall not terminate
the Purchase Agreement
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or exercise any other remedy under Buyer's Documents, or at law or in equity, by
reason of any Seller's Default unless and until Buyer has given Project Lender
and, if the Project has been sold by Seller to Lessor, Lessor (each such party
being herein called a "Financing Party") notice of such Seller's Default and (i)
if such Seller's Default occurs prior to the payment in full of the indebtedness
outstanding under the Construction Loan Documents, neither Construction Lender
nor any other Person has cured the same within 90 days after the giving of such
notice, or (ii) if such Seller's Default occurs after the payment in full of the
indebtedness outstanding under the Construction Loan Documents, neither
Permanent Lender, Lessor (if the Project has been sold by Seller to Lessor) nor
any other Person has cured the same within 180 days after the giving of such
notice, it being understood that any Seller's Default arising by reason of the
existence of any lien, charge or encumbrance not permitted by Buyer's Documents
may be cured by discharging or bonding the same in a manner reasonably
satisfactory to Buyer.
(b) Notwithstanding the foregoing, if a Financing Party shall, within
the applicable cure period specified in Section 4.1(a), or, if applicable,
within the time permitted by Section 4.1(e), (i) notify Buyer of its election to
exercise its remedies under (A) in the case of Construction Lender, the
Construction Loan Documents, (B) in the case of Lessor, the Lease, and (C) in
the case of Permanent Lender, the Permanent Loan Documents, pursuant to any
right to do so set forth therein, and to effect a Succession to the interest of
a Defaulting Party in the Project, and (ii) execute and deliver to Buyer a
Succession Undertaking wherein it shall agree
(A) promptly after the Financing Party has effected such Succession,
to pay or cause to be paid to Buyer (1) all sums, if any, due to Buyer
under Buyer's Documents that were specified in Buyer's notice pursuant to
Section 4.1(a) and (2) all payments which became due and payable under
Buyer's Documents after such notice but prior to the exercise of the
Financing Party's rights under this Section 4.1(b), other than any such
sums which become due and payable (by acceleration or otherwise) solely
upon and by reason of the occurrence of such Seller's Default, and
(B) promptly after the Financing Party has effected such Succession,
subject to Sections 5.1 and 5.2, to perform or cause to be performed all
obligations of Seller under Buyer's Documents, except such of Seller's
obligations as Seller failed to perform prior to such Succession and which
cannot with the exercise of due diligence be performed by the Financing
Party, it being understood that the time for the Financing Party to perform
or cause to be performed such obligations as Seller failed to perform prior
to such Succession shall be extended for such period of time as may be
necessary for the Financing Party, with the exercise of
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due diligence, to perform the same or cause the same to be performed,
then Buyer shall postpone any election to terminate the Purchase Agreement or to
exercise any other remedy it may have under Buyer's Documents, or at law or in
equity, by reason of such Seller's Default for such period of time as may be
necessary for the Financing Party with the exercise of due diligence to effect
such Succession and to perform or cause to be performed, pursuant to such
Succession Undertaking, such of Seller's obligations under Buyer's Documents as
Seller failed to perform prior to such Succession and which can, with the
exercise of due diligence, be performed by the Financing Party, it being
understood that upon full compliance by the Financing Party with such Succession
Undertaking any obligations under Buyer's Documents which Seller failed to
perform prior to such Succession and which the Financing Party cannot, with the
exercise of due diligence, perform or cause to be performed shall thereupon be
deemed waived.
(c) Once the Financing Party has, with the exercise of due diligence,
effected such Succession and so performed or caused to be performed such
obligations of Seller pursuant to such Succession Undertaking, then,
notwithstanding anything to the contrary contained in Buyer's Documents, Buyer
shall no longer have the right to terminate the Purchase Agreement or to
exercise any other remedy by reason of such Seller's Default, and such
Succession Undertaking shall be of no further force and effect, but nothing
herein contained shall affect the right of Buyer, upon the subsequent occurrence
of any Seller's Default, to exercise any right or remedy it may have under
Buyer's Documents and this Agreement consequent thereon, subject to the
provisions of this Agreement. Without limiting the generality of the foregoing,
if Lessor effects any such Succession pursuant to a Succession Undertaking and
enters into a new Lease or an Operating Agreement between Lessor and an
Independent Operator pursuant to which Lessee or such Independent Operator
agrees to perform or cause to be performed all obligations of Seller under
Buyer's Documents, except such of Seller's obligations as Seller failed to
perform prior to such Succession and which cannot with the exercise of due
diligence be performed by Lessee or such Independent Operator, Lessor shall be
deemed to have performed its obligations under such Succession Undertaking.
(d) Notwithstanding anything to the contrary contained in this
Section 4.1, Buyer may, at any time following the occurrence of a Seller's
Default and prior to the execution and delivery of a Succession Undertaking by
the Financing Party pursuant to Section 4.1(b), exercise any remedy it may have
to obtain specific performance by Seller of its obligations under any of the
Operative Documents to the exclusion of any other remedies, without restriction.
E-16
(e) If both Lessor and Permanent Lender deliver a Succession
Undertaking to Buyer pursuant to Section 4.1(b), Lessor's Succession Undertaking
shall be given priority by Buyer and Permanent Lender; provided, however, that
-------- -------
if Lessor shall default in the performance of its obligations under such
Succession Undertaking, Buyer shall give Permanent Lender notice of such default
and Permanent Lender shall have the right to deliver a Succession Undertaking to
Buyer pursuant to Section 4.1(b) within 60 days after the giving of such notice
or, if such period of 60 days expires prior to the expiration of the applicable
time otherwise permitted by Section 4.1(b), within the time permitted by Section
4.1(b).
(f) Notwithstanding anything to the contrary contained in this
Section 4.1 or in any Succession Undertaking, Lessor shall have the right to
revoke any Succession Undertaking delivered by it to Buyer pursuant to Section
4.1(b) by giving notice of such revocation to Buyer at any time prior to the
earlier of (i) the date Lessor or any other Successor to Lessee's interest in
the Project takes possession and commences operation of the Project following
such Succession or (ii) the date 180 days after the date of such Succession.
Upon any such revocation, the rights and obligations of the parties under this
Agreement shall be restored as if such Succession Undertaking had not been
delivered.
(g) Notwithstanding anything to the contrary contained in this
Section 4.1, if the only Seller's Default existing is a Seller's Default arising
solely by reason of a Project Loan Default, Buyer shall not terminate the
Purchase Agreement by reason of such Seller's Default, but nothing herein
contained shall affect Buyer's right to exercise any other right or remedy it
may have under Buyer's Documents and this Agreement consequent thereon, subject
to the provisions of this Agreement, or to exercise such right or any other
right or remedy it may have thereunder and hereunder upon the subsequent
occurrence of any Seller's Default.
Section 4.2. Financing Party's Right to Suspend Buyer's Remedies. (a)
---------------------------------------------------
In the event Buyer shall be entitled to terminate the Purchase Agreement or to
exercise any other remedy under Buyer's Documents, or at law or in equity, by
reason of any Seller's Default that remains uncured pursuant to Section 4.1,
then each Financing Party, provided such Financing Party shall not theretofore
have delivered a Succession Undertaking to Buyer with respect to such Seller's
Default pursuant to Section 4.1(b), shall have the right at any time prior to
the termination of the Purchase Agreement or a Succession by Buyer to Project
Owner's interest in the Project to suspend the exercise by Buyer of such
remedies upon compliance with the provisions of Section 4.2(b).
(b) If a Financing Party shall be entitled to suspend the exercise of
Buyer's remedies pursuant to Section 4.2(a), such right shall be exercised by
(i) notifying Buyer of its election to
E-17
exercise its remedies under the relevant Operative Documents and effect a
Succession to the Defaulting Party's interest in the Project, and (ii) executing
and delivering to Buyer a Succession Undertaking wherein it shall agree to
promptly pay to Buyer, within 30 days after demand therefor, all out-of-pocket
costs and expenses, including reasonable attorneys' fees, incurred by Buyer in
connection with the exercise of such remedies under Buyer's Documents, or at law
or in equity, by reason of such Seller's Default prior to the receipt of such
Succession Undertaking, and otherwise containing the agreements described in the
case of a Succession Undertaking to be delivered pursuant to Section 4.1(b).
(c) Upon receipt of such Succession Undertaking and the payment of
such out-of-pocket costs and expenses of Buyer, Buyer shall postpone any further
exercise of such remedies for such period of time as may be necessary for the
Financing Party with the exercise of due diligence to effect such Succession and
to perform or cause to be performed, pursuant to such Succession Undertaking,
such of Seller's obligations under Buyer's Documents as Seller failed to perform
prior to such Succession and which can, with the exercise of due diligence, be
performed by the Financing Party, it being understood that upon full compliance
by the Financing Party with such Succession Undertaking any obligations under
Buyer's Documents which Seller failed to perform prior to such Succession and
which the Financing Party cannot, with the exercise of due diligence, perform or
cause to be performed shall thereupon be deemed waived.
(d) Once the Financing Party has, with the exercise of due diligence,
effected such Succession and so performed or caused to be performed such
obligations of Seller pursuant to such Succession Undertaking, then,
notwithstanding anything to the contrary contained in Buyer's Documents, Buyer
shall no longer have the right to terminate the Purchase Agreement or to
exercise any other remedy by reason of such Seller's Default, and such
Succession Undertaking shall be of no further force and effect, but nothing
herein contained shall affect the right of Buyer, upon the subsequent occurrence
of any Seller's Default, to exercise any right or remedy it may have under
Buyer's Documents and this Agreement consequent thereon, subject to the
provisions of this Agreement. Without limiting the generality of the foregoing,
if Lessor effects any such Succession pursuant to a Succession Undertaking and
enters into a new Lease or an Operating Agreement between Lessor and an
Independent Operator pursuant to which Lessee or such Independent Operator
agrees to perform or cause to be performed all obligations of Seller under
Buyer's Documents, except such of Seller's obligations as Seller failed to
perform prior to such Succession and which cannot with the exercise of due
diligence be performed by Lessee or such Independent Operator, Lessor shall be
deemed to have performed its obligations under such Succession Undertaking.
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(e) If both Lessor and Permanent Lender deliver a Succession
Undertaking to Buyer pursuant to Section 4.2(b), Lessor's Succession Undertaking
shall be given priority by Buyer and Permanent Lender; provided, however, that
-------- -------
if Lessor shall default in the Performance of its obligations under such
Succession Undertaking, Buyer shall give permanent Lender notice of such default
and Permanent Lender shall have the right to deliver a Succession Undertaking
pursuant to Section 4.2(b) within 30 days after the giving of such notice.
