EXHIBIT 10.32
EXECUTION COPY
--------------------------------------------------------------------------------
AGREEMENT
FOR
ENGINEERING, PROCUREMENT AND
CONSTRUCTION SERVICES
BETWEEN
PROBEX WELLSVILLE, L.P.
AS OWNER
AND
PETROFAC LLC
AS CONTRACTOR
DATED: APRIL 11, 2002
CONFIDENTIAL
--------------------------------------------------------------------------------
EXECUTION COPY
TABLE OF CONTENTS
ARTICLE 1. GENERAL PROVISIONS ............................................... 1
1.1 Turnkey Obligation of Contractor ................................... 1
1.2 Owner Not Responsible For Acts of Contractor ....................... 1
ARTICLE 2. OWNER'S RESPONSIBILITIES ......................................... 2
2.1 Site ............................................................... 2
2.2 Owner Governmental Approvals ....................................... 2
2.3 Operations Personnel ............................................... 2
2.4 Front End Feedstock ................................................ 2
2.5 Payment to Contractor .............................................. 2
2.6 Construction Utilities ............................................. 2
2.7 Hazardous Wastes or Materials ...................................... 2
ARTICLE 3. CONTRACTOR'S RESPONSIBILITIES .................................... 3
3.1 Subcontractors and Agents .......................................... 3
3.2 Scope of the Work .................................................. 3
3.3 Standard of Performance ............................................ 6
3.4 Contractor Governmental Approvals .................................. 7
3.5 Avoidance of Labor-Related Delays .................................. 7
3.6 Hazardous Wastes or Materials ...................................... 7
3.7 Liens .............................................................. 7
3.8 Cooperation with Independent Engineer .............................. 8
3.9 Cooperation in Financing ........................................... 8
3.10 Cooperation with Technology Facility Provider ...................... 9
3.11 Publicity by Contractor ............................................ 9
3.12 Accounts and Records ............................................... 9
3.13 Cooperation and Coordination ....................................... 9
3.14 Compliance with Governmental Approvals ............................. 9
3.15 Monthly Status Meetings ............................................ 9
3.16 Third Party Notices ................................................ 9
3.17 Office Facilities .................................................. 10
3.18 Operating Manuals .................................................. 10
ARTICLE 4. CHANGES TO THE WORK PROGRAM ...................................... 10
4.1 General ............................................................ 10
4.2 Minor Modifications ................................................ 10
4.3 Estimates and Authorizations ....................................... 10
4.4 Contractor Requested Change Order .................................. 12
4.5 Schedule Adjustments ............................................... 14
4.6 Change in Contract Price ........................................... 14
4.7 General Requirements and Limitations ............................... 15
ARTICLE 5. COMMENCEMENT OF WORK ............................................. 16
5.1 Notice to Proceed .................................................. 16
i
EXECUTION COPY
5.2 Conditions for Issuance of Notice to Proceed........................ 16
ARTICLE 6. REVIEW AND INSPECTION RIGHTS...................................... 18
6.1 Right of Owner to Review Certain Documents ......................... 18
6.2 Right of Access and Oversight ...................................... 18
6.3 Observation of Tests ............................................... 18
6.4 Rejection of Work................................................... 18
6.5 No Acceptance of Work............................................... 19
ARTICLE 7. MECHANICAL COMPLETION ............................................ 19
7.1 Mechanical Completion Defined ...................................... 19
7.2 Notice of Mechanical Completion .................................... 19
7.3 Punch List. ........................................................ 20
ARTICLE 8. FACILITY TESTING, SUBSTANTIAL COMPLETION AND FINAL
COMPLETION........................................................ 20
8.1 Facility Testing ................................................... 20
8.2 Substantial Completion.............................................. 22
8.3 Final Completion ................................................... 24
8.4 Completion of Punch List ........................................... 26
8.5 Retainage Release Request .......................................... 26
ARTICLE 9. WARRANTIES RELATED TO THE WORK.................................... 27
9.1 In General.......................................................... 27
9.2 Correction of Nonconforming or Defective Work....................... 28
9.3 LIMITATION ON WARRANTIES............................................ 30
9.4 Subcontractor Warranties............................................ 30
9.5 Warranty Period. ................................................... 31
9.6 Notice.............................................................. 31
ARTICLE 10. SECURITY ........................................................ 31
10.1 Surety Bond. ....................................................... 31
10.2 Warranty Bond....................................................... 31
ARTICLE 11. CONTRACTOR COMPENSATION ......................................... 31
11.1 Contract Price...................................................... 31
11.2 Taxes............................................................... 32
ARTICLE 12. INVOICING AND PAYMENTS .......................................... 32
12.1 Payment--General. .................................................. 32
12.2 Request for Payment ................................................ 33
12.3 Failure to Pay Subcontractors ...................................... 35
12.4 Deficient Requests for Payment...................................... 35
12.5 Milestone Payments ................................................. 35
12.6 Retainage........................................................... 35
12.7 Final Payment. ..................................................... 36
12.8 Holdbacks .......................................................... 36
ii
EXECUTION COPY
12.9 Offset............................................................. 36
12.10 Contractor's Continuing Obligation to Perform ..................... 36
12.11 Application of Moneys ............................................. 37
ARTICLE 13. FORCE MAJEURE ................................................... 37
13.1 Force Majeure Event................................................ 37
13.2 Excuse from Performance for Force Majeure Event ................... 38
13.3 Burden of Proof.................................................... 38
13.4 Owner Self-Help ................................................... 38
ARTICLE 14. SUSPENSION ...................................................... 39
14.1 Owner's Right to Suspend .......................................... 39
14.2 Obligation of Contractor .......................................... 39
14.3 Contractor's Right of Suspension .................................. 40
14.4 Extension of Time.................................................. 40
14.5 Compensation of Contractor ........................................ 40
ARTICLE 15. DEFAULT AND TERMINATION.......................................... 40
15.1 Contractor Default ................................................ 40
15.2 Owner's Default Remedies Against Contractor ....................... 42
15.3 Termination by Owner for Convenience .............................. 45
15.4 Owner Default...................................................... 46
ARTICLE 16. INSURANCE........................................................ 46
16.1 Contractor Furnished Insurance..................................... 46
16.2 Owner Furnished Insurance. ........................................ 49
ARTICLE 17. TITLE AND RISK OF LOSS........................................... 52
17.1 Provision of Clear Title........................................... 52
17.2 Care, Custody and Control; Risk of Loss ........................... 52
17.3 Safe Delivery ..................................................... 52
ARTICLE 18. INDEMNIFICATION.................................................. 52
18.1 General Indemnification Obligations................................ 52
18.2 Indemnities Against Intellectual Property Infringement............. 54
18.3 Procedures......................................................... 55
18.4 Conditions......................................................... 56
ARTICLE 19. CONFIDENTIAL AND PROPRIETARY INFORMATION ........................ 56
19.1 Confidentiality ................................................... 56
19.2 EPC Data and Information........................................... 57
19.3 Inventions......................................................... 57
19.4 Licenses........................................................... 57
ARTICLE 20. ASSIGNMENT....................................................... 58
20.1 Assignment by Owner................................................ 58
20.2 Assignment by Contractor. ......................................... 58
20.3 Binding Effect..................................................... 58
iii
EXECUTION COPY
ARTICLE 21. DISPUTE RESOLUTION .............................................. 58
21.1 Resolution of Disputes Related to Failure of Process Test........... 58
21.2 Resolution of All Other Disputes.................................... 58
21.3 Other Remedies...................................................... 61
21.4 Performance During Dispute ......................................... 61
ARTICLE 22. PERFORMANCE GUARANTEES AND LIQUIDATED DAMAGES.................... 62
22.1 Schedule............................................................ 62
22.2 Performance. ....................................................... 63
22.3 Liquidated Damages Generally........................................ 63
ARTICLE 23. LIMITATION OF LIABILITY ......................................... 64
23.1 Limitation of Contractor's Liability................................ 64
23.2 Facility Performance Failures or Deficiencies After Substantial
Completion.......................................................... 65
23.3 Consequential Damages............................................... 65
ARTICLE 24. REPRESENTATIONS AND WARRANTIES................................... 66
24.1 By Contractor....................................................... 66
24.2 By Owner............................................................ 68
ARTICLE 25. REPRESENTATIVES AND NOTICES/COMMUNICATIONS ...................... 68
25.1 Designation and Function of Authorized Representatives.............. 68
25.2 Notices. ........................................................... 69
25.3 Technical Communications ........................................... 70
ARTICLE 26. MISCELLANEOUS ................................................... 70
26.1 Independent Contractor.............................................. 70
26.2 Effect of Invalid Provisions ....................................... 70
26.3 Order of Precedence................................................. 70
26.4 Survival; Time Limitation........................................... 71
26.5 Entire Agreement ................................................... 71
26.6 Modification in Writing ............................................ 71
26.7 Continuing Obligations.............................................. 71
26.8 Headings ........................................................... 71
26.9 Governing Law ...................................................... 71
26.10 Remedies Cumulative ............................................... 71
iv
EXECUTION COPY
EXHIBITS:
Exhibit A. Definitions and Rules of Usage
Exhibit B. Scope Document
Exhibit C. Governmental Approvals
Exhibit D. Approved Vendors
Exhibit E. Project Milestone Payment Schedule
Exhibit F. Project Cash Flow Schedule
Exhibit G. Performance Guarantees
Exhibit H. Site Access Plan
Exhibit I. Criteria for Mechanical Completion
Exhibit J. Calculation of Liquidated Damages
Exhibit K. Form of Affidavit of Notice of Commencement
Exhibit L. Change Order Form
Exhibit M. Testing and Test Procedures
Exhibit N. Forms of Contractor and Subcontractor Lien Waivers
Exhibit O. Project Schedule
Exhibit P. Separated Contract Pricing
Exhibit Q. Conditions Under Section 5.2(b)
Exhibit R. [intentionally omitted]
Exhibit S. [intentionally omitted]
Exhibit T. Training and Start-Up
v
EXECUTION COPY
AGREEMENT FOR
ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES
This AGREEMENT FOR ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES
(this "AGREEMENT") is made as of April 11, 2002 by and between PROBEX
WELLSVILLE, L.P., a Delaware limited partnership ("OWNER") and PETROFAC LLC, a
Texas limited liability company ("CONTRACTOR").