Section 4.3. Permanent Lender's Right to Redeem Project Owner's
--------------------------------------------------
Equity. In the event Buyer exercises any right it may have under the Buyer
- ------
Mortgage or otherwise to foreclose its lien on the Project and effect a
Succession to Project Owner's interest in the Project and, as a result of such
Succession, Buyer is the Successor to Project Owner's interest in the Project
subject to the permanent Loan Documents as contemplated by Sections 6.4(b),
then, so long as any indebtedness is outstanding under the Permanent Loan
Documents, Permanent Lender or its designee shall have the right,
notwithstanding such Succession, at any time on or prior to the second
anniversary of the date of such Succession and upon not less than 180 days'
prior notice to Buyer, to redeem Project Owner's equity of redemption under the
Buyer Mortgage and to reinstate the Purchase Agreement at the expiration of such
180 day period by (i) tendering to Buyer all out-of-pocket costs and expenses,
including reasonable attorneys' fees, incurred by Buyer in exercising such
remedies and effecting such Succession, and all costs of improvements and
repairs to the Project made by Buyer while in possession of the Project,
together with interest thereon at the Applicable Rate from the date such costs
were incurred, (ii) executing and delivering to Buyer a Succession Undertaking,
including an agreement to pay or cause to be paid to Buyer all other sums which
were due and payable to Buyer under Buyer's Documents and remain unpaid, other
than any such sums which became due and payable (by acceleration or otherwise)
solely upon and by reason of the occurrence of the Seller's Default which
entitled Buyer to exercise such right, and otherwise containing the agreements
described in the case of a Succession Undertaking to be delivered pursuant to
Section 4.1(b), (iii) executing and delivering to Buyer a written instrument in
form and substance satisfactory to Buyer ratifying and confirming this
Agreement, and (iv) executing and delivering to Buyer a written instrument in
form and substance satisfactory to Buyer ratifying and confirming the Buyer
Mortgage, or, if necessary, creating a new Buyer's lien on and security interest
in the Mortgaged Property as security, to the extent and with the priority
provided in Buyer's Documents and this Agreement, for the performance of
Seller's obligations under Buyer's Documents; provided, however, that if prior
-------- -------
to the expiration of such 180 day period, Buyer shall have executed and
delivered to Permanent Lender a Succession Undertaking wherein Buyer shall
assume personal liability for the performance of all of the obligations of
Lessor under the Permanent Loan Documents, Permanent Lender or such designee
shall not have any further
E-19
rights under this Section 4.3. Permanent Lender shall pay or cause to be paid
all out-of-pocket expenses, including reasonable attorneys' fees, incurred by
Buyer in effecting such redemption. Upon compliance with the requirements of
this Section 4.3, Buyer shall quitclaim its interest in the Project to Permanent
Lender or such designee, subject, however, to the Purchase Agreement, the Buyer
------- -------
Mortgage (or such new lien and security interest) and this Agreement, but
subject to no other liens, charges or encumbrances other than those existing at
the time Buyer became the Successor to Project Owner's interest in the Project
or those otherwise permitted by the Permanent Loan Documents.
ARTICLE 5
Rights Upon Succession
Effected by a Financing Party
Section 5.1. Recognition of Operative Documents. In the event a
----------------------------------
Financing Party exercises any of its remedies under any Operative Documents or
in any manner effects a Succession to a Defaulting Party's interest in the
Project, then unless Construction Lender shall be entitled pursuant to Section
5.5, and shall elect, to effect such Succession free and clear of Buyer's
Documents and this Agreement,
(a) the Successor to the Defaulting Party's interest in the
Project as a result of such Succession (which may be such Financing
Party) shall be bound by each and every provision of the Operative
Documents applicable to the Defaulting Party and shall recognize each
and every right of the Nondefaulting Party under such Operative
Documents (including the right of Buyer to have the Reserve Fund
referred to in Section 3.8 of the Purchase Agreement maintained), the
Nondefaulting Party's rights under such Operative Documents shall not
be affected or disturbed by such Successor, and the Nondefaulting
Party shall have the same remedies against such Successor for the
breach of any provision contained in such Operative Documents as the
Nondefaulting Party would have had thereunder, or at law or in equity,
against the Defaulting Party if the Financing Party had not so
exercised its remedies or effected such Succession, all with the same
force and effect as if such Successor were the Seller, Lessor or
Lessee, as the case may be, named in such Operative Documents;
provided, however, that (i) such Successor shall neither be liable for
-------- -------
any prior act or omission of the Defaulting Party nor be subject to
any offsets or defenses to which the Nondefaulting Party might have
been entitled under such Operative Documents by reason of such prior
act or omission and (ii) such Successor shall not be bound by any
amendment or modification of
E-20
such Operative Documents made without the Financing Party's consent
unless permitted by Section 8.3; but nothing contained in clause (i)
of the foregoing proviso shall be construed to limit or otherwise
impair (A) any sums then due and payable to Buyer under Buyer's
Documents, other than any such sums which became due and payable (by
acceleration or otherwise) solely upon and by reason of the occurrence
of any Seller's Default arising prior to the time the Financing Party
so exercises such remedies or so effects such Succession, or (B) any
obligations required to be performed pursuant to any Succession
Undertaking delivered to Buyer pursuant to Section 4.1 or 4.2;
(b) such Successor shall be entitled to exercise all rights and
remedies of the Defaulting Party under such Operative Documents and to
enforce all of the Nondefaulting Party's obligations thereunder with
the same force and effect as if such Successor were the Seller, Lessor
or Lessee, as the case may be, named therein;
(c) any other Successor to the Defaulting Party's interest in
the Project shall be subject to all of the provisions of such
Operative Documents, shall be entitled to enforce all of the
Nondefaulting Party's obligations thereunder and hereunder and shall
be subject to all of the rights of the Nondefaulting Party thereunder
and hereunder, all with the same force and effect as if such Successor
were the Seller, Lessor or Lessee, as the case may be, named therein
and herein, and such Operative Documents shall continue in effect in
accordance with their terms between the Nondefaulting Party and such
Successor; and
(d) the Nondefaulting Party shall recognize any Successor to the
Defaulting Party's interest in the Project as the Seller, Lessor or
Lessee, as the case may be, named in such Operative Documents, and, in
the case of a Succession to Project Owner's interest in the Project,
Buyer shall make all payments for Project Energy from time to time
becoming due under the Purchase Agreement directly to or as instructed
by such Successor;
provided, however, that the Nondefaulting Party shall not have any duty to
- -------- -------
recognize, nor shall the Nondefaulting Party be bound to, any Successor to the
Defaulting Party's interest in the Project unless such Successor executes and
delivers to the Nondefaulting Party a Succession Undertaking wherein it shall
agree to perform or cause to be performed the obligations of the Defaulting
Party under such Operative Documents in accordance with this Section 5.1, and,
in the case of a Succession to Project Owner's interest
E-21
in the Project, Buyer shall not be liable for any payment made in good faith to
such Successor's predecessor without notice of such Successor's Succession to
Seller's rights and obligations under the Purchase Agreement; and provided,
--------
further, that in the case of a Succession to Project Owner's interest in the
- -------
Project as a result of any Permanent Loan Default at a time when no Lease
Default exists, any Successor to Project Owner's interest in the Project shall
be subject to and bound by all of the provisions of this Agreement applicable to
Lessor and, so long as no Lease Default exists, Permanent Lender shall not join
Lessee or any Person claiming possession of the Project by, through or under
Lessee, in any foreclosure, ejectment, summary or other proceedings to recover
possession of the Project.
Section 5.2. Financing Party's Right to Modify Purchase Agreement.
----------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, in the
event a Financing Party shall effect any Succession to a Defaulting Party's
interest in the Project following a Seller's Default pursuant to any Succession
Undertaking delivered to Buyer under Section 4.1 or 4.2 and shall perform or
cause to be performed all obligations of Seller under Buyer's Documents to the
extent required to be performed pursuant to this Agreement or pursuant to any
such Succession Undertaking,
(a) Buyer shall no longer have the right to terminate the
Purchase Agreement or to exercise any other remedy by reason of any
Seller's Default described in Section 6.1(b) of the Purchase Agreement
occurring in whole or in part by reason of any failure by Seller to
perform its obligations under Buyer's Documents prior to the time of
such Succession, but nothing herein contained shall affect the right
of Buyer, upon the subsequent occurrence of any such Seller's Default
occurring solely by reason of the failure of the Financing Party, or
other Successor to the Defaulting Party's interest in the Project who
succeeds thereto by reason of such Succession, to perform or cause to
be performed Seller's obligations under Buyer's Documents, to exercise
any right or remedy it may have under Buyer's Documents and this
Agreement consequent thereon, subject to the provisions of this
Agreement;
(b) no Seller's Default described in Section 6.1(b) of the
Purchase Agreement shall be deemed to occur by reason of any failure
of the Financing Party or such other Successor to the Defaulting
Party's interest in the Project to perform or cause to be performed
Seller's obligations under Buyer's Documents during any period prior
to the earlier of (i) the date the Financing Party or such other
Successor takes possession and commences operation of the Project
following such Succession or (ii) the date 180 days after the date of
such Succession;
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(c) in the event a Seller's Default described in Section 6.1 (b)
of the Purchase Agreement exists or, but for this Section 5.2, would
have existed at the time of such Succession, the Financing Party or
such other Successor to the Defaulting Party's interest in the Project
shall have the right to specify a new Contract Output by notice to
Buyer within 90 days after the date of such Succession (the output so
specified being herein called the "Revised Contract Output");
provided, however, that (i) the Revised Contract Output so specified
-------- -------
shall not exceed the lesser of (A) 80% of the Contract Output, or (B)
125% of the average hourly deliveries of Project Energy made to Buyer
during the Test Period referred to in Section 6.1(b) of the Purchase
Agreement, and (ii) no later than 180 days after the date of such
Succession, the Financing Party or such other Successor shall either
(x) pay or cause to be paid to Buyer an amount (the "Shortfall
Replacement Charge") equal to the Capacity Replacement Charge,
computed in accordance with the formula set forth in Section 6.2(b) of
the Purchase Agreement, multiplied by a fraction, the numerator of
which is the Contract Output minus the Revised Contract Output, and
-----
the denominator of which is the Contract Output, or (y) accept an
adjustment to the Energy Cost Rate and Capacity Cost Rate payable
under the Purchase Agreement (which adjustment shall be made in a
manner mutually satisfactory to such Financing Party or other
Successor and Buyer) that will result in an aggregate reduction of the
payments to be made by Buyer under the Purchase Agreement which shall
have a present value (discounted at Buyer's Incremental Weighted Cost
of Capital) equal to such Shortfall Replacement Charge, and upon such
payment or upon such adjustment to the Energy Cost Rate and Capacity
Cost Rate, as the case may be, the Contract Output thereafter shall be
deemed to be the Revised Contract Output;
(d) in the case of a Succession to Lessee's interest in the
Project, the Financing Party or such other Successor to Lessee's
interest in the Project shall have the right at any time to enter into
a new lease of the Project at a rental rate not exceeding the greater
of (i) the rental rate set forth in the preceding Lease or (ii) any
rental rate that would be permitted by amendment to the preceding
Lease pursuant to Section 8.3, and for a stated term expiring no later
than the term of the preceding Lease, specifying a Stipulated Loss
Value no greater than that specified in the preceding Lease, as the
same may be adjusted pursuant to Section 8.3, and otherwise on terms
E-23
reasonably equivalent to those set forth in the preceding Lease; and
(e) in the case of a Succession to Project Owner's interest in
the Project, the Financing Party or such other Successor to Project
Owner's interest in the Project shall have the right at any time to
grant a lien on and security interest in its interest in the Project,
as security to the extent and with the priority provided in the
Permanent Loan Documents and this Agreement, for any financing of the
Project not prohibited by Section 8.3 up to an amount not exceeding,
in the aggregate, either (i) the amount that would have been
outstanding under the Permanent Loan Documents at such time as a
result of the application of any sinking fund or mandatory payment
provisions of the Permanent Loan Documents if the Financing Party had
not so effected such Succession and the Permanent Loan Documents had
remained in effect, or (ii) the amount that would be permitted by
amendment of the Permanent Loan Documents pursuant to Section 8.3, and
otherwise on terms reasonably equivalent to those set forth in the
Permanent Loan Documents.