RECITALS
A. Owner requires services in connection with the design, engineering,
procurement, construction, commissioning, startup and testing of a used
oil refining facility to be located on land in the vicinity of
Wellsville, Ohio, and desires to engage Contractor to perform such
services under the terms and conditions of this Agreement.
B. Contractor represents it has the necessary personnel, experience,
competence and legal right to perform such design, engineering,
procurement, construction, commissioning, startup and testing of such
facility as herein provided and desires to undertake such performance
and assistance under the terms and conditions of this Agreement.
C. Contractor acknowledges that Owner will seek to finance the Facility on
a non-recourse basis.
D. Contractor acknowledges that Owner has obtained the Technology Cover
Facility, and Contractor has agreed to enter the Coordination Agreement
in connection therewith in order to facilitate, as applicable,
determination of responsibility for failures in the performance of the
Facility, if any.
E. The Parties desire to set forth in this Agreement their agreements
related to the design, engineering, procurement, construction,
commissioning, startup and testing of the complete Facility.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the Parties, intending to be legally bound, agree
as follows:
ARTICLE 1. GENERAL PROVISIONS
1.1 TURNKEY OBLIGATION OF CONTRACTOR. Contractor's obligation under
this Agreement is to perform the Work on a fixed-price, lump-sum, date certain
basis and provide Owner with the Facility and its components constructed,
installed, and completed in accordance with the Scope Document and Prudent
Industry Practices, and to achieve the Performance Guarantees, as more fully
provided in this Agreement.
1.2 OWNER NOT RESPONSIBLE FOR ACTS OF CONTRACTOR. Owner, the
Independent Engineer, the Technology Facility Provider in connection with the
Technology Cover Facility, any Lender in connection with any Financing
Agreement, and any of their respective agents, shall not be responsible for and
shall not have control over, charge of, or approval rights
1
EXECUTION COPY
regarding the EPC (engineering, procurement and construction) means, methods,
techniques, sequences or procedures, or safety precautions and programs of
Contractor, any Subcontractor, or any of their respective agents or employees,
in connection with the Work, and shall not be responsible for the failure, or
the acts or omissions, of any of such Persons in connection with the performance
of the Work. Neither inspection nor failure to inspect by Owner, the Independent
Engineer, the Technology Facility Provider or any Lender shall be a waiver of
the obligations of Contractor, any Subcontractor, or any of their respective
agents or employees, or be construed as approval or acceptance of the Work or
any part thereof.
ARTICLE 2. OWNER'S RESPONSIBILITIES
2.1 SITE. Owner shall furnish the Site, and assure rights of ingress
and egress to and from the Site for Contractor and its Subcontractors for the
performance of the Work to the extent specified in the Site Access Plan attached
as Exhibit H.
2.2 OWNER GOVERNMENTAL APPROVALS. Owner shall secure those Governmental
Approvals specifically indicated to be obtained by Owner in Exhibit C. Upon
notice to Owner of not less than five (5) Business Days, Owner shall exercise
commercially reasonable efforts to assist Contractor in such manner as
Contractor reasonably may request in obtaining Governmental Approvals required
to be obtained by Contractor hereunder.
2.3 OPERATIONS PERSONNEL. Owner shall provide, or cause Operator to
provide, operations personnel as described in Exhibit T, for the purposes set
forth therein.
2.4 FRONT END FEEDSTOCK. Owner shall provide Front End Feedstock in
connection with the testing and commissioning of the Facility as set forth in
Exhibit M.
2.5 PAYMENT TO CONTRACTOR. Owner shall make payments to Contractor
during the progress of the Work as set forth in this Agreement. The lump-sum
price for the Work is divided into separately stated amounts of incorporated
materials and skill and labor in order to cause this Agreement to be a separated
contract as permitted in the Texas Tax Code. Prices for the separated portions
of this Agreement are as set forth in Exhibit P.
2.6 CONSTRUCTION UTILITIES. Owner shall make arrangements for the
supply of, and shall supply at no cost to Contractor, all utilities (other than
telephone services) required during construction, commissioning, startup, and
Facility testing until Substantial Completion.
2.7 HAZARDOUS WASTES OR MATERIALS. Owner shall be responsible for and
shall control any special handling, removal, transportation or disposal required
pursuant to a Governmental Rule with respect to any Hazardous Wastes or
Materials that are (a) existing at the Site prior to the commencement of the
Work, or (b) transported to the Site by Owner or by Owner's contractors (other
than Contractor or its Subcontractors). Owner shall not be responsible for and
nothing herein shall oblige Owner to handle, remove, transport or dispose of any
Hazardous Wastes or Materials that are the responsibility of Contractor under
Section 3.6. Owner shall provide the Environmental Reports to Contractor.
2
EXECUTION COPY
ARTICLE 3. CONTRACTOR'S RESPONSIBILITIES
3.1 SUBCONTRACTORS AND AGENTS.
3.1.1 OWNER'S APPROVAL. Contractor may subcontract portions of
the Work to any Person; provided, however, that Contractor, without
Owner's prior approval (such approval to be provided only with the
prior concurrence of the Independent Engineer), may subcontract only
with (i) any Subcontractor identified on the Approved Vendors List
attached as Exhibit D for the supply or service for which such
Subcontractor specifically has been approved as specified in Exhibit D,
or (ii) with any Subcontractor not identified on the Approved Vendors
List, or for a supply or service to be provided by a Subcontractor not
specifically approved as a provider of such supply or service in
Exhibit D, or for a supply or service not specified in Exhibit D, where
the value of the supplies and/or services does not exceed two hundred
fifty thousand dollars ($250,000). Contractor shall notify Owner and
Independent Engineer if Contractor wants to be able to enter any
subcontract other than one permitted without Owner's approval in
accordance with the foregoing sentence. Contractor shall provide Owner
and Independent Engineer with a reasonable time, in any event not less
than ten (10) Business Days, to disapprove such Subcontractor for
reasonable cause. In the event Owner and Independent Engineer fail to
respond within the period specified in Contractor's notice,
Contractor's request shall be deemed to have been approved.
3.1.2 SUBCONTRACTS ASSIGNABLE. Each subcontract covering the
scopes of supply set forth in the Approved Vendors List shall provide
that such subcontract is assignable to Owner and its assigns upon
Owner's and its assign's (if applicable) written request. Owner or its
assign may request such assignment at any time when permitted by this
Agreement.
3.1.3 CONTRACTOR'S RESPONSIBILITY. Contractor shall be
responsible for entering into, and shall be solely responsible for its
obligations under, all contracts with Subcontractors who will be
performing portions of the Work. Notwithstanding any agreement with any
Subcontractor, Contractor shall be solely responsible for the Work and
the performance or non-performance of its Subcontractors with respect
to the Work, including without limitation compliance by each
Subcontractor and its personnel with Governmental Rules and
Governmental Approvals. Contractor shall keep Owner apprised of any
material disputes with any Subcontractor; provided, however, that the
Parties agree Contractor is an independent contractor with respect to
performance of the Work and Contractor shall have sole responsibility
to resolve all such disputes, without interference by Owner.
3.1.4 SUBCONTRACTOR WARRANTIES. Contractor shall obtain
warranties from Subcontractors as provided in Section 9.4.
3.1.5 WARRANTY ADMINISTRATION. Contractor shall perform its
warranty obligations under this Agreement notwithstanding any dispute
with, or failure to perform by, any Subcontractor.
3.2 SCOPE OF THE WORK. The scope of the Work shall include the scope
set forth in the Scope Document, and any additional work that can be reasonably
inferred therefrom and from
3
EXECUTION COPY
this Agreement and Prudent Industry Practices as being within the scope of the
Work, all as required to supply a Facility capable of achieving the Front End
Performance Guarantee and the Back End Performance Guarantee and of operating
safely in conformance with Governmental Approvals and Governmental Rules. The
scope of the Work will require that Contractor perform all work and services
necessary for the design, engineering, procurement, construction, testing and
commissioning of the Facility (including, without limitation, the supply,
transportation, importation, and installation of all equipment, machinery
supplies, materials, tools and components thereof), and shall include, without
limitation, the obligations described below.
3.2.1 DESIGN AND ENGINEERING. Contractor shall perform design
and engineering of the Facility as set forth in the Scope Document in
accordance with applicable Governmental Rules and Governmental
Approvals. Engineering shall be based upon applicable Prudent Industry
Practices, and upon the engineering criteria, design criteria, and
other information contained in the Scope Document. Contractor's
engineering services shall include the preparation of drawings, "as
built" drawings, specifications, schedules, calculations, and
documents, and coordination with the engineering efforts of
Subcontractors. As an element of the engineering Work, Contractor shall
review, confirm the accuracy and completeness of and, if required,
supplement existing design basis and related technical information as
included in the Scope Document or provided by Owner in connection
therewith, and shall assume responsibility therefor. Drawings and
documents shall be prepared in the format as detailed in the Scope
Document. For the avoidance of doubt, notwithstanding any other
provision of this Agreement to the contrary, Contractor acknowledges
and agrees that, in order to achieve Substantial Completion (but not to
have the Facility satisfy the Process Tests), Contractor has full and
sole responsibility for the design and the design basis for the
Facility and any related technical information, including without
limitation any information set forth in section 3 of Book 1 of the
Scope Document and any other provision cross referenced in such section
3 of Book 1 of the Scope Document and any other information relating to
the Pro Terra(TM) Process or the design or design basis of the Facility
that may have been provided to Contractor by Owner.
3.2.2 PROCUREMENT. Contractor shall provide and procure the
supply, transportation, importation and installation of all equipment,
machinery, supplies, materials, tools and related components for the
Facility and provide and procure any equipment, material or services
for the interconnection of the Facility to electrical transmission and
distribution, water, sewage, utility or communication systems.
Contractor shall perform all inspection, expediting, quality
surveillance, and other like services required for performance of the
Work, including inspecting all materials and equipment that comprise a
portion of the Facility or that are to be used in the performance of
the Work.
3.2.3 CONSTRUCTION. Contractor shall perform the construction
for the Facility, including furnishing management, labor, equipment,
tools, temporary facilities and all other services necessary for
construction, commissioning, startup, applicable testing, and warranty
work, employing Prudent Industry Practices. The foregoing shall include
inspection, shipping, unloading, receiving, handling and warehousing
materials, supplies, commissioning spare parts, and handling customs
clearance and claims related thereto.
4
EXECUTION COPY
Construction of the Facility shall include construction of new, and
refurbishment of existing, infrastructure and equipment. Contractor
shall perform required road, bridge, electrical transmission line, or
underground pipeline modifications to allow equipment to be transported
to the Site; repair any damage to such roads and bridges caused by
Contractor or any Subcontractor; obtain Governmental Approvals (and
bonds in connection therewith) necessary to use such roads and bridges
and for making such modifications and repairs; provide and perform
necessary work to move equipment across such underground utilities on
the Site or property adjacent to the Site; and protect such utilities
from damage as a result of any construction activities. Contractor
shall provide at its own cost and expense all telephone services and
supplies used in performance of the Work, and all consumables,
chemicals and lubricants (except Front End Feedstock) for the Facility,
until the Substantial Completion Date. When construction is completed,
Contractor shall remove on a timely basis all of Contractor's
personnel, supplies, equipment, waste materials, rubbish, and temporary
facilities, except as may be needed for ongoing obligations.
3.2.4 QUALITY CONTROL, ENVIRONMENTAL, AND SAFETY PROGRAMS. In
support of its construction effort at the Site, Contractor shall
develop, implement and comply with a quality control program, a
construction safety program, and a construction environmental program.
Such programs shall include the provision of safety and emergency
apparatus, first aid personnel, equipment, training of site personnel
and Subcontractors and written procedures for the protection of
personnel, the environment and the Work including incipient stage fire
fighting, emergency response and evacuation, and fire protection
systems training. Within ninety (90) Days after the Notice to Proceed
Date, Contractor shall provide to Owner and Independent Engineer such
programs to be used by Contractor in the performance of the Work. Owner
and Independent Engineer shall have the right to review and comment on
such programs and, within fifteen (15) Days following receipt thereof,
Owner and Independent Engineer shall provide to Contractor any comments
on and required changes to such programs.
3.2.5 SITE ACCESS. Contractor shall be responsible for
constructing temporary and permanent roads on the Site. Contractor
shall use only the access routes and entrances to the Site specified
and confirmed on the Site Access Plan for ingress and egress of all
personnel, equipment, vehicles, and materials, and shall be responsible
for any damage caused to property (other than the Site) as a result of
the Work. Contractor shall maintain all roads utilized by Contractor
during the performance of the Work. Contractor may, at its own risk,
cost and expense, secure access to the Site via the Ohio River, and
Owner will provide reasonable cooperation to Contractor in such regard.
3.2.6 SITE CONDITIONS. Contractor specifically acknowledges
and accepts the Site Conditions and agrees that the Guaranteed
Substantial Completion Date shall not be extended and the Contract
Price shall not be modified, and Contractor shall not be entitled to a
Change Order, as a result of any Site Conditions. Should the Site
Conditions be at variance with the Site Conditions indicated by this
Agreement, or should unknown physical conditions below the surface of
the ground, or water, or physical or unknown conditions in an existing
structure of an unusual nature, differing in any way from those
ordinarily encountered and generally recognized as inherent in work of
the character
5
EXECUTION COPY
provided for in this Agreement, be encountered, Contractor shall not be
entitled to a Change Order and no adjustment shall be made in the
Guaranteed Substantial Completion Date or in the Contract Price, and
Contractor shall complete the Work (without any additional
reimbursement from Owner for unexpected expenses); provided, however,
that Hazardous Wastes or Materials shall be subject to the provisions
of Sections 2.7 and 3.6.
3.2.7 PARTS, SPARE PARTS AND TOOLS. Contractor shall procure,
supply, handle and warehouse parts and tools required for the Work,
including commissioning spare parts, which parts and tools and related
expenditures are included in the Contract Price. Owner shall be
responsible for the procurement, handling and storage of operational
spare parts; provided, however, that Contractor shall be responsible
for providing, as a deliverable under this Agreement, a list of vendor
recommended spare parts and tools for operation and maintenance of the
Facility (with option, exercisable by Owner through a Change Order, to
purchase such spare parts as part of Contractor's associated equipment
purchase orders); provided, further, that owner shall have no
obligation to procure or otherwise make available spare parts for use
by Contractor. Contractor shall use reasonable efforts to deliver the
list of vendor recommended operational spare parts at least ninety (90)
Days prior to the anticipated Mechanical Completion Date, but in any
event no later than the Mechanical Completion Date.
3.2.8 PRE-OPERATIONAL MATTERS.
3.2.8.1 Commissioning, Startup and Testing.
Contractor shall (i) perform Contractor responsibilities
listed in Exhibit I and Exhibit T, and (ii) undertake
necessary activities incident to commissioning and startup of
the Facility. Contractor shall be responsible for initial
fills of all lubricants and other consumables (except Front
End Feedstock) to commission, startup and test the Facility,
all as more particularly set forth in the Scope Document.
Contractor shall conduct the Performance Tests as provided in
Article 8.
3.2.8.2 Preliminary Operations and Training.
Contractor shall supervise all Facility personnel. Contractor
shall conduct a training program for Owner's operators as set
forth in the Scope Document.
3.3 STANDARD OF PERFORMANCE. Contractor shall diligently perform and
prosecute all Work and use methods and equipment that are accepted by, and in
accordance with, the terms and conditions of this Agreement, Prudent Industry
Practices, and all Governmental Approvals and Governmental Rules applicable to
the execution of the Work. Contractor shall design and install all equipment and
systems in a safe manner, and all equipment and materials supplied by Contractor
under this Agreement and the Work shall (a) be free from Defects, (b) be free
from any charge, lien, security interest or other encumbrance, (c) conform to
the standard of material and workmanship prevailing in the industry, and (d)
conform in all respects to the Scope Document, the detailed design and
engineering work and the terms of this Agreement. All equipment and materials
supplied by Contractor shall be new and of good quality if not otherwise
expressly approved by Owner in writing.
6
EXECUTION COPY
3.4 CONTRACTOR GOVERNMENTAL APPROVALS. Contractor shall secure those
Governmental Approvals specifically indicated to be obtained by Contractor in
Exhibit C. To the extent any additional Governmental Approvals not reflected in
Exhibit C are (a) necessary for performance of the Work, or (b) in connection
with any other category of activities or matters for which Contractor has been
assigned relevant Governmental Approval responsibility, as may reasonably be
inferred from Exhibit C, obtaining such Governmental Approvals shall be the
responsibility of Contractor. Contractor shall provide to Owner such assistance
as Owner may reasonably request in connection with Owner's securing of those
Governmental Approvals to be obtained by Owner.
3.5 AVOIDANCE OF LABOR-RELATED DELAYS. Contractor shall use its
reasonable efforts to minimize the risk of labor-related delays, and shall
promptly take any and all commercially reasonable steps that may be available in
connection with the resolution of violations of collective bargaining agreements
and jurisdictional disputes, including the filing of appropriate processes with
any Governmental Unit. Contractor shall notify Owner promptly of any labor
dispute that might affect the performance of the Work by Contractor or any
Subcontractor. No such labor-related delay shall excuse Contractor from
performance of its obligations except to such extent as may be specified as
constituting an event of Force Majeure.
3.6 HAZARDOUS WASTES OR MATERIALS. Contractor, at its expense and
without schedule relief, shall remove, transport and dispose of, in accordance
with applicable Governmental Rules and Governmental Approvals, any Hazardous
Wastes or Materials brought on to the Site by Contractor or any Subcontractor
and/or used, produced, created or exacerbated as part of Contractor's or any
Subcontractor's activities at the Site. Contractor shall not be responsible for:
(a) Any special handling, removal, transportation or disposal
required under a Governmental Rule with respect to any
Hazardous Wastes or Materials that are (i) existing at the
Site prior to the commencement of the Work, or (ii)
transported to the Site by Owner or by Owner's contractors
(other than Contractor or its Subcontractors); or
(b) the exacerbation of pre-existing Hazardous Wastes or
Materials, other than where such exacerbation is a result of
Contractor's (i) negligence, (ii) failure to notify Owner
within a reasonable time of any such discoveries by Contractor
or any Subcontractor or of accidental spills by Contractor or
any Subcontractor, or (iii) failure to follow Owner's
directions to avoid further exacerbation.
Contractor shall review, and shall have the right to rely on the accuracy of,
the Environmental Reports with respect to pre-existing Hazardous Wastes or
Materials.