Section 5.3. Application of Net Proceeds. (a) Without limiting the
---------------------------
generality of Section 5.1, in the event a Financing Party shall be entitled to
effect a Succession to a Defaulting Party's interest in the Project, then unless
Construction Lender shall be entitled pursuant to Section 5.5, and shall elect,
to effect such Succession free and clear of Buyer's Documents and this Agreement
(i) any such Succession shall be to the Defaulting Party's
entire interest in the Project, subject to the rights of all other
Persons under the Operative Documents (including Buyer's Documents),
and may be effected in any manner permitted by the Construction Loan
Documents, the Lease or the Permanent Loan Documents, as the case may
be; and
(ii) any and all Net Proceeds arising out of such Succession
shall be paid and applied as provided in the Construction Loan
Documents, the Lease or the Permanent Loan Documents, as the case may
be.
(b) In the event Buyer shall be entitled, and shall elect, to
terminate the Purchase Agreement by reason of any Seller's Default that remains
uncured pursuant to Section 4.1 or 4.2, a Financing Party may thereafter
exercise any remedy it may have under the Operative Documents, or at law or in
equity, by reason of any Project Loan Default or any Lease Default and effect a
Succession to Project Owner's interest in the Project free and clear of Buyer's
Documents and this Agreement; provided, however, that
-------- -------
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(i) any such Succession shall be to Project Owner's entire
interest in the Project and shall be effected as the result of a public
sale, after not less than 20 days' prior notice, or such greater notice as
may be required by law, to all parties having or claiming an interest in
the Project, and Buyer and each Financing Party shall have the right to bid
for and purchase the Project at any such public sale;
(ii) the terms of such public sale shall be solely for cash;
Provided, however, that there may be offset against the purchase price the
-------- -------
amount, if any, to be distributed to the purchaser pursuant to clause (iv)
below;
(iii) any such Succession shall be subject to the provisions of
Section 8.5; and
(iv) the Net Proceeds of any such sale shall be paid and
applied as follows:
First, (A) if such sale occurs before the indebtedness
outstanding under the Construction Loan Documents is paid in
full, subject to Section 5.3(c), to Construction Lender up to an
amount equal to (1) prior to the Commencement Date, the aggregate
amount due Construction Lender under the Construction Loan
Documents as of the date of such payment, or (2) after the
Commencement Date, the lesser of such amount or the Encumbered
Value of the Project as of the date of such sale (appropriately
reduced to take into account any prior distribution to
Construction Lender pursuant to Section 7.2 that, absent such
adjustment, would have the effect of causing Construction Lender
to realize a greater recovery of its investment than would
otherwise be payable under this paragraph "First"), and (B) if
such sale occurs after the indebtedness outstanding under the
Construction Loan Documents is paid in full, subject to Section
5.3(c), to Permanent Lender up to an amount equal to the
aggregate amount due Permanent Lender under the Permanent Loan
Documents as of the date of such payment,
Second, if such sale occurs after the indebtedness
outstanding under the Construction Loan Documents is paid in full
and prior to the expiration of Lessor's Preference Period,
subject to Section 5.3(d), to Lessor up to an amount equal to (A)
the lesser of (1) the Stipulated Loss Value, calculated as of the
last rental payment date to
E-25
which basic rent has been paid under the Lease (or, if no Lease
is in effect, the date on which the default occurred which
resulted in such sale), plus interest on such amount, at the
Lease Rate, from such date to the date of such payment, or (2)
the Encumbered Value of the Project as of the date of such sale
(appropriately reduced to take into account any prior
distribution to Lessor pursuant to Section 7.2 that, absent such
adjustment, would have the effect of causing Lessor to realize a
greater recovery of its investment than would otherwise be
payable under this paragraph "Second"), minus (B) the amount, if
-----
any, paid to Permanent Lender pursuant to paragraph "First"
above,
Third, to Buyer up to an amount equal to the Capacity
Replacement Charge calculated as of the date of such payment,
taking into account any prior modification thereof pursuant to
Section 5.2 (appropriately reduced to take into account any prior
distribution to Buyer pursuant to Section 7.2 that, absent such
adjustment, would have the effect of causing Buyer to realize a
greater recovery than would otherwise be payable under this
paragraph "Third"),
Fourth, if the indebtedness outstanding under the
Construction Loan Documents is not paid in full pursuant to
paragraph "First" above, to Construction Lender up to an amount
equal to the aggregate remaining amount due Construction Lender
under the Construction Loan Documents as of the date of such
payment, and
Fifth, the balance to Project Owner or whosoever is legally
entitled thereto.
(c) Notwithstanding anything to the contrary contained in this
Section 5.3, (i) Construction Lender shall not be entitled to receive any Net
Proceeds described in Section 5.3(b)(iv) pursuant to paragraph "First" thereof
if, at the time of such termination of the Purchase Agreement by Buyer,
Construction Lender has delivered to Buyer a Succession Undertaking pursuant to
Section 4.1(b) or 4.2(b) with respect to the Seller's Default referred to in
Section 5.3(b) and has defaulted in the performance of any of its obligations
thereunder, and (ii) Permanent Lender shall not be entitled to receive any Net
Proceeds described in Section 5.3(b)(iv) pursuant to paragraph "First" thereof
in an amount greater than the Encumbered Value of the Project as of the date of
such sale (appropriately reduced to take into account any prior distribution to
Permanent Lender pursuant to Section 7.2 that, absent such adjustment, would
have the effect of causing
E-26
Permanent Lender to realize a greater recovery of its investment than would
otherwise be payable under paragraph "First" of Section 5.3(b)(iv) as a result
of this limitation) if, at the time of such termination of the Purchase
Agreement by Buyer, Permanent Lender has delivered to Buyer a Succession
Undertaking pursuant to Section 4.1(b) or 4.2(b) with respect to the Seller's
Default referred to in Section 5.3(b) and has defaulted in the performance of
any of its obligations thereunder.
(d) Notwithstanding anything to the contrary contained in this
Section 5.3,
(i) Lessor shall not be entitled to receive any Net Proceeds
described in Section 5 .3(b)(iv) pursuant to paragraph "Second"
thereof unless at the time of such termination of the Purchase
Agreement by Buyer (A) Lessor has an interest in the Project and (B)
either (1) the Lease is in effect or the Project is being operated by
or is in the possession of a Person other than Lessor or an Affiliate
of Lessor pursuant to an Operating Agreement between Lessor and an
Independent Operator or (2) no Succession Undertaking has been
delivered by Lessor to Buyer pursuant to Section 4.1(b) or 4.2(b) with
respect to the Seller's Default referred to in Section 5.3(b) or, if a
Succession Undertaking has been delivered by Lessor to Buyer pursuant
to Section 4.1(b) and clause (1) above does not apply, either the time
within which Lessor may revoke such Succession Undertaking pursuant to
Section 4.1(f) has not expired or such Succession Undertaking has been
revoked pursuant to Section 4.1(f); and
(ii) in the event there are any liens, charges or encumbrances
on the Project on a parity with or junior to the lien of the Buyer
Mortgage at the time of any application of Net Proceeds of any sale
described in Section 5.3(b), the amount of any such Net Proceeds to be
paid and applied to Lessor pursuant to paragraph "Second" of Section
5.3(b)(iv) shall be reduced by an amount equal to the amount of the
Net Proceeds of such sale that would have been applied to the payment
of the obligations secured thereby absent this Agreement,
notwithstanding anything to the contrary at law, in equity or
otherwise.
Section 5.4. Nature of Obligations. Notwithstanding anything to the
---------------------
contrary contained in Buyer's Documents, this Agreement or any Succession
Undertaking, neither a Financing Party nor any other Successor to a Defaulting
Party's interest in the Project shall have any personal liability, under a
Succession Undertaking or otherwise, to Buyer for the performance of Seller's
obligations under Buyer's Documents, it being understood that after a Succession
and delivery of a Succession Undertaking
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pursuant to this Agreement, Buyer shall look solely to the Mortgaged Property
(as defined in the Buyer Mortgage) for the enforcement of Seller's obligations
under Buyer's Documents. All agreements and undertakings in favor of Buyer made
by a Financing Party or any other Successor to a Defaulting Party's interest in
the Project contained in any Succession Undertaking, or to which the Financing
Party or such other Successor may become subject under Buyer's Documents,
pursuant to Section 5.1 or otherwise, as a result of a Succession, are made and
intended not as personal agreements and undertakings or for the purpose or with
the intention of binding it personally but are made and intended for the purpose
of binding only the interest in the Project to which the Financing Party or such
other Successor shall succeed upon effecting such Succession.
Section 5.5. Construction Lender's Right to Reject Buyer's Documents.
-------------------------------------------------------
(a) Notwithstanding anything to the contrary contained in this Agreement, if
Construction Lender shall become entitled to effect a Succession to Project
Owner's interest in the Project pursuant to the Construction Loan Documents
prior to the Commencement Date, Construction Lender shall have the right upon
not less than 15 days' prior notice to Buyer, unless within such period of 15
days Buyer shall (i) notify Construction Lender of its election to exercise its
remedies under Buyer's Documents and effect a Succession to Project Owner's
interest in the Project, (ii) pay or cause to be paid to Construction Lender all
sums due under the Construction Loan Documents at the time of Construction
Lender's notice pursuant to this Section 5.5(a), other than any such sums which
became due and payable (by acceleration or otherwise) solely upon and by reason
of the occurrence of any Construction Loan Default arising prior to the time
Buyer exercises its rights under this Section 5.5(a), and (iii) execute and
deliver to Construction Lender a Succession Undertaking pursuant to, and in
compliance with the provisions of, Sections 3.1(b) and 3.1(e), to effect such
Succession either (A) subject to Buyer's Documents and this Agreement by
executing and delivering, or causing any other Successor to Project Owner's
interest in the Project to execute and deliver, to Buyer a Succession
Undertaking containing the agreements described in the case of a Succession
Undertaking to be delivered pursuant to Section 4.1(b), or (B) free and clear of
Buyer's Documents and this Agreement and of Buyer's rights thereunder and
hereunder; provided, however, that if Construction Lender shall effect such
-------- -------
Succession without giving Buyer notice of such election, any such Succession
shall be deemed made subject to Buyer's Documents and this Agreement.
(b) In the event Construction Lender shall be entitled and shall
elect to effect a Succession to Project Owner's interest in the Project free and
clear of Buyer's Documents and this Agreement pursuant to Section 5.5(a),
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(i) such Succession shall be to Project Owner's entire
interest in the Project and shall be effected as the result of a
public sale, after not less than 20 days' prior notice, or such
greater notice as may be required by law, to all parties having or
claiming an interest in the Project, free and clear of Buyer's
Documents, and Buyer and Construction Lender shall have the right to
bid for and purchase the Project at such public sale;
(ii) the terms of such public sale shall be solely for cash;
provided, however, that there may be offset against the purchase price
-------- -------
the amount, if any, to be distributed to the purchaser pursuant to
clause (iv) below;
(iii) any such Succession shall be subject to the provisions of
Section 8.5; and
(iv) the Net Proceeds of such sale shall be paid and applied as
follows:
First, to Construction Lender up to an amount equal to the
aggregate amount due Construction Lender under the Construction
Loan Documents as of the date of such payment,
Second, to Buyer up to an amount equal to the Capacity
Replacement Charge calculated as of the date of such payment, and
Third, the balance to Project Owner or whosoever is legally
entitled thereto.
ARTICLE 6
Rights Upon Succession
Effected by Buyer
Section 6.1. Recognition of Permanent Loan Documents. In the event
---------------------------------------
Buyer shall be entitled and shall elect to exercise any remedy it may have under
the Buyer Mortgage or otherwise to foreclose its lien on the Project and effect
a Succession to Project Owner's interest in the Project at any time after the
indebtedness outstanding under the Construction Loan Documents is paid in full
and while any indebtedness is outstanding under the Permanent Loan Documents,
then
(a) the Successor to Project Owner's interest in the Project as a
result of such Succession (which may be Buyer) shall be bound by each and
every provision of the Permanent Loan Documents applicable to Lessor
(including any provision
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thereof which incorporates by reference any provisions of the Lease) and
shall recognize each and every right of Permanent Lender thereunder, and
Permanent Lender shall have the same remedies against such Successor for
the breach of any provision contained in the Permanent Loan Documents as
Permanent Lender would have had thereunder, or at law or in equity, against
Lessor if Buyer had not so exercised its remedies or effected such
Succession, all with the same force and effect as if such Successor were
the Lessor named in the Permanent Loan Documents; provided, however, that
-------- -------
(i) such Successor shall neither be liable for any prior act or omission of
Lessor nor be subject to any offsets or defenses to which Permanent Lender
might have been entitled under the Permanent Loan Documents by reason of
such prior act or omission, (ii) such Successor shall not be bound by any
of the Project Documents, notwithstanding anything to the contrary
contained in the Permanent Loan Documents, and (iii) such Successor shall
not be bound by any amendment or modification of the Permanent Loan
Documents made without Buyer's consent unless permitted by Section 8.3; but
nothing contained in clause (i) of the foregoing proviso shall be construed
to limit or otherwise impair any obligations required to be performed
pursuant to any Succession Undertaking delivered to Permanent Lender
pursuant to Section 3.1;
(b) such Successor shall be entitled to exercise all rights and
remedies of Lessor under the Permanent Loan Documents and to enforce all of
Permanent Lender's obligations thereunder with the same force and effect as
if such Successor were the Lessor named in the Permanent Loan Documents;
(c) any other Successor to Project Owner's interest in the Project
shall be subject to all of the provisions of the Permanent Loan Documents
(including any provision thereof which incorporates by reference any
provisions of the Lease) and this Agreement, shall be entitled to enforce
all of Permanent Lender's obligations hereunder and thereunder and shall be
subject to all of the rights of Permanent Lender hereunder and thereunder,
all with the same force and effect as if such Successor were the Lessor
named therein and herein, and the Permanent Loan Documents and this
Agreement shall continue in effect in accordance with their respective
terms between Permanent Lender and such Successor; and
(d) Permanent Lender shall recognize any Successor to Project Owner's
interest in the Project as the Lessor named in the Permanent Loan
Documents;
provided, however, that Permanent Lender shall not have any duty to recognize,
- -------- -------
nor shall Permanent Lender be bound to, any Successor to Project Owner's
interest in the Project unless such
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Successor executes and delivers to Permanent Lender a Succession Undertaking
wherein it shall agree to perform or cause to be performed the obligations of
Lessor under the Permanent Loan Documents in accordance with this Section 6.1,
and Permanent Lender shall not be liable for any payment or advance made in
faith to such Successor's predecessor without notice of such Successor's
Succession to Lessor's rights and obligations under the Permanent Loan
Documents.
Section 6.2. No Duty to Recognize Other Operative Documents.
----------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, or at law,
in equity or otherwise, in the event Buyer exercises any remedy it may have
under the Buyer Mortgage or otherwise to foreclose its lien on the Project and
effect a Succession to Project Owner's interest in the Project, then, unless the
provisions of Section 6.4(a) apply and the indebtedness outstanding under the
Construction Loan Documents is being assumed as provided in Sections 3.1(b) and
3.1(e), the provisions of Section 6.4(b) shall apply to such Succession and
neither Buyer nor any Successor to Project Owner's interest in the Project as a
result of such Succession shall be bound by the Construction Loan Documents or
the Lease, it being understood that Construction Lender's and Lessor's sole
rights in the event of any such Succession shall be to receive the portion of
the Net Proceeds of any sale described in Section 6.4(b) to which Construction
Lender or Lessor may be entitled to the extent provided in such Section.
Section 6.3. Operation of the Project by Buyer. (a) Notwithstanding
---------------------------------
anything to the contrary contained in any of the Operative Documents, during any
period after the Commencement Date while Buyer is operating the Project, Buyer
shall operate the Project in accordance with sound electric utility practice and
the standards required of Seller in the Purchase Agreement; provided, however,
-------- -------
that such performance shall be subject to the approval, if any be required, of
all regulatory agencies having jurisdiction over Buyer and its Affiliates.
(b) So long as any indebtedness is outstanding under the Permanent
Loan Documents, during any period after the Commencement Date while Buyer is
operating the Project, Buyer shall maintain an account (the "Notional Cash Flow
Account") in which it will record each month, (i) as a positive amount, the
product obtained by multiplying (A) the kilowatthours of Project Energy
generated by the Project during such month, by (B) the price Buyer would have
paid to Seller pursuant to Section 1.2 of the Purchase Agreement for such
Project Energy had such Project Energy been delivered to Buyer by Seller under
the Purchase Agreement, and (ii) as a negative amount, (A) all Operating and
Maintenance Expenses incurred by Buyer during such month, and (B) all payments
of principal of and interest on the indebtedness outstanding under the Permanent
Loan Documents paid in respect of such month. The excess, if any, for any period
of any sums recorded in the Notional Cash Flow Account as positive amounts
E-31
over any sums recorded therein as negative amounts is hereinafter called the
"Notional Cash Flow". Permanent Lender shall have the right to examine, or
cause an audit to be made of, all books and records of Buyer relating to all
entries made in the Notional Cash Flow Account.
(c) Notwithstanding anything to the contrary contained in this
Agreement, if (i) Buyer shall default in the performance of any Succession
Undertaking delivered to Permanent Lender pursuant to Section 3.1(b) which shall
remain uncured 30 days after notice of such default shall have been given by
Permanent Lender to Buyer, or (ii) Buyer shall exercise any right it may have
under the Buyer Mortgage or otherwise to foreclose its lien on the Project and
effect a Succession to Project Owner's interest in the Project, Buyer shall be
the Successor to Project Owner's interest in the Project as a result of such
Succession and, as a result of Buyer's failure to perform or observe any
obligation set forth in Section 6.3(a) or 6.3(b) or to perform, to the extent
required by this Agreement or any Succession Undertaking delivered to Permanent
Lender, any obligation of Lessor under the Permanent Loan Documents, a Permanent
Loan Default shall occur at any time thereafter, Permanent Lender shall have the
right, unless it exercises its rights under Section 4.3, to effect a Succession
to Project Owner's interest in the Project pursuant to the Permanent Loan
Documents free and clear of Buyer's Documents and this Agreement and of Buyer's
rights thereunder and hereunder, subject, however, to the provisions of Section
------- -------
8.5.
(d) Notwithstanding anything to the contrary contained in this
Agreement, in the event of any occurrence described in Section 6.3(c) that would
permit Permanent Lender to effect a Succession to Project Owner's interest in
the Project free and clear of Buyer's Documents and this Agreement, Buyer shall
remain liable, notwithstanding any such Succession, for all payments of
principal of and interest on the indebtedness outstanding under the Permanent
Loan Documents which became due and payable thereunder while Buyer was operating
the Project and which remain unpaid at the time Permanent Lender so effects any
such Succession, but only to the extent of any Notional Cash Flow recorded in
the Notional Cash Flow Account at such time.