3.7 LIENS.
3.7.1 Contesting or Discharging Liens. Contractor shall take
prompt steps to contest or discharge any lien, claim, charge,
encumbrance, security interest or other possessory or non-possessory
interest in, on or against real, tangible or intangible property in the
nature of mechanic's, labor or materialmen's liens or claims filed or
imposed against the Site or the Facility or against any tangible
personal property to be incorporated into the Facility by any
Subcontractor (collectively, "LIENS"). In order for
7
EXECUTION COPY
Contractor to contest any such Lien, Contractor shall be required to
give Notice to Owner and shall be required to either post a bond in the
amount of the Lien in form and substance reasonably satisfactory to
Owner and Lender or provide other assurances or security in form and
substance reasonably satisfactory to Owner and Lender, provided,
however, that Contractor shall be permitted to contest such Liens up to
an aggregate of two hundred fifty thousand dollars ($250,000) in value
without having to post such bond or provide other assurances or
security. If, within twenty (20) Days after Contractor has acquired
actual knowledge of a Lien, Contractor fails to discharge such Lien or
fails to contest such Lien as set forth herein, Owner shall have the
right, following five (5) Days Notice to Contractor, to discharge such
Lien and deduct the cost therefor, together with reasonable and
necessary attorney's fees, from any payments due Contractor, or to
otherwise seek indemnity. Contractor shall indemnify and hold Owner and
Lender harmless from, and defend Owner's and Lender's interests
against, any and all Liens.
3.7.2 Lender's Mortgage. Neither Contractor nor any
Subcontractor shall perform any Work on the Site until (a) Lender's
mortgage is filed for record and (b) Owner serves Contractor with a
copy of an "AFFIDAVIT OF NOTICE OF COMMENCEMENT" for the Work, a form
of which is attached hereto at Exhibit K, which has been recorded in
the Office of the Recorder of Columbiana County, Ohio. Contractor
agrees to comply with and be subject to the provisions of Chapter 1311
of the Ohio Revised Code relating to Liens.
3.8 COOPERATION WITH INDEPENDENT ENGINEER. Lender may select a
nationally recognized engineering and consulting firm to be engaged for the
purpose of providing third party monitoring of the Work on behalf of the Lender
(the "Independent Engineer"). The Independent Engineer shall provide independent
opinions with respect to the status of the Work, testing protocols and test
results, invoices submitted by Contractor, and Contractor's quality control
procedures for the Work and major components thereof. The Independent Engineer
shall be given notice by Owner of and may, at its option, attend Monthly Status
Meetings, and shall undertake such reviews and inspections and render such
concurrences as may be required to be made by the Independent Engineer under the
Financing Documents or required or permitted hereunder. Contractor shall
cooperate with the Independent Engineer, and with Owner, to the extent required
to ensure the Independent Engineer's ability to exercise its rights and
obligations as contemplated hereunder; provided, however, that the Independent
Engineer shall have no right to direct Contractor or Subcontractors or any
portion of the Work, to order any changes to the Work or to interfere with
Contractor's or any Subcontractor's progress of the Work.
3.9 COOPERATION IN FINANCING. Contractor acknowledges and accepts that
Owner will seek to finance the Facility on a non-recourse basis. Contractor
shall cooperate with Owner to take such actions, enter into such documents and
agreements, furnish such information, and provide such other documents or
assistance as may be reasonably required in relation to this Agreement or in
conjunction with any Financing Agreements and do other acts and things
reasonably necessary to assist Owner in attaining such project financing.
Contractor's risk shall not be deemed increased by any collateral assignment of
this Agreement to Lender or any subordination of Contractor's lien rights to the
security interests of Lender. Contractor agrees to execute, directly in favor of
Lender, such certificates, consents, assignments, acknowledgments,
subordinations or other documents, as may be reasonably requested by Lender in
connection
8
EXECUTION COPY
with such financing, and which are customary in financing transactions for
assets such as the Facility on a non-recourse basis; provided, however, that the
consent agreement to be executed by Contractor, Owner and Lender shall be
satisfactory in form and substance to Contractor, Owner and Lender.
3.10 COOPERATION WITH TECHNOLOGY FACILITY PROVIDER. Contractor will
enter a Coordination Agreement, and will provide such other cooperation and
coordination with the Technology Facility Provider as may be specified herein
and therein.
3.11 PUBLICITY BY CONTRACTOR. Contractor shall obtain Owner's prior
written approval, to be granted in Owner's sole and absolute discretion, of the
text of any announcement, publication, photograph, or other type of
communication concerning the Work prior to the dissemination or release of same
by Contractor or its Subcontractors.
3.12 ACCOUNTS AND RECORDS. Contractor shall furnish project information
identified in the Scope Document for purposes of establishing and maintaining
fixed asset records, including lists of equipment makes, models and serial
numbers, and instrument indices, such information to be provided in the format
specified in the Scope Document, not later than the Guaranteed Final Completion
Date.
3.13 COOPERATION AND COORDINATION. Contractor shall work in harmony at
the Site with other contractors retained by Owner, and shall cooperate with same
in a timely manner during the performance of the Work. Contractor shall provide
or make available to Owner and, as provided in this Agreement or upon request,
to any Lender, the Technology Facility Provider, insurer(s), the parties to any
other project agreement, and/or any Governmental Unit, plans, drawings,
engineering calculations and studies, bid packages and any and all other
documents associated with the Work and the Facility. Any such information shall
be provided without charge. Contractor shall provide Owner with advance notice
of any significant scheduled meeting with any Governmental Unit and shall
provide Owner with a reasonable opportunity to attend any such meeting where
practicable. Contractor and Owner shall promptly notify the other Party when a
representative of a Governmental Unit is present on the Site.
3.14 COMPLIANCE WITH GOVERNMENTAL APPROVALS. Contractor shall engineer
and construct the Facility so that, if properly operated and maintained, the
Facility will be in compliance with applicable Governmental Approvals.
3.15 MONTHLY STATUS MEETINGS. Contractor shall schedule, attend and
participate in periodic meetings with Owner and Lender at the Site, or at any
other appropriate location determined by Owner, for the purpose of reviewing the
progress of the Work. In furtherance of such obligation, Contractor shall meet
with Owner at least once each calendar month (the "MONTHLY STATUS MEETING") to
review the Progress Report submitted with a Request for Payment as provided in
Section 12.2.4.
3.16 THIRD PARTY NOTICES. Contractor shall provide Owner with copies of
all notices to and other communications with any Governmental Units and
insurance companies, including notices with respect to accidents that occur at
the Site, and thereafter provide such written reports relating thereto as Owner
may reasonably request.
9
EXECUTION COPY
3.17 OFFICE FACILITIES. Contractor shall supply office facilities at
the Site for Owner's representatives.
3.18 OPERATING MANUALS. Contractor shall prepare or cause to be
prepared and shall furnish to Owner manufacturer's drawings and data, vendor
manuals and operating manuals as specified in this Agreement.
ARTICLE 4. CHANGES TO THE WORK PROGRAM
4.1 GENERAL. Owner shall have the right to make changes in the Work
(whether such changes be modifications, alterations, additions, or deletions),
in the method or manner of performance of the Work, or in the services to be
furnished by Owner, and the right to direct acceleration of, or temporarily
suspend, the Work. All such changes shall be made in accordance with this
Article 4 and shall be considered, for all purposes of this Agreement, as part
of the Work and shall not affect the validity of this Agreement. Subject to the
provisions of Section 14.1.2, Owner may suspend the Work by Notice to Contractor
pending Owner's decision whether to implement a change.
4.2 MINOR MODIFICATIONS. Minor modifications or adjustments that
involve no price or time adjustment, do not affect the Milestone Payment Plan,
and do not affect the Work to be provided by Contractor (or the performance
thereof) as specified in this Agreement may be made by Contractor and shall not
require a Change Order; provided, however, that Contractor shall notify Owner
thereof in writing and Owner shall provide its prior written consent (which may
be withheld in its reasonable discretion) prior to Contractor's effecting any
such modification.
4.3 ESTIMATES AND AUTHORIZATIONS.
4.3.1 CONTRACTOR'S ESTIMATE. In the event that Owner
contemplates making a change in the Work, Owner shall advise Contractor
of same by issuing a Change Notice, and Owner and Contractor shall then
promptly consult concerning the cost and impact on the Project Schedule
and the Performance Guarantees of implementing the proposed change,
subject to Section 4.6.2.4. Following such consultation, Owner may
request and Contractor shall, within five (5) Business Days after
request by Owner or such additional period of time that Contractor
reasonably requires to complete such estimate, prepare and deliver to
Owner a detailed written estimate relating to the contemplated change,
including:
(a) the proposed change in the Contract Price resulting
from such change in accordance with the provisions of
Section 4.6;
(b) subject to the provisions of Section 4.5, the effect
such change could be expected to have on the
Guaranteed Substantial Completion Date or any
schedule;
(c) the potential effect of such change on Contractor's
ability to comply with any of its obligations
hereunder, including warranties and the Performance
10
EXECUTION COPY
Guarantees;
(d) suggested changes to the Milestone Payment Plan which
are made necessary by such changes;
(e) documentation reasonably sufficient to enable Owner
and the Independent Engineer to determine the factors
necessitating a Change Order and the impact which the
Change Order is likely to have on the Contract Price,
the Project Schedule, the Performance Guarantees and
any other provision of this Agreement affected
thereby; and
(f) such other information which Owner and the
Independent Engineer may reasonably request in
connection with such Change Order in order to
determine the factors and impacts identified in
Section 4.3.1(e) (including, with respect to Change
Orders involving price changes, Contractor's pricing
information relating to the basis and rationale for
such change, but not including Contractor's internal
cost information).
4.3.2 OWNER'S REVIEW. Owner shall review Contractor's estimate with
Contractor for the purpose of agreeing on the matters set forth therein,
including a mutually acceptable cost adjustment, if any, if the proposed change
requires a modification of the Work. Owner shall have the right to review, and
Contractor shall provide, supporting detail for Contractor's calculated
increased costs, savings or costs not incurred, in each case, due to such
changes in the Work.
4.3.3 OWNER'S DIRECTIVES. Where Owner has issued a Change Notice in the
case of an Owner-initiated change as provided in Section 4.3.1, if (a) Owner and
Contractor are unable to agree on the matters described in an estimate and the
change in the Work reflected in such estimate will not affect the design or
fabrication of any equipment or (b) Owner reasonably believes that it is in the
best interests of the Facility to implement the proposed change in the Work
prior to receiving Contractor's estimate (and the proposed change in the Work
will not affect the design or fabrication of any equipment), then, in either
case, Owner, with the concurrence of the Independent Engineer, shall have the
right to direct Contractor by Notice to proceed in accordance with the proposed
change and Contractor shall perform the Work as modified by the proposed change
(an "OWNER DIRECTIVE"). In the event that Owner issues an Owner Directive, then
the Contract Price and the Project Schedule shall be modified to the extent
appropriate, consistent with the provisions of this Article 4, and Owner shall
pay, prior to the start of any Work modified by the Owner Directive, seventy
five percent (75%) of any Contractor-proposed increase in the Contract Price or,
in the event the Owner Directive is issued before the estimate in which such
proposal is included is complete, Owner shall pay Contractor seventy five
percent (75%) of any Contractor-proposed increase in the Contract Price no later
than fifteen (15) Business Days from Owner's receipt of the estimate provided
under Section 4.3.1; provided, however, that any such amounts paid to Contractor
shall be reconciled with amounts actually payable pursuant to the relevant
Change Order issued pursuant to Section 4.3.4 and any excess amount paid by
Owner shall be refunded promptly by Contractor. Notwithstanding anything herein
to
11
EXECUTION COPY
the contrary, payments for Provisional Change Orders (as defined in the
Coordination Agreement) shall be made in accordance with the terms and
conditions of the Coordination Agreement.
4.3.4 CHANGE ORDERS. If the Parties reach agreement on the matters
listed in the Contractor's estimate, Owner and Contractor shall execute an
amendment to this Agreement which reflects the nature of such agreement (a
"CHANGE ORDER"), in the form set forth in Exhibit L. Contractor shall promptly
adjust (in consultation with Owner) the Milestone Payment Plan and any other
schedules requiring adjustment to reflect the change agreed upon.
4.4 CONTRACTOR REQUESTED CHANGE ORDER.
4.4.1 Contractor shall be entitled to submit a request for a Change
Order with respect to:
(a) the failure of, or inability to run, a Process Test
or remedial work in connection with a failure of a
Process Test, in each case other than solely due to a
Defect, unless covered by an Owner-initiated Change
Order;
(b) a delay caused by a failure of Owner to provide Front
End Feedstock for purposes of Performance Tests in
accordance with the requirements of Exhibit M;
(c) a Force Majeure Event;
(d) any Change of Law, unless such Change of Law is due
to an act or omission of Contractor;
(e) Owner's failure to comply with Section 2.7 regarding
Hazardous Wastes or Materials or any delay arising as
a result of the handling, removal, transportation or
disposal of any Hazardous Waste or Materials by the
Owner in accordance with and to the extent required
by Section 2.7;
(f) a delay caused by a failure of Owner to furnish the
Site and to provide rights of ingress and egress to
and from the Site for Contractor and its
Subcontractors to the extent specified in the Site
Access Plan;
(g) a delay caused by Owner's failure to assist
Contractor to the extent provided in Section 2.2 in
obtaining Governmental Approvals to be obtained by
Contractor or a delay caused by Owner's delay in
obtaining Governmental Approvals to be obtained by
Owner in accordance with Section 2.2 (other than as a
result of a failure of Contractor to assist Owner in
accordance with Section 3.4);
(h) Owner's failure to provide, or failure to cause
Operator to provide, operations personnel in
accordance with Section 2.3;
12
EXECUTION COPY
(i) Owner's failure to make arrangements for the supply
of utilities as provided in Section 2.6;
(j) the suspension of the Work or any portion thereof
pursuant to Article 14;
(k) an unreasonable exercise by any of Owner's Parties of
inspection or observation rights pursuant to Section
6.2 which results in delay or adverse cost impact;
(l) a rejection of Work by Owner in accordance with
Section 6.4, following which it is determined that no
Defect occurred;
(m) a delay caused by a claim as a result of which
Contractor is required to change the scope of Work
(provided that so long as Contractor is indemnified
for such claim by Owner, Contractor shall not change
the scope of Work without Owner's consent) or by an
injunction issued by a court of competent
jurisdiction, in each case relating to an
intellectual property infringement arising out of the
Pro Terra(TM) Process;
(n) written instructions, directions or communications
from Owner that are outside the Scope of Work and
that Contractor notifies Owner in writing will
adversely impact Contractor's costs or the Project
Schedule; provided, however, that during the initial
design phase, including Owner's review of drawings
and comments thereto, the Facility may be subject to
further refinement by the Parties and that Contractor
shall receive no additional compensation or schedule
relief for such refinements that could reasonably be
expected to be within the scope of Work;
(o) changes required by Owner to Contractor's quality
control, environmental and safety programs that are
communicated to Contractor after expiration of the
fifteen (15) Day comment period specified in Section
3.2.4; and
(p) written requests by Owner's Parties to change
operational access features, where such requests are
made after Owner's review of the relevant
documentation and incorporation of Owner's comments
to such documentation, if any, pursuant to Section
6.1.
4.4.2 Contractor shall use reasonable efforts to mitigate the
adverse effects of any Force Majeure Event or a Change of Law that is
the subject of a Change Order request. No such event shall excuse
Contractor's continuing obligation to perform the Work, as affected by
such event, while such request is pending, except as set forth in
Section 13.2 or if cessation of performance is required by a
Governmental Unit.
4.4.3 Any Change Order request under this Section 4.4 shall be
processed in accordance with Section 4.3; provided, however, that no
Change Notice from Owner shall be required and Contractor's Change
Order request shall include the detailed written estimate relating to
the requested change that is required by Section 4.3.1, without the
need for Owner to request same.
13
EXECUTION COPY
4.5 SCHEDULE ADJUSTMENTS. If a change that is the subject of a Change
Order or Owner Directive adversely affects Contractor's ability to achieve
Substantial Completion by the Guaranteed Substantial Completion Date, and such
effect could not be avoided or mitigated by Contractor's reasonable efforts,
then the Contractor shall be entitled to an equitable adjustment of the
Guaranteed Substantial Completion Date on a Day-for-Day basis (or part thereof),
for the impact of such change on Contractor's performance of the Work.
4.6 CHANGE IN CONTRACT PRICE.
4.6.1 Subject to Section 4.6.2 and Section 4.6.3, in the event
of a change in the Work pursuant to Section 4.3 or Section 4.4, the
Contract Price shall be increased or decreased by a fixed lump sum
amount. Contractor expressly waives any other compensation for a change
in the Work.
4.6.2 Changes to the Contract Price as a result of a change in
the Work shall be subject to the following limitations:
4.6.2.1 Under no circumstances shall a change in the
Work modify the Contract Price unless Owner shall have
executed a Change Order or an Owner Directive with respect to
such change in the Work.
4.6.2.2 Changes having a cost impact of less than ten
thousand dollars ($10,000) shall not be processed as a Change
Order unless such changes relate to written proposals and cost
estimates requested by Owner as provided in Section 4.6.2.4.
Notwithstanding the foregoing: (i) if Owner requests a series
of closely related changes, the costs of such closely related
changes may be aggregated and processed as a Change Order;
(ii) if three or more changes not meeting the foregoing
threshold are proposed by Owner in any one month, Contractor
shall be entitled to recovery of the aggregate related costs
pursuant to a Change Order; and (iii) to the extent that the
difference between (x) the aggregate of the cost of all
changes not meeting the foregoing threshold and (y) the
aggregate amount of the cost of such changes recovered by
Contractor pursuant to (i) and (ii) exceeds one hundred
thousand dollars ($100,000), Contractor shall be entitled to
recover such costs in excess of one hundred thousand dollars
($100,000); provided, however, that a Change Order to recover
such costs shall be processed only at such time or times as
such excess equals or exceeds ten thousand dollars ($10,000)
in the aggregate.
4.6.2.3 Contractor shall not be entitled to an
increase in the Contract Price in connection with any Force
Majeure Event other than a Non-Insurable Force Majeure Event.
4.6.2.4 To the extent that Contractor is entitled to
a Change Order, the cost to prepare written proposals and cost
estimates shall be included in the price of the Change Order.
If written proposals and cost estimates are requested by Owner
in writing, then the cost of the proposals and estimates shall
be reimbursed by
14
EXECUTION COPY
Owner as part of the resulting Change Order if implemented, or
as a separate Change Order if the evaluated change is not
implemented.
4.6.3 In the event Owner and Contractor are unable to agree to
a fixed lump sum change in the Contract Price in connection with a
Change Order proposed by Owner or requested by Contractor, the
following provision of this Section 4.6.3 shall apply:
4.6.3.1 Either Party may at any time refer the matter
to the members of senior management of the Parties designated
pursuant to Section 21.2.1.1. Notwithstanding the provisions
of Section 21.2.1.3, if the dispute is not resolved by such
representatives within two (2) Days, then each Party, without
further delay, shall have the right to submit the dispute to
be settled exclusively and finally in accordance with Section
21.2.3; provided, however, that notwithstanding the provisions
of Section 21.2.3, the decision of the Technical Arbitrator
resolving such dispute shall be rendered within three (3)
Business Days following referral of the matter to such
Technical Arbitrator unless otherwise agreed by the Parties.