Section 6.4. Application of Net Proceeds. (a) In the event Buyer
---------------------------
shall be entitled and shall elect to exercise any remedy it may have under the
Buyer Mortgage or otherwise to foreclose its lien on the Project and effect a
Succession to Project Owner's interest in the Project pursuant to Section 3.1(b)
at any time prior to the Commencement Date as a result of any Seller's Default,
(i) any such Succession shall be to Project Owner's entire
interest in the Project, free and clear of the Project Documents but
subject to the Construction
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Loan Documents, and may be effected in any manner permitted by Buyer's
Documents; and
(ii) any and all Net Proceeds arising out of such Succession
shall be paid and applied as provided in Buyer's Documents.
(b) In the event Buyer shall be entitled and shall elect to exercise
any remedy it may have under the Buyer Mortgage or otherwise to foreclose its
lien on the Project and effect a Succession to Project Owner's interest in the
Project as a result of any Seller's Default, then, except as otherwise provided
in Section 6.4(a),
(i) any such Succession shall be to Project Owner's entire
interest in the Project and shall be effected as the result of a
public sale, after not less than 20 days' prior notice, or such
greater notice as may be required by law, to all parties having or
claiming an interest in the Project, free and clear of (A) if such
Succession occurs prior to the payment in full of the indebtedness
outstanding under the Construction Loan Documents, the Project
Documents and the Construction Loan Documents, and (B) if such
Succession occurs after the payment in full of the indebtedness
outstanding under the Construction Loan Documents, the Project
Documents and the Lease (but subject to the Permanent Loan Documents
as provided in Section 6.1), and Construction Lender or Lessor, as the
case may be, and Buyer shall have the right to bid for and purchase
the Project at such public sale;
(ii) the terms of such public sale shall be solely for cash;
provided, however, that there may be offset against the purchase price
-------- -------
the amount, if any, to be distributed to the purchaser pursuant to
clause (iii) below; and
(iii) the Net Proceeds of such sale shall be paid and applied as
follows:
First, (A) if such sale occurs before the indebtedness
outstanding under the Construction Loan Documents is paid in
full, subject to Section 6.4(d), to Construction Lender up to an
amount equal to (1) prior to the Commencement Date, the aggregate
amount due Construction Lender under the Construction Loan
Documents as of the date of such payment, or (2) after the
Commencement Date, the lesser of such amount or the Encumbered
Value of the Project as of the date of such sale (appropriately
reduced to take into account any prior distribution to
Construction Lender pursuant
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to Section 7.2 that, absent such adjustment, would have the
effect of causing Construction Lender to realize a greater
recovery of its investment than would otherwise be payable under
this paragraph "First"), and (B) if such sale occurs after the
indebtedness outstanding under the Construction Loan Documents is
paid in full and prior to the expiration of Lessor's Preference
Period, subject to Section 6.4(e), to Lessor up to an amount
equal to (1) the lesser of (x) the Stipulated Loss Value,
calculated as of the last rental payment date to which basic rent
has been paid under the Lease (or, if no Lease is in effect, the
date on which the default occurred which resulted in such sale),
plus interest on such amount, at the Lease Rate, from such date
to the date of such payment, or (y) the Encumbered Value of the
Project as of the date of such sale (appropriately reduced to
take into account any prior distribution to Lessor pursuant to
Section 7.2 that, absent such adjustment, would have the effect
of causing Lessor to realize a greater recovery of its investment
than would otherwise be payable under this clause "First"), minus
-----
(2) the then outstanding indebtedness due Permanent Lender as
provided in the Permanent Loan Documents,
Second, to Buyer up to an amount equal to the Capacity
Replacement Charge calculated as of the date of such payment,
taking into account any prior modification thereof pursuant to
Section 5.2 (appropriately reduced to take into account any prior
distribution to Buyer pursuant to Section 7.2 that, absent such
adjustment, would have the effect of causing Buyer to realize a
greater recovery than would otherwise be payable under this
clause "Second"),
Third, if the indebtedness outstanding under the
Construction Loan Documents is not paid in full pursuant to
paragraph "First" above, to Construction Lender up to an amount
equal to the aggregate remaining amount due Construction Lender
under the Construction Loan Documents as of the date of such
payment, and
Fourth, the balance to Project Owner or whosoever is legally
entitled thereto.
(c) In the case of any Succession to Project Owner's interest in the
Project described in Section 6.4(b) effected by Buyer after the payment in full
of the indebtedness outstanding under the Construction Loan Documents, the
Successor to Project
E-34
Owner's interest in the Project shall, notwithstanding anything to the contrary
contained in the Permanent Loan Documents, have the right, at any time after
such Succession, to prepay the indebtedness outstanding under the Permanent Loan
Documents, in whole or in multiples of $100,000, without payment of any penalty
or premium; provided, however, that in the case of any partial prepayment, and
--------- -------
after giving effect thereto, the principal amount of the indebtedness
outstanding under the Permanent Loan Documents shall not be less than
$10,000,000.
(d) Notwithstanding anything to the contrary contained in this
Section 6.4, Construction Lender shall not be entitled to receive any Net
Proceeds of any sale described in Section 6.4(b)(iii) pursuant to paragraph
"First" thereof unless, at the time of such sale, no Succession Undertaking has
been delivered by Construction Lender to Buyer pursuant to Section 4.1(b) or
4.2(b) with respect to the Seller's Default referred to in Section 6.4(b).
(e) Notwithstanding anything to the contrary contained in this
Section 6.4,
(i) Lessor shall not be entitled to receive any Net Proceeds of
any sale described in Section 6.4(b)(iii) pursuant to paragraph
"First" thereof unless at the time of such sale (A) Lessor has an
interest in the Project and (B) either (1) the Lease is in effect or
the Project is being operated by or is in the possession of a Person
other than Lessor or an Affiliate of Lessor pursuant to an Operating
Agreement between Lessor and an Independent Operator or (2) no
Succession Undertaking has been delivered by Lessor to Buyer pursuant
to Section 4.1(b) or 4.2(b) with respect to the Seller's Default
referred to in Section 6.4(b) or, if a Succession Undertaking has been
delivered by Lessor to Buyer pursuant to Section 4.1(b) and clause (1)
above does not apply, either the time within which Lessor may revoke
such Succession Undertaking pursuant to Section 4.1(f) has not expired
or such Succession Undertaking has been revoked pursuant to Section
4.1(f); and
(ii) in the event there are any liens, charges or encumbrances
on the Project on a parity with or junior to the lien of the Buyer
Mortgage at the time of any application of Net Proceeds of any sale
described in Section 6.4(b), the amount of any such Net Proceeds to be
paid and applied to Lessor pursuant to paragraph "First" of Section
6.4(b)(iii) shall be reduced by an amount equal to the amount of the
Net Proceeds of such sale that would have been applied to the payment
of the obligations secured thereby absent this Agreement,
notwithstanding anything to the contrary at law, in equity or
otherwise.
E-35
Section 6.5. Nature of Obligations. Except to the extent otherwise
---------------------
expressly provided in Sections 3.1(e) and 6.3(d) or in a Succession Undertaking
delivered to Project Lender pursuant to Section 3.1(b) (as contemplated by said
Section 3.1(e)) or Section 4.3, (a) neither Buyer nor any other Successor to
Project Owner's interest in the Project shall have any personal liability, under
a Succession Undertaking or otherwise, to Project Lender for the performance of
Seller's or Lessor's obligations under the Project Loan Documents, it being
understood that after a Succession and delivery of a Succession Undertaking
pursuant to this Agreement, Project Lender shall look solely to the property
encumbered by the Construction Mortgage or the Trust Indenture, as the case may
be, for the enforcement of Seller's or Lessor's obligations under the Project
Loan Documents, and (b) all agreements and undertakings in favor of Project
Lender by Buyer or any other Successor to Project Owner's interest in the
Project contained in any Succession Undertaking, or to which Buyer or such other
Successor may become subject under the Project Loan Documents, pursuant to
Section 6.1 or otherwise, as a result of a Succession, are made and intended not
as personal agreements and undertakings or for the purpose or with the intention
of binding it personally but are made and intended for the purpose of binding
only the interest in the Project to which Buyer or such other Successor shall
succeed upon effecting such Succession.
ARTICLE 7
Damage and Condemnation
Section 7.1. Application of Proceeds to Restoration. (a)
--------------------------------------
Notwithstanding anything to the contrary contained in the Operative Documents,
in the event of any damage to or destruction of the Project or any part thereof
as a result of any casualty ("Damage"), or in the event the Project Site, the
Project or any part thereof are taken or damaged as the result of the exercise
of the power of eminent domain, or as the result of any other governmental
action for which compensation shall be given by any governmental authority
("Condemnation"), all proceeds of insurance required to be maintained pursuant
to the Operative Documents and all awards or other compensation payable to
Seller, Project Lender, Lessor, Lessee or Buyer in connection with such Damage
or Condemnation and, during Lessor's Preference Period, all proceeds of any
"business interruption" or "outage expense" insurance required to be maintained
pursuant to the Operative Documents (herein, together with any interest and
investment earnings thereon and all cash and non-cash proceeds thereof,
collectively called "Conversion Proceeds") shall be paid or delivered to
Indenture Trustee or any other bank or trust company having an office in the
City of New York or the City of Pittsburgh and having a combined capital and
surplus aggregating at least $100,000,000 (the Indenture Trustee or such other
bank or trust company being herein called the "Depositary") and held by the
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Depositary, in trust for application in accordance with the provisions of this
Article; provided, however, that so long as no Seller's Default, Project Loan
--------- -------
Default or Lease Default exists, any Conversion Proceeds aggregating less than
$100,000 shall be payable to Seller or Lessee (or, if the Project has been sold
by Seller to Lessor and no Lease is in effect, Lessor), as the case may be, for
application in accordance with the provisions of the Operative Documents.