4.6.3.2 In the event the Technical Arbitrator fails
to render a decision within the period of three (3) Business
Days specified in Section 4.6.3.1, then each Party, following
the expiration of such period and prior to receipt of a
decision from the Technical Arbitrator, shall have the right
to submit the dispute to arbitration in accordance with
Section 21.2.2. A decision rendered by the Technical
Arbitrator prior to either Party's issuance of a Notice under
Section 21.2.2.1 commencing arbitration shall be final and
binding on the Parties, and the right to submit the dispute to
arbitration under Section 21.2.2 shall thereupon expire.
4.6.3.3 In the event of a Change Order proposed by
Owner pursuant to Section 4.3.1, Owner may withdraw the
relevant Change Notice at any time including, without
limitation, after receipt of Contractor's estimate and after a
dispute regarding the appropriate change to the Contract Price
has been referred for resolution pursuant to this Section
4.6.3. In such event, Contractor's cost to prepare its
estimate shall be reimbursed by Owner as a Change Order.
4.6.3.4 The dispute resolution procedures of this
Section 4.6.3 are applicable solely for the purpose specified,
and may be invoked by a Party only for such purpose and by
reference to this Section 4.6.3, and shall be without
prejudice to the applicability of Article 21 to other
disputes.
4.7 GENERAL REQUIREMENTS AND LIMITATIONS.
4.7.1 No Change Order or Owner Directive which (a)
individually increases the Contract Price by more than one hundred
thousand dollars ($100,000), (b) taken together with all other Change
Orders or Owner Directives in the aggregate increases the Contract
Price by more than two hundred fifty thousand dollars ($250,000), (c)
subject to Section 4.5 or Section 22.1.2.1(c), extends the Guaranteed
Substantial Completion Date, or (d)
15
EXECUTION COPY
modifies the Performance Guarantees, shall be effective without
Lender's prior written consent.
4.7.2 No change in the Work, or suspension thereof, pursuant
to this Article 4 shall affect the Contract Price, the Guaranteed
Substantial Completion Date (subject to Section 4.5 or Section
22.1.2.1(c)) or the Performance Guarantees unless Owner specifically
agrees to such change in writing.
4.7.3 Except to the extent immediate action may be required by
an emergency threatening life or property, in no event shall Contractor
undertake a change in the Work until it has received a Change Order or
an Owner Directive signed by Owner.
4.7.4 No addition, deletion, comment, modification or
amplification by Owner to the Work shall require a Change Order, an
increase in the Contract Price or an extension of any of the deadlines
set forth in the Project Schedule, in each case, if such addition,
deletion, comment, modification or amplification is for the purpose of
curing a Defect or is required in connection with a Contractor Event of
Default.
4.7.5 Contractor shall maintain complete and accurate records
of the costs incurred due to the change in the Work, which records
shall be made available to and subject to review by Owner.
4.7.6 Contractor shall not be relieved of responsibility for
the Work pending agreement on the terms of any Change Order. In the
event of any disputes between the Parties related to a change, a
proposed Change Order or an Owner Directive, such disputes shall be
resolved in accordance with the dispute resolution provisions in
Article 21 or, if applicable, Section 4.6.3. Notwithstanding any
dispute, Contractor shall be required to implement any Owner Directive
and in no event shall any disputes related to a change, a proposed
Change Order or an Owner Directive entitle Contractor to stop, delay or
suspend the Work.
ARTICLE 5. COMMENCEMENT OF WORK
5.1 NOTICE TO PROCEED. On the first Business Day following the date on
which the conditions specified in Section 5.2 have been met, Owner shall issue
to Contractor a written notice instructing Contractor to commence the Work (the
"NOTICE TO PROCEED"). Upon receipt of the Notice to Proceed (the "NOTICE TO
PROCEED DATE"), Contractor shall commence, and continuously and diligently and
with due care pursue the Work, in accordance with this Agreement.
5.2 CONDITIONS FOR ISSUANCE OF NOTICE TO PROCEED. The Notice to Proceed
shall not be issued until the following conditions have been satisfied or
waived:
(a) Owner has entered into binding Financing Agreements
to provide sufficient funds for the construction of
the Facility, under which the conditions for initial
disbursement shall have been satisfied;
(b) the conditions set forth on Exhibit Q have been
met;
16
EXECUTION COPY
(c) Owner, Contractor and Lender have entered into a
consent agreement satisfactory in form and substance
to Contractor, Owner and Lender;
(d) the Parties have secured the insurance to be obtained
under this Agreement;
(e) the Technology Cover Facility is in full force and
effect and the Coordination Agreement has been
executed;
(f) the Surety Bond, in a form to be agreed upon among
Lender, Contractor and Owner, has been delivered to
Owner and payment to Contractor for the cost of such
Surety Bond has been made and such Surety Bond is in
full force and effect, and the form of Warranty Bond
has been agreed among Owner, Contractor and Lender;
(g) all Governmental Approvals which are necessary for
commencement of the Work have been obtained;
(h) the Affidavit of Notice of Commencement in the form
of Exhibit K has been received by Contractor;
(i) the subordination agreement referenced in Section
18.2.2, in form and substance satisfactory to Owner,
Lender, Contractor and Technology Facility Provider,
has been executed; and
(j) this Agreement (including the consent agreement to be
entered by Owner, Contractor and Lender) shall be
amended, amended and restated, modified or
supplemented to reflect (in a manner satisfactory to
Owner, Contractor, Lender and Technology Facility
Provider) the terms and conditions of the Technology
Cover Facility including the following features of
the Technology Cover Facility:
(i) the Technology Cover Facility is a
subordinated loan facility provided to the
Owner by one or more subordinated lenders
under which a subordinated lender agent will
act on behalf of the subordinated lenders;
(ii) Owner intends to xxxxx x xxxx on the
Technology Cover Facility to Lender which
may afford Lender certain rights thereunder;
(iii) the Technology Cover Facility shall benefit
from a second lien on all collateral
securing the Senior Debt (other than the
lien granted with respect the Technology
Cover Facility); and
(iv) the Technology Cover Facility contemplates a
"Facility Provider Expert" that functions in
a manner similar to the Independent Engineer
as to matters directly or indirectly
relating to the Technology Cover
Facility.
17
EXECUTION COPY
ARTICLE 6. REVIEW AND INSPECTION RIGHTS
6.1 RIGHT OF OWNER TO REVIEW CERTAIN DOCUMENTS. As soon as completed
and checked by Contractor, Contractor shall provide to Owner's Representative
and Independent Engineer all drawings, specifications, and other documents of
the type that are subject to Owner's review in accordance with the Scope
Document, including subsequent revisions to such documents. Owner's comments on
these documents, with Independent Engineer's concurrence, will be provided no
later than ten (10) Business Days from the later of receipt by Owner and receipt
by Independent Engineer. In the event Owner fails to reply within the specified
time, Owner shall be deemed to have no comments. Such documents, as revised in
accordance with Owner's comments as concurred in by Independent Engineer, shall
be the basis on which Contractor shall perform the Work related thereto;
provided, however, that no review or failure to review or comment upon any such
documents by Owner or Independent Engineer shall be deemed a waiver of
Contractor's obligations or be construed as acceptance of the Work or any part
thereof.
6.2 RIGHT OF ACCESS AND OVERSIGHT. Owner, the Technology Facility
Provider in connection with the Technology Cover Facility, any Lender in
connection with any Financing Agreement, the Independent Engineer, and any of
their respective agents (collectively, the "OWNER'S PARTIES") shall have, at
their sole cost and expense, the right at all times during performance of the
Work (but shall have no obligation) to visit and/or maintain a staff at the Site
or any other location where any portion of the Work shall be performed, to
familiarize itself or themselves with the progress and quality of the Work, to
determine if the Work is proceeding in accordance with this Agreement, to
inspect the Work, the Facility and any item of equipment, material, design,
engineering, service or the workmanship associated therewith, whether at
Contractor's office, the Site or at the point of the equipment's significant
fabrication, and to conduct such other inspections as any of them reasonably
deems appropriate. Owner shall notify Contractor in advance of any inspections.
6.3 OBSERVATION OF TESTS. The Owner's Parties shall have the right to
observe tests of the major equipment, the Work and the Facility. In addition to
any other obligations of Contractor with respect to the conduct of tests
hereunder, Contractor shall use reasonable efforts to provide any of the Owner's
Parties who have requested in writing to observe specific tests with at least
ten (10) Business Days prior notice of such test.
6.4 REJECTION OF WORK. Owner and the Independent Engineer shall have
the right to reject any portion of the Work that does not meet the standard of
performance set forth in Sections 3.3 and 9.1 or which does not conform in any
respect to the drawings and specifications prepared in connection with the scope
of Work and for which Owner or the Independent Engineer provide Contractor with
written notice describing with reasonable specificity the reasons for rejection
(except for Work which fails to conform in immaterial respects with such
drawings and specifications, as reasonably determined by the Owner or the
Independent Engineer, so long as any such nonconformance does not impact the
safety, performance, operability or reliability of the Facility or any component
thereof (any such nonconformance, an "IMMATERIAL NONCONFORMANCE")). Upon such
rejection and, if applicable, before such portion of the Work is covered so as
not to be able to be reviewed during a subsequent inspection, Contractor shall
remedy the nonconformance, at no additional cost to Owner.
18
EXECUTION COPY
6.5 NO ACCEPTANCE OF WORK. Owner's Parties' exercise of any right of
inspection, observation, rejection or approval shall be for its intended purpose
as provided in this Agreement or in procedures developed for purposes of this
Agreement and agreed to in writing by Owner. If not for such intended purpose or
if not so provided, Owner's Parties' exercise of any right of inspection,
observation, rejection or approval shall not limit or reduce Contractor's
obligations under this Agreement or constitute an acceptance by Owner.