(b) Except to the extent otherwise provided in Section 7.2, all
Conversion Proceeds (after deducting therefrom all costs and expenses, including
attorneys' fees, incurred in connection with the collection thereof regardless
of the particular nature thereof and whether incurred with or without suit)
shall be paid to or for the account of Seller or Lessee (or, if the Project has
been sold by Seller to Lessor and no Lease is in effect, Lessor), as the case
may be, pursuant to Section 7.1(c), for application to the payment of the costs
of restoring the Project or the part thereof so damaged (or restoring the
portion thereof not so taken to a viable economic unit), including the payment,
during Lessor's Preference Period, of all installments of principal of and
interest on the indebtedness outstanding under the Project Loan Documents or, if
the Lease is in effect, all installments of rent under the Lease as such
installments become due until completion of such restoration (collectively,
"Restoration Costs"); provided, however, that if a Seller's Default, a Project
-------- -------
Loan Default or a Lease Default exists, then, except as otherwise provided in
Section 7.1(e), such Conversion Proceeds shall be held in trust until such
Seller's Default, Project Loan Default or Lease Default is cured or waived in
accordance with the provisions of the Operative Documents and this Agreement,
or, if a Financing Party or Buyer, as the case may be, elects to exercise its
remedies under the Operative Documents and effect a Succession to the Defaulting
Party's or Project Owner's interest in the Project, as the case may be, in
accordance with the provisions of this Agreement, until such Financing Party or
Buyer, as the case may be, shall have effected such Succession (unless such
Financing Party or Buyer, as the case may be, shall elect to begin restoring the
Project itself without effecting such Succession), whereupon such Conversion
Proceeds shall be paid to or for the account of Seller, Lessee (or, if the
Project has been sold by Seller to Lessor and no Lease is in effect, Lessor),
the Successor to the Defaulting Party's or Project Owner's interest in the
Project, or such Financing Party or Buyer, as the case may be, pursuant to
Section 7.1(c) for application to the payment of Restoration Costs.
(c) Any Conversion Proceeds to be paid to or for the account of
Seller, Lessee, Lessor, the Successor to a Defaulting Party's or Project Owner's
interest in the Project, or such Financing Party or Buyer, as the case may be
(herein called a "Restoring Party"), pursuant to Section 7.1(b) shall, except as
otherwise provided in Section 7.1(e), be paid to the Restoring
E-37
Party, upon request therefor, to pay or reimburse the Restoring Party for
Restoration Costs as the work progresses, in each case against receipt by the
Depositary of proof satisfactory to it that (i) the Restoring Party has complied
with the requirements of Section 7.1(d) and, if the Restoring Party is Seller or
Lessee, such other requirements applicable to Seller or Lessee as may be set
forth in the Operative Documents, (ii) the work, to the extent performed, has
been satisfactorily accomplished, (iii) the amount requested has been paid by or
on behalf of the Restoring Party or is justly due to persons who have rendered
services or furnished materials in connection with the work, (iv) no mechanic's,
materialmen's or similar statutory or other liens or charges have been filed
against any property encumbered by the Buyer Mortgage, the Construction Mortgage
or the Trust Indenture, as the case may be, and (v) there are no amounts then
due and payable to persons who have rendered services or furnished materials in
connection with such work other than such as will be discharged in full from the
amounts requested. The Depositary shall not be required to apply such
Conversion Proceeds as aforesaid unless Buyer, Project Lender and Lessor, or, if
they are unable to agree, the Independent Engineer referred to in Section
7.1(d)(ii), shall determine that the amount thereof remaining after payment of
the amount requested (together with anticipated interest and investment earnings
thereon) will be sufficient to pay in full all Restoration Costs reasonably
anticipated to be incurred in connection with such restoration, and the
Restoring Party shall promptly deposit with the Depositary the amount of any
deficiency, to be held and disbursed by the Depositary in accordance with the
provisions of this Section 7.1.
(d) All restoration work following any Damage or Condemnation shall
be subject to the following terms and conditions:
(i) no work shall be undertaken unless the Restoring
Party shall have procured and paid for all required governmental
permits and authorizations of any governmental authorities having
jurisdiction in connection therewith;
(ii) any work shall be designed, constructed and
completed in accordance with plans and specifications prepared by an
architect or engineer selected by the Restoring Party and satisfactory
to an independent engineering consultant selected by Buyer, Project
Lender and Lessor (the "Independent Engineer") and otherwise in
accordance with the Design and Construction Standard, and shall be
performed by contractors selected by the Restoring Party and approved
by the Independent Engineer;
E-38
(iii) no work involving estimated Restoration Costs of
$500,000 or more (exclusive of principal of and interest on the
indebtedness outstanding under the Project Loan Documents or, if the
Lease is in effect, rent under the Lease) shall be undertaken unless
the Independent Engineer shall have certified in writing (which
certification shall be given only after consultation with Buyer,
Project Lender and Lessor) that the Project or the part thereof so
damaged (or the portion thereof not so taken) can be restored
substantially to the value and condition thereof immediately prior to
such Damage, or, in the case of a Condemnation, to a complete, viable
economic unit; and
(iv) no work involving estimated Restoration Costs of
$500,000 or more (exclusive of principal of and interest on the
indebtedness outstanding under the Project Loan Documents or, if the
Lease is in effect, rent under the Lease) shall be undertaken unless
such work is done pursuant to guaranteed maximum or fixed price
contracts with guaranteed completion dates reasonably satisfactory to
Buyer, Project Lender and Lessor; provided, however, that if the
-------- -------
Restoring Party is Buyer, Buyer may, in lieu of such requirement,
guarantee completion of such restoration work subject to delays caused
by force majeure (including the payment of deficiencies, if any, of
Conversion Proceeds to cover Restoration Costs, except to the extent
resulting from such delays) pursuant to an instrument reasonably
satisfactory to Project Lender and Lessor.
(e) Notwithstanding anything to the contrary contained in Section
7.1(b) or 7.1(c), during Lessor's Preference Period, the Depositary shall apply
monies held in trust pursuant to this Article 7 to the payment of all
installments of principal of and interest on the indebtedness outstanding under
the Project Loan Documents or, if the Lease is in effect, all installments of
rent under the Lease as such installments become due until completion of such
restoration; provided, however, that no such monies, other than proceeds of any
-------- -------
"business interruption" or "outage expense" insurance required to be
maintained pursuant to the Operative Documents, shall be so applied (i) to the
payment of any such installments of principal of and interest on the
indebtedness outstanding under the Project Loan Documents if, at the time in
question, Project Lender would not be entitled pursuant to Section 7.2(b) to
receive any distribution of Conversion Proceeds described therein if a
distribution of Conversion Proceeds were made at such time pursuant to Section
7.2(a), or (ii) to the payment of any such installments of rent under the Lease
(to the extent not necessary to pay such installments of principal of and
interest on the indebtedness outstanding under the Project Loan Documents) if,
at the time in question, Lessor would not be entitled pursuant to Section 7.2(c)
to receive any distribution of
E-39
Conversion Proceeds described therein if a distribution of Conversion Proceeds
were made at such time pursuant to Section 7.2(a). Upon the expiration of
Lessor's Preference Period, the balance of any proceeds of any "business
interruption" or "outage expense" insurance required to be maintained pursuant
to the Operative Documents shall be disbursed to or for the account of Lessor,
or as Lessor may direct, it being understood for this purpose that all
installments of principal of and interest on the indebtedness outstanding under
the Project Loan Documents and all installments of rent under the Lease shall be
deemed to have been paid first from such proceeds before the application of any
other Conversion Proceeds.
(f) Upon receipt by the Depositary of a certificate of the
Independent Engineer certifying that such restoration is complete, that the
Project is ready for operation and that the cost thereof has been paid in full,
the balance of any Conversion Proceeds not required to be disbursed pursuant to
Sections 7.1(b) and 7.1(e) shall be disbursed first to the Restoring Party to
the extent of any funds advanced by the Restoring Party and then to the party
legally entitled thereto, or as such party may direct.
(g) Any monies held by the Depositary pursuant to this Article 7
shall be invested in Permitted Investments (as defined in the Participation
Agreement). The Depositary shall have the right to deduct from any Conversion
Proceeds its reasonable charges for acting as trustee hereunder.
Section 7.2. No Restoration. (a) If, in the event of any Damage or
--------------
Condemnation, (i) Seller or Lessee (or, if the Project has been sold by Seller
to Lessor and no Lease is in effect, Lessor) shall fail to restore the Project
or, in the case of a Condemnation, the portion thereof not so taken, in the
manner and to the extent required by the Operative Documents and this Agreement,
or, if not so obligated to restore the Project (or the portion thereof not so
taken), shall not have elected to so restore the same, and (ii) neither a
Financing Party nor Buyer shall have elected, by notice to each Nondefaulting
Party, to exercise its remedies under the Operative Documents and effect a
Succession to a Defaulting Party's or Project Owner's interest in the Project,
as the case may be, in accordance with the provisions of this Agreement within
180 days after the expiration of all applicable cure periods afforded to each
Nondefaulting Party under this Agreement or any Operative Documents by reason of
any such failure to restore or failure to elect to restore the same, then, all
Conversion Proceeds then held by the Depositary shall be paid and applied as
follows:
First, (A) if such Damage or Condemnation shall occur before the
indebtedness outstanding under the Construction Loan Documents is paid
in full, subject to Section 7.2(b), to Construction Lender up to an
amount equal to (1) prior to the Commencement Date, the
E-40
aggregate amount due Construction Lender under the Construction Loan
Documents as of the date of such payment, or (2) after the
Commencement Date, the lesser of such amount or the Encumbered Value
of the Project as of the date immediately preceding the date of such
Damage or Condemnation (appropriately reduced to take into account any
prior distribution to Construction Lender pursuant to Section 5.3(b)
or this Section 7.2 that, absent such adjustment, would have the
effect of causing Construction Lender to realize a greater recovery of
its investment than would otherwise be payable under this paragraph
First"); and (B) if such Damage or Condemnation shall occur after the
indebtedness outstanding under the Construction Loan Documents is paid
in full, subject to Section 7.2(b), to Permanent Lender up to an
amount equal to the aggregate amount due Permanent Lender under the
Permanent Loan Documents as of the date of such payment,
Second, if such Damage or Condemnation shall occur after the
indebtedness outstanding under the Construction Loan Documents is paid
in full and prior to the expiration of Lessor's Preference Period,
subject to Section 7.2(c), to Lessor up to an amount equal to (A) the
lesser of (1) Stipulated Loss Value, calculated as of the last rental
payment date to which basic rent has been paid under the Lease (or, if
no Lease is in effect, the date on which the Damage or Condemnation
occurred which resulted in such sale), plus interest on such amount,
at the Lease Rate, from such date to the date of such payment, or (2)
the Encumbered Value of the Project as of the date immediately
preceding the date of such Damage or Condemnation (appropriately
reduced to take into account any prior distribution to Lessor pursuant
to Section 5.3(b) or this Section 7.2 that, absent such adjustment,
would have the effect of causing Lessor to realize a greater recovery
of its investment than would otherwise be payable under this paragraph
"Second"); provided, however, that if such Damage or Condemnation
-------- -------
shall occur during the first five years of Lessor's Preference Period
and shall constitute a Total Loss, Lessor shall be entitled to receive
up to the amount described in clause (1) above without regard to the
limitation described in clause (2) above; minus (B) the amount, if
-----
any, paid to Permanent Lender pursuant to paragraph "First" above,
Third, to Buyer up to an amount equal to the Capacity Replacement
Charge calculated as of the date of such payment, taking into account
any prior modification thereof pursuant to Section 5.2 (appropriately
reduced to take into account any prior distribution pursuant to
Section 5.3(b) or this Section 7.2 that, absent such
E-41
adjustment, would have the effect of causing Buyer to realize a
greater recovery than would otherwise be payable under this paragraph
"Third"),
Fourth, if the indebtedness outstanding under the Construction
Loan Documents is not paid in full pursuant to paragraph "First"
above, to Construction Lender up to an amount equal to the aggregate
remaining amount due Construction Lender under the Construction Loan
Documents as of the date of such payment, and
Fifth, the balance to Project Owner or whosoever is legally
entitled thereto.
(b) Notwithstanding anything to the contrary contained in this
Section 7.2, Project Lender shall not be entitled to receive any distribution of
Conversion Proceeds described in Section 7.2(a) pursuant to paragraph "First"
thereof if, at the time of such distribution, Project Lender has previously
delivered to Buyer a Succession Undertaking pursuant to Section 4.1(b) or 4.2(b)
with respect to the Seller's Default referred to in Section 7.1(b) and Project
Lender shall have defaulted in the performance of any of its obligations
thereunder; provided, however, that Project Lender shall be entitled to receive
-------- -------
any such distribution to which it would otherwise be entitled pursuant to
paragraph "Fifth" of Section 7.2(a).
(c) Notwithstanding anything to the contrary contained in this
Section 7.2,
(i) Lessor shall not be entitled to receive any distribution of
Conversion Proceeds described in Section 7.2(a) pursuant to paragraph
"Second" thereof unless at the time of such distribution (A) Lessor
has an interest in the Project and (B) either (1) the Lease is in
effect or the Project is being operated by or is in the possession of
a Person other than Lessor or an Affiliate of Lessor pursuant to an
Operating Agreement between Lessor and an Independent Operator or (2)
no Succession Undertaking has been delivered by Lessor to Buyer
pursuant to Section 4.1(b) or 4.2(b) with respect to the Seller's
Default referred to in Section 7.1(b) or, if a Succession Undertaking
has been delivered to Buyer pursuant to Section 4.1(b) and clause (1)
above does not apply, either the time within which Lessor may revoke
such Succession Undertaking pursuant to Section 4.1(f) has not expired
or such Succession Undertaking has been revoked pursuant to Section
4.1(f); and
(ii) in the event there are any liens, charges or encumbrances
on the Project on a parity with or junior to the lien of the Buyer
Mortgage at the time of any distribution of Conversion Proceeds
described in this
E-42
Section 7.2(a), the amount of any such Conversion Proceeds to be paid
and applied to Lessor pursuant to paragraph "Second" of Section 7.2(a)
shall be reduced by an amount equal to the amount of the Conversion
Proceeds that would have been disbursed for application to the payment
of the obligations secured thereby absent this Agreement,
notwithstanding anything to the contrary at law, in equity or
otherwise.
ARTICLE 8
Miscellaneous
Section 8.1. Determination of Encumbered Value. The Encumbered Value
---------------------------------
of the Project shall be determined by mutual agreement of Buyer and either
Construction Lender (if there shall be indebtedness outstanding under the
Construction Loan Agreement) or Lessor (if the indebtedness outstanding under
the Construction Loan Agreement is paid in full) within 20 days after any sale
of the Project pursuant to Section 5.3(b) or 6.4 or, in the case of any
distribution pursuant to Section 7.2 requiring such a determination, within 20
days after either party receives notice of any proposed distribution pursuant
thereto, or, failing such agreement, by an appraisal conducted in the following
manner: The party desiring such appraisal may serve notice on the other party
appointing a person who is a duly qualified engineering and management
consultant having not less than 10 years experience in the appraisal of electric
generating plants similar in size and capacity to the Project, and the other
party within 10 days after service of such notice shall appoint, by notice to
the first party, a person having similar qualifications to act as appraiser on
its behalf. If the other party fails to notify the first party of the
appointment of the second appraiser within said period of time, the second
appraiser shall be chosen in the same manner as hereinafter provided for the
appointment of a third appraiser where the first two appraisers are unable to
agree upon said appointment. If the appraisers so designated are unable to agree
as to such value within 30 days after the designation of the second appraiser,
they shall appoint a third appraiser having similar qualifications. If such two
appraisers are unable to agree on such third appraiser within 10 days after the
expiration of such 30 day period, the third appraiser shall be selected by both
parties within 10 days thereafter. If the parties do not so agree within such
period of time, either party may apply to the Court of Common Pleas of Allegheny
County, Pennsylvania, for the appointment of such third appraiser and the other
party shall not raise any objection as to the court's full power and
jurisdiction to entertain the application and make the appointment. In the event
of the failure, refusal or inability to act of any appraiser, his successor
shall be appointed within 10 days by the party which originally appointed him
(or in the event of such party's failure so to do, or in the case of the third
appraiser,
E-43
his successor shall be appointed in the manner hereinbefore provided). The
decision of any two of the appraisers so designated shall be conclusive and
binding upon the parties. The proceedings of the appraisers so designated shall
be conducted in compliance with the rules of the American Arbitration
Association. If two of the appraisers so designated are unable to agree as to
such value within 30 days after the designation of the third appraiser, either
party may apply to the Court of Common Pleas of Allegheny County, Pennsylvania,
for the determination of such value, and neither party shall raise any objection
as to the court's full power and jurisdiction to entertain the application and
determine such value. Each party shall pay the fees and expenses of the
appraiser appointed by such party and the fees and expenses of the third
appraiser shall be borne equally by the parties.
Section 8.2. Notices. All notices or other communications
-------
(collectively, "notices") which are required or permitted hereunder to be given
to any party shall be in writing and shall be deemed sufficiently given if
delivered personally or by registered or certified mail, postage prepaid, or
tested telex, (a) if to any party hereto, to the address of such party specified
above and, in the case of notice to Buyer, with a copy to Allegheny Power
Service Corporation, 800 Cabin Hill Drive, Greensburg, Pennsylvania 15601,
Attention: Legal Department; (b) if to Lessor, to the address of Lessor
specified in the Lease, with a copy to ____; and (c) if to Permanent Lender, to
the address of Permanent Lender specified in or pursuant to the Participation
Agreement. Any party may at any time change its address for notices by giving
notice of such change, as aforesaid, to the other parties. A notice shall be
deemed to have been given as of the date personally delivered or sent by telex
or, if mailed, three days after mailing in accordance with this Section
8.2.
Section 8.3. Amendments to Operative Documents. (a) Lessor shall not
---------------------------------
amend or consent to any amendment of the Lease so as to
(i) shorten or extend the stated time of payment of rent or
any other sums payable to Lessor under the Lease, or extend the stated
term of the Lease (including any renewal options);
(ii) change the method of computing Lessor's Cost, Lessor's Net
Economic Return or the Stipulated Loss Value specified in the Lease,
(iii) increase the rent, the Stipulated Loss Value or any other
sums payable to Lessor under the Lease (except any adjustments thereto
expressly provided for in the Original Lease or in the Participation
Agreement solely to maintain Lessor's Net Economic Return) or
E-44
increase Lessor's Net Economic Return (as anticipated by ____ on the
date this Agreement is executed), or
(iv) otherwise materially and adversely affect the rights of
Buyer under Buyer's Documents and this Agreement;
provided, however, that if (A) a Lease Default exists, (B) it is necessary to
- -------- -------
avoid a Lease Default, or (C) Lessor enters into a new Lease following any
Succession to Lessee's interest in the Project, the rent under the Lease may
be increased to an amount not exceeding, as of any rental payment date, the
amount specified in Exhibit C hereto and the Stipulated Loss Value may be
appropriately adjusted in the manner specified in the Participation Agreement
based on such increase in rent. In no event shall the rent under the Lease
(including the Original Lease) exceed the amount specified in Exhibit C hereto
nor shall the Stipulated Loss Value exceed the amount specified in the
definition of such term in Section 1.1.
(b) Project Lender shall not amend or consent to any amendment of any
of the Project Loan Documents so as to
(i) shorten or extend the stated time of payment of the
principal of or interest on, or any other sums payable in respect of,
the indebtedness outstanding under the Project Loan Documents,
(ii) increase the rate of interest payable on the
indebtedness outstanding under the Project Loan Documents,
(iii) increase the amount of principal of or other sums
payable in respect of the indebtedness outstanding or committed to be
advanced under the Project Loan Documents, or
(iv) otherwise materially and adversely affect the rights
of Buyer under Buyer's Documents and this Agreement;
provided, however, that if a Construction Loan Default exists, the
--------- -------
principal amount of the indebtedness outstanding under the Construction Loan
Documents may be increased to an amount not exceeding $__________, or if (A) a
Permanent Loan Default exists, (B) it is necessary to avoid a Permanent Loan
Default, or (C) Permanent Lender becomes the holder of any indebtedness secured
by a lien on and security interest in the interest of Project Owner's Successor
in the Project following any Succession to Project Owner's interest in the
Project, the amount of any installments of principal of and interest on such
indebtedness may be increased to an amount not exceeding, as of any payment
date, the amount specified in Exhibit C hereto.
E-45
(c) Neither Construction Lender, Lessor, Permanent Lender nor Seller
shall amend or consent to any amendment of any Operative Document so as to
materially and adversely affect the rights of Buyer under Buyer's Documents and
this Agreement.
(d) Buyer shall not amend or consent to any amendment of any of
Buyer's Documents that would materially and adversely affect the rights of
Construction Lender, Lessor or Permanent Lender under the Construction Loan
Documents, the Lease or the Permanent Loan Documents, as the case may be, and
this Agreement.
Section 8.4. Relative Priorities. The relative priorities of the
-------------------
liens of the Construction Mortgage or the Trust Indenture, as the case may be,
and the Buyer Mortgage shall, notwithstanding any rights Project Lender or Buyer
may have at law, in equity or otherwise absent this Agreement, be determined
solely by application of the provisions of this Agreement.