ARTICLE 7. MECHANICAL COMPLETION
7.1 MECHANICAL COMPLETION DEFINED. "MECHANICAL COMPLETION" shall occur
when all of the following have occurred or have been waived in writing by Owner
and Lender:
7.1.1 Contractor has installed all components and systems for
the Facility in accordance with the standards set forth in Sections 3.3
and 9.1 and Governmental Rules and Governmental Approvals (except for
completion of painting, non-critical insulation, final grading and any
other portion of the Work not affecting the operability, safety and
mechanical and electrical integrity of the Facility);
7.1.2 All components and systems for the Facility have been
flushed and cleaned out as necessary, have been successfully tested and
can be operated continuously in a safe and prudent manner that would
not void any Subcontractor warranties;
7.1.3 The work items listed as Contractor's responsibility for
Mechanical Completion in Exhibit I have been satisfactorily performed;
7.1.4 Contractor's obligations to prepare and deliver
operation and maintenance manuals and to train operations personnel as
of Mechanical Completion, as provided in Exhibit T, have been
satisfactorily performed;
7.1.5 The Punch List described in Section 7.3 has been agreed;
and
7.1.6 The Mechanical Completion Certificate has been issued to
Contractor.
7.2 NOTICE OF MECHANICAL COMPLETION. Promptly after Contractor's
determination that the conditions of Section 7.1 for Mechanical Completion
(other than the condition of Section 7.1.6) have been satisfied, Contractor
shall issue to Owner and to Independent Engineer a Notice of Mechanical
Completion ("NOTICE OF MECHANICAL COMPLETION"), which shall include copies of
relevant supporting data in reasonable detail. Within seven (7) Days after its
receipt of the Notice of Mechanical Completion, Owner, with the concurrence of
Independent Engineer, shall respond to Contractor in writing and either accept
or reject such Notice of Mechanical Completion; provided, however, that Owner
shall not be permitted to reject a Notice of Mechanical Completion for an
Immaterial Nonconformance. If the Notice of Mechanical Completion is rejected,
Owner shall with reasonable specificity identify any deficiencies. Contractor
shall then satisfactorily explain or correct the identified deficiencies and
issue a revised Notice of Mechanical Completion to Owner and Independent
Engineer, whereupon Owner, with the concurrence of Independent Engineer, shall
have five (5) Days to accept or reject such notice. This process shall be
repeated as necessary until Owner has confirmed, with the concurrence of the
Independent Engineer, that all the conditions for Mechanical Completion.
19
EXECUTION COPY
have been satisfied or (with the written consent of Lender) waived, whereupon
Owner and Independent Engineer shall accept the Notice of Mechanical Completion
by issuing to Contractor a "MECHANICAL COMPLETION CERTIFICATE". The "MECHANICAL
COMPLETION DATE" shall be the date Owner receives the Notice of Mechanical
Completion which is accepted by Owner and Independent Engineer in accordance
with the foregoing procedures. If Owner and Independent Engineer fail to respond
within the periods specified above, at the expiration of the applicable time
period Mechanical Completion shall be deemed accepted and the Mechanical
Completion Date shall be deemed to have occurred on the date Owner received the
relevant Notice of Mechanical Completion.
7.3 PUNCH LIST. Contemporaneously with Owner's review of Mechanical
Completion, Owner and Contractor shall together identify any and all known
discrepancies between installed equipment, materials and supplies or workmanship
and the drawings and specifications therefor. Such items as do not preclude
achieving the Mechanical Completion Date but must be rectified, shall be agreed
upon by Contractor and Owner in a Punch List, to be maintained by Contractor,
identifying the responsible Party and a schedule to perform each task. Such
Punch List shall include each Immaterial Nonconformance identified in Section
7.2 or Section 8.2.2. The initiation of the Substantial Completion Tests and the
achievement of the Substantial Completion Date shall not require completion of
the Punch List Items nor relieve the Contractor of its obligation to complete
such tasks.
ARTICLE 8. FACILITY TESTING, SUBSTANTIAL COMPLETION AND FINAL
COMPLETION
8.1 FACILITY TESTING
8.1.1 RESPONSIBILITY FOR TESTS. Contractor shall be
responsible for conducting the Front End Performance Test, the Back End
Performance Tests and the Substantial Completion Discharge and
Emissions Verification Run (collectively, the "SUBSTANTIAL COMPLETION
TESTS"), and for conducting the Front End Process Test, the Back End
Process Tests and the Process Discharge and Emissions Verification Run
(together, the "PROCESS TESTS" and, collectively with the Substantial
Completion Tests, the "PERFORMANCE TESTS"), and all other tests to
demonstrate that the performance of the Facility is consistent with the
Performance Guarantees and other requirements of this Agreement. Other
than costs expressly allocated to Owner in this Agreement, costs of all
tests shall be borne by Contractor.
8.1.2 SEQUENCE OF TESTS. Unless otherwise approved in writing
by Owner and Lender, the Performance Tests shall be performed as
follows:
8.1.2.1 The Front End Performance Test shall be
conducted as soon as practicable after the Mechanical
Completion Date. The Front End Performance Test shall be
repeated, if necessary, until at least the Front End Minimum
Performance Criteria have been achieved.
8.1.2.2 The Back End Performance Tests shall be
conducted at such time as sufficient Back End Feedstock
produced by the Front End is available for such
20
EXECUTION COPY
tests, and shall be repeated, if necessary, until at least the
Back End Minimum Performance Criteria have been achieved.
8.1.2.3 The Substantial Completion Discharge and
Emissions Verification Run shall be conducted after the Front
End Minimum Performance Criteria and the Back End Minimum
Performance Criteria have been achieved, and shall be
repeated, if necessary, until passed.
8.1.2.4 The Front End Process Test shall be conducted
after the Substantial Completion Date.
8.1.2.5 The Back End Process Tests shall be conducted
at such time as sufficient Back End Feedstock is available
from the Front End Process Test.
8.1.2.6 The Process Discharge and Emissions
Verification Run shall be conducted after successful
completion of the Front End Process Test and Back End Process
Tests, and prior to Final Completion.
8.1.3 CONDUCT OF TESTS. Contractor shall conduct the
Performance Tests in accordance with the Test Procedures. The Test
Procedures shall be designed to demonstrate (i) compliance with the
Performance Guarantees, (ii) that the Facility is free from Defects and
deficiencies, and (iii) compliance with Governmental Rules and
Governmental Approvals.
8.1.4 NOTICES AND REPORTS. Notices to the Parties concerning
scheduling and performance of the Performance Tests, test report
requirements, and procedures related thereto shall be as provided in
Exhibit M.
8.1.5 DETAILED TEST PLAN. After giving written notices of
planned initial test runs as provided in Section 8.1.4, Contractor
shall keep Owner and Independent Engineer personnel informed of actual
Performance Test scheduling and changes thereto. Contractor shall
provide Owner notice should any need arise necessitating a change in
the Test Procedures set forth in Exhibit M. No changes to the Test
Procedures may be made by Contractor without the prior written notice
to and approval by Owner, with the concurrence of the Independent
Engineer, such approval not to be unreasonably withheld. At a time
sufficiently in advance of an affected Performance Test to provide
Owner and the Independent Engineer with sufficient time to review and
comment thereon, but not less than ninety (90) Days prior to the
commencement of an affected Performance Test, Contractor shall provide
to Owner a detailed test plan for such Performance Test, as provided in
Exhibit M, and shall concurrently notify Owner of any proposed
modifications to the Test Procedures. Owner shall provide any comments
to Contractor within fifteen (15) Days following receipt of such
detailed test plan and any modifications to the Test Procedures, and
the Parties shall thereafter confer in a timely manner for purposes of
reaching agreement on a final detailed test plan and Test Procedures
applicable to the affected Performance Test. Contractor may propose
further modifications or other changes to the detailed test plan(s) and
the Test Procedures, in which case Owner and the Independent Engineer
shall have not more than five (5) Business Days to review and comment
on the proposed modifications, unless such review
21
EXECUTION COPY
and comment shall require more than five (5) Business Days based on the
information provided, in which case Owner and the Independent Engineer
shall have reasonable additional time to review and comment.
8.1.6 CORRECTION OF DEFECTS, RE-RUN OF TESTS.
8.1.6.1 Contractor shall, at its sole cost and
expense, (i) correct prior to Substantial Completion any
Defects discovered or observed during performance of the
Substantial Completion Tests, and (ii) correct prior to Final
Completion any Defects discovered or observed during
performance of the Process Tests; provided, however, that any
such Defects agreed by the Parties, with the concurrence of
the Independent Engineer, to be Punch List Items shall be
included on the Punch List and completed as provided in
Section 8.4.
8.1.6.2 Without limiting Contractor's schedule
obligations herein, Contractor may re-run any of the
Performance Tests, but shall not be required to re-run any
successful Performance Test; provided, however, that no
Substantial Completion Test may be re-run after the
Substantial Completion Date has occurred. Subject to the
foregoing, Contractor shall provide Owner with notice of its
intent to re-run a Performance Test, which notice, if
applicable, shall include an explanation of corrective
measures taken since the previous run of such test. Owner
shall have a reasonable period from receipt of such notice,
not to exceed thirty (30) Days, within which to provide Front
End Feedstock sufficient to conduct such re-run. In the event
of any re-run of a Performance Test, the results of the last
completed Performance Test shall apply.