Section 8.5. Termination of Purchase Agreement. If Seller or any
---------------------------------
Financing Party shall be entitled and shall elect to terminate the Purchase
Agreement or to effect a Succession to Project Owner's interest in the Project
free and clear of Buyer's Documents pursuant to Section 6.4 of the Purchase
Agreement, Section 5.5 or 6.3(c) of this Agreement or otherwise, Seller or such
Financing Party, as the case may be, shall agree or cause any Successor to
Project Owner's interest in the Project as a result of such Succession to agree,
pursuant to an instrument in form and substance reasonably satisfactory to Buyer
and on behalf of itself and its successors and assigns, and any other Successor
to Project Owner's interest shall be deemed to have agreed, that if any electric
energy thereafter generated by the Project is sold to Buyer, pursuant to PURPA
or otherwise, Buyer shall not be obligated to pay for such energy at a rate per
kilowatthour greater than the price specified in Section 1.2 of the Purchase
Agreement; provided, however, that if no Event of Default as to Buyer exists at
-------- ------
the time of such termination, Buyer may pay for such energy at a rate per
kilowatthour equal to the lesser of (a) the price specified in Section 1.2 of
the Purchase Agreement or (b) the sum of the Variable Energy Cost Rate and 95%
of the applicable weekly demand charge (expressed in cents per kilowatthour), as
determined by Buyer in its reasonable discretion, specified from time to time in
Buyer's short-term tariff filed with the FERC. If any such electric energy is
not sold to Buyer, Buyer shall transmit Project Energy from the Interconnection
to any electric utility, municipality or other entity interconnected with Buyer
(other than any such entities then being supplied energy as a part of APS
Demand) as Seller, such Financing Party or such Successor may designate, to the
extent sufficient transmission capacity is available and to the extent such
transmission is in compliance with the interconnection standards set forth in
Section 35 of the APS Engineering Manual, and is consistent with the operating
specifications set forth in
E-46
the Operations Coordination Agreement, and is consistent with APS Demand,
whenever arising, Buyer's other third party transmission arrangements, whenever
arising, and Buyer's service obligations under Pennsylvania and Federal law; any
such transmission pursuant to this Section in any event to be provided under
rate and service conditions similar to those applicable to Buyer's other third-
party transmission arrangements, whenever arising, or under such other rates and
conditions as may be reasonable under the circumstances, subject to the
approval, if any be required, of all regulatory agencies having jurisdiction
over such transmission transactions.
Section 8.6. No Amendments, Etc. This Agreement may not be modified,
------------------
amended, terminated or discharged, nor any provisions hereof waived, except by
an agreement in writing signed by each of the parties against which enforcement
of any such modification, amendment, termination, discharge or waiver is sought
Section 8.7. Further Assurances. Each of the parties hereto shall
------------------
take all such further action, and shall execute and deliver all such further
documents or instruments, as any other party hereto may reasonably request in
order to carry out the intent of this Agreement; provided, however, that no
--------- -------
action shall be requested of any party by any other party under this Section,
and no party shall take any such action, if such action would materially and
adversely affect the rights of any other party under the Operative Documents and
this Agreement.
Section 8.8. Term. This Agreement shall continue in effect until all
----
of Seller's obligations under Buyer's Documents shall have been fully performed
and discharged or the Purchase Agreement shall have been sooner terminated in
accordance with its terms; provided, however, that any provisions of this
--------- -------
Agreement applicable to any such termination shall survive such termination.
When all of Seller's obligations under Buyer's Documents and this Agreement
shall have been fully performed and discharged, and all provisions of this
Agreement inuring to the benefit of Buyer shall have been complied with, or, in
the event the Project is sold free and clear of Buyer's Documents pursuant to
Section 5.3(b), 5.5 or 6.3(c), when Buyer has received the Net Proceeds to which
it is entitled pursuant to such Section or by law, Buyer shall, if requested by
Project Owner or any Successor to Project Owner's S interest in the Project or
if required by law, execute and deliver to Project Owner or such Successor an
instrument, in form for recording, discharging the lien of the Buyer Mortgage.
Section 8.9. Successors and Assigns. The covenants and agreements
----------------------
contained herein shall constitute covenants running with the land and shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns.
E-47
Section 8.10. Headings. The introductory captions to the sections
--------
hereof are for the convenience of the parties and are not a part of this
Agreement, and shall not be used in the interpretation of any provision hereof.
Section 8.11. Severability. If any term or provision of this
------------
Agreement or the application thereof to any Person, entity or circumstance shall
to any extent be invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to Persons, entities or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law
Section 8.12. Immunities. (a) Notwithstanding anything to the
----------
contrary contained in this Agreement, all and each of the undertakings and
agreements herein made on the part of Owner Trustee are made and intended not as
personal undertakings and agreements by Owner Trustee or for the purpose or with
the intention of binding it personally but are made and intended for the purpose
of binding only the trust estate under the Owner Trust Agreement, and this
Agreement is executed and delivered by Owner Trustee solely in the exercise of
the powers expressly conferred upon it as trustee under the Owner Trust
Agreement; and no personal liability or responsibility is assumed hereunder by
or shall at any time be enforceable against Owner Trustee or its successor in
trust or ____ on account of any undertaking or agreement hereunder of Owner
Trustee, either expressed or implied, all such personal liability, if any, being
expressly waived by each party hereto and by all persons claiming by, through or
under any such party; provided, however, that Owner Trustee or its successor in
--------- -------
trust, as applicable, shall be personally liable in a proper action for damages
for its own gross negligence or willful misconduct.
(b) Notwithstanding anything to the contrary contained in this
Agreement, all and each of the undertakings and agreements herein made on the
part of Indenture Trustee are made and intended not as personal undertakings and
agreements by Indenture Trustee or for the purpose or with the intention of
binding it personally but are made and intended for the purpose of binding only
the trust estate under the Trust Indenture, and this Agreement is executed and
delivered by Indenture Trustee solely in the exercise of the powers expressly
conferred upon it as Trustee under the Trust Indenture; and no personal
liability or responsibility is assumed hereunder by or shall at any time be
enforceable against Indenture Trustee or its successor in trust or the
Noteholders on account of any undertaking or agreement hereunder of Indenture
Trustee, either expressed or implied, all such personal liability, if any, being
expressly waived by each party hereto and by all persons claiming by, through or
under any such party; provided, however, that Indenture Trustee or its successor
-------- -------
in trust, as
E-48
applicable, shall be personally liable in a proper action for damages for its
own gross negligence or willful misconduct.
Section 8.13. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each such counterpart shall be deemed to be an
original instrument; but all such counterparts together shall constitute but one
agreement.
Section 8.14. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
[SEAL] WEST PENN POWER COMPANY
Attest:
__________________________________ By____________________________________
Secretary President
[SEAL] MILESBURG ENERGY, INC.
Attest:
__________________________________ By____________________________________
[SEAL] [Construction Lender/Owner
Attest: Participant]
__________________________________ By____________________________________
[SEAL] [Owner Trustee]
Attest:
__________________________________ By____________________________________
[SEAL] [Permanent Lender]
Attest:
__________________________________ By____________________________________
[SEAL] [Indenture Trustee]
Attest:
__________________________________ By____________________________________
E-49
STATE OF ____________________ )
) ss:
COUNTY OF ___________________ )
On this, the ____ day of _______________, 1987, before me, a Notary
Public, the undersigned officer, personally appeared ____________________, who
acknowledged himself to be the __________________ of WEST PENN POWER COMPANY, a
Pennsylvania corporation, and that he as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
Given under my hand this ____ day of _____________________, 1986.
__________________________________
[SEAL]
My commission expires:
E-50
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
On this, the ____ day of ________________, 1987, before me, a Notary
Public, the undersigned officer, personally appeared _______________, who
acknowledged himself to be the ____________ of MILESBURG ENERGY, INC., a
__________________ corporation, and that he as such officer, being authorized to
do so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
Given under my hand this ____ day of_________________________ 1986.
____________________________________
[SEAL]
My commission expires:
E-51
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
On this the ____ day of ________________ 1987, before me, a Notary Public, the
undersigned officer, personally appeared ___________________________, who
acknowledged himself to be the ________________________ of [Construction
------------
Lender/Owner Participant], a _____________ corporation, and that he as such
- -------------------------
officer, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by himself as
such officer.
Given under my hand this ___ day of ___________________________,
1986.
______________________________________
[SEAL]
My commission expires:
E-52
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
On this, the ____ day of _________________ , 1987, before me, a Notary
Public, the undersigned officer, personally appeared ________________________
who acknowledged himself to be the _____________________ of [Owner Trustee], a
--------------
___________ corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
Given under my hand this ___ day of _______________________________, 1986.
___________________________________________
[SEAL]
My commission expires:
E-53
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
On this, the ___ day of _________________, 1987, before me, a Notary
Public, the undersigned officer, personally appeared ________________________,
who acknowledged himself to be the ______________________ of [Permanent
---------
Lender], a _________________ corporation, and that he as such officer, being
- ------
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
Given under my hand this ___ day of _____________________________________,
1986.
________________________________________________
[SEAL]
My commission expires:
E-54
STATE OF __________________ )
) ss:
COUNTY OF _________________ )
On this, the ____ day of _________________, 1987, before me, a Notary
Public, the undersigned officer, personally appeared _______________, who
acknowledged himself to be the ______________ of [Indenture Trustee],
-----------------
a ________________ corporation, and that he as such officer, being authorized
to do so, executed the foregoing instrument for the purposes therein contained
by signing the name of the corporation by himself as such officer.
Given under my hand this ___ day of ___________________________________,
1986.
______________________________________________
[SEAL]
My commission expires:
E-55
EXHIBIT A
Legal Description of Project Site
---------------------------------
[metes, bounds and title reference description of Site (Schedule I of
the Mortgage) to be added]
EXHIBIT B
Schedule of Stipulated Loss Value
---------------------------------
If no Lease is in effect as of any time of determination, Stipulated
Loss Value shall be the product of Lessor's Cost multiplied by the percentage
set forth in Column A opposite the semi-annual period in which such
determination is made; provided, however, that if the Permanent Notes are not
--------- -------
issued in connection with the execution and delivery of the Original Lease, the
percentage set forth in Column B shall be used for such calculation.
Semi-Annual Period
After Commencement
Date In Which
Determination Is Made Column A Column B
- --------------------- -------- --------
1 % %
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
EXHIBIT C
Schedule of Maximum Semi-Annual Rent
and Debt Service
--------------------------------------
Semi -Annual
Payments
Year ($000)
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1 $
2
3
4
5
6
7
8
9
10
11
12
13
14
15