8.2 SUBSTANTIAL COMPLETION
8.2.1 Conditions to Substantial Completion. "SUBSTANTIAL
COMPLETION" shall occur when all of the following have occurred or have
been waived in writing by Owner and Lender:
(a) The Mechanical Completion Date has occurred;
(b) Contractor, subject to the requirements of
Section 8.1.2,
(i) has demonstrated that the Facility
meets the Performance Guarantees;
or
(ii) has demonstrated that the Facility
meets the Minimum Performance
Criteria (but does not meet either
or both of the Front End
Performance Guarantee and the Back
End Performance Guarantee) and has
paid the Buy-Down Amounts;
(c) Contractor has certified that the Facility
has been designed and constructed in
accordance with the Scope Document and is
operating and occupied in accordance with
all Governmental Rules and Governmental
Approvals, Prudent Industry Practices and
the other
22
EXECUTION COPY
terms and conditions of this Agreement and
has performed all of its obligations under
this Agreement required to be performed with
respect thereto as of the date of such
notice, other than warranty and Punch List
items;
(d) Owner has received from Contractor all
Governmental Approvals required to be
obtained by Contractor;
(e) Owner has received all drawings and
specifications in hard copies and electronic
form (including three (3) sets of
preliminary drawings and "as builts"), test
results and back-up data, and other
technical information required under this
Agreement for Owner to commission, operate
safely and reliably and maintain the
Facility;
(f) The Facility can operate safely and reliably
in accordance with the operating parameters
as set forth in applicable equipment manuals
and the Scope Document;
(g) All special tools purchased by Contractor
for the Facility as provided in this
Agreement have been delivered to Owner;
(h) Contractor has paid all Delay Liquidated
Damages, if any, then due;
(i) The Surety Bond is in full force and effect;
(j) Contractor has delivered to Owner a written
plan for completing all Punch List Items by
the Guaranteed Final Completion Date;
(k) No Contractor Event of Default shall have
occurred and be continuing; and
(l) The Substantial Completion Certificate has
been issued to Contractor.
8.2.2 NOTICE OF SUBSTANTIAL COMPLETION. Contractor shall
satisfy the conditions for Substantial Completion no later than the
Guaranteed Substantial Completion Date. Promptly after Contractor's
determination that the conditions of Section 8.2.1 to attain
Substantial Completion (other than the condition of Section 8.2.1(l))
have been satisfied, Contractor shall issue to Owner and to Independent
Engineer a Notice of Substantial Completion ("NOTICE OF SUBSTANTIAL
COMPLETION"), which shall include a copy of the test report for the
each of the Substantial Completion Tests, if not previously
transmitted. Within ten (10) Business Days after its receipt of the
Notice of Substantial Completion, Owner, with the concurrence of
Independent Engineer, shall respond to Contractor in writing and either
accept or reject such Notice of Substantial Completion; provided,
however, that Owner shall not be permitted to reject a Notice of
Substantial Completion for an Immaterial Nonconformance. If the Notice
of Substantial Completion is rejected, Owner shall with reasonable
specificity identify any deficiencies. Contractor shall then
satisfactorily explain or correct the identified deficiencies, or to
the extent necessary re-conduct the Substantial Completion Tests, and
issue a revised Notice of Substantial Completion to Owner and
Independent Engineer, whereupon Owner, with the
23
EXECUTION COPY
concurrence of Independent Engineer, shall have five (5) Business Days
to accept or reject such Notice of Substantial Completion. This process
shall be repeated as necessary until Owner has confirmed, with the
concurrence of the Independent Engineer, that all the conditions for
Substantial Completion have been satisfied or (with the written consent
of Lender) waived, whereupon Owner and Independent Engineer shall
accept the Notice of Substantial Completion by issuing to Contractor a
"SUBSTANTIAL COMPLETION CERTIFICATE". The "SUBSTANTIAL COMPLETION DATE"
shall be the date Owner receives the Notice of Substantial Completion
which is accepted by Owner and Independent Engineer in accordance with
the foregoing procedures. If Owner and Independent Engineer fail to
respond within the periods specified above, at the expiration of the
applicable time period Substantial Completion shall be deemed accepted
and the Substantial Completion Date shall be deemed to have occurred on
the date Owner received the relevant Notice of Substantial Completion.
8.3 FINAL COMPLETION
8.3.1 CONDITIONS TO FINAL COMPLETION. "FINAL COMPLETION" shall
occur when all of the following have been achieved or have been waived
by Owner and Lender:
(a) The Mechanical Completion Date has occurred;
(b) The Substantial Completion Date has occurred;
(c) The performance requirements of the Process Tests, as
set forth in Exhibit M, have been met in full;
(d) Contractor has completed performance of the Work and
remedied any Defects associated therewith, and all
Punch List Items have been completed or bought out as
provided in Section 8.4;
(e) Final "as-built" drawings and other remaining
documentation have been delivered to Owner in
electronic form;
(f) All specifications, test data and information
specified in this Agreement have been delivered to
Owner;
(g) Contractor has furnished Owner with:
(i) a final release of Contractor's lien rights
in the form of Exhibit N-4;
(ii) final Subcontractor lien waivers for all
amounts paid under this Agreement, in the
form attached hereto as Exhibit N-2, from
each Subcontractor whose subcontract price
exceeds ten thousand dollars ($10,000);
and
24
EXECUTION COPY
(iii) a bond or other security in form and
substance satisfactory to the Owner and
Lender covering any amounts in respect of
which a lien waiver has not been obtained
pursuant to clause (ii) above;
(h) Any special tools purchased by Contractor for the
Facility's permanent equipment have been delivered to
Owner in acceptable condition and all replacement
spare parts which have been used by Contractor out of
Owner's stock, if any, have been purchased and
delivered to Owner free and clear of liens;
(i) All Contractor's personnel, supplies, equipment,
waste materials, rubbish, and temporary facilities
have been removed from the Site, except as Owner
agrees may be needed for ongoing obligations;
(j) Owner has received from Contractor all information
set forth in this Agreement for Owner's final fixed
asset records with respect to the Facility;
(k) Contractor has delivered final operation and
maintenance manuals and completed the training of
operations personnel as provided in Exhibit T;
(l) All Liquidated Damages or other amounts due by
Contractor, if any, have been paid in full;
(m) Contractor has delivered in satisfactory form all
Governmental Approvals required by the Contract;
(n) Contractor has delivered to Owner, in the form
specified under the Contract, all final plans,
specifications and drawings, including equipment
manuals, test data and reports, vendor information,
quality verification documents, warranty
administration program documents, and other technical
information required under this Agreement for Owner
to start-up, operate and maintain the Facility;
(o) Contractor has delivered all operations, maintenance,
and manufacturer recommended spare parts lists which
shall include pricing and manuals and all instruction
books;
(p) Contractor has performed all other covenants and
provisions of, and delivered all items required by,
this Agreement then to be performed or delivered,
each in a manner reasonably satisfactory to Owner;
and
(q) The Final Completion Certificate has been issued to
Contractor.
8.3.2 NOTICE OF FINAL COMPLETION. Contractor shall satisfy the
conditions for Final Completion no later than the Guaranteed Final
Completion Date. Promptly after
25
EXECUTION COPY
Contractor's determination, in its judgment, that the conditions of
Section 8.3.1 to attain Final Completion (other than the condition of
Section 8.3.1(q)) have been satisfied, Contractor shall issue to Owner
and to Independent Engineer a Notice of Final Completion ("NOTICE OF
FINAL COMPLETION"), which shall include a copy of the test report for
the Process Tests, if not previously transmitted. Within ten (10)
Business Days after its receipt of the Notice of Final Completion,
Owner, with the concurrence of Independent Engineer, shall respond to
Contractor in writing and either accept or reject such Notice of Final
Completion. If the Notice of Final Completion is rejected, Owner shall
with reasonable specificity identify any deficiencies. Contractor shall
then satisfactorily explain or correct the identified deficiencies, or
to the extent necessary re-conduct the Process Tests, and issue a
revised Notice of Final Completion to Owner and Independent Engineer,
whereupon Owner, with the concurrence of Independent Engineer, shall
have five (5) Business Days to accept or reject such Notice of Final
Completion. This process shall be repeated as necessary until Owner,
with the concurrence of the Independent Engineer, has confirmed that
all the conditions for Final Completion have been satisfied or (with
the written consent of Lender) waived, whereupon Owner and Independent
Engineer shall accept the Notice of Final Completion by issuing to
Contractor a "FINAL COMPLETION CERTIFICATE". The "FINAL COMPLETION
DATE" shall be the date Owner receives the Notice of Final Completion
which is accepted by Owner and Independent Engineer in accordance with
the foregoing procedures. If Owner and Independent Engineer fail to
respond within the periods specified above, at the expiration of the
applicable time period Final Completion shall be deemed accepted and
the Final Completion Date shall be deemed to have occurred on the date
Owner received the relevant Notice of Final Completion.
8.4 COMPLETION OF PUNCH LIST
8.4.1 Contractor shall be obligated to complete all Punch List
Items prior to the Guaranteed Final Completion Date; provided, however,
that Punch List Items shall be deemed satisfied to the extent Owner,
with Independent Engineer's concurrence in writing, agrees in writing
to transfer the Punch List Items to the warranty list, or to the extent
bought-out by Contractor in accordance with Section 8.4.2.
8.4.2 No later than thirty (30) Days prior to the Guaranteed
Final Completion Date, Contractor shall notify Owner of all Punch List
items that have not been completed as of the date of such notice,
together with respective values as reasonably determined by Contractor
in accordance with Prudent Industry Practices. One hundred and fifty
percent (150%) of the value specified in Contractor's notice of any
Punch List Items not completed by the Guaranteed Final Completion Date
shall be due and payable on the Guaranteed Final Completion Date.
8.5 RETAINAGE RELEASE REQUEST. At any time that Contractor has
satisfied all conditions for Final Completion (including, without limitation,
completion or buy-out of Punch List Items) other than the conditions of Section
8.3.1(c) and Section 8.3.1(q), Contractor shall be entitled to return of
Retainage, subject to the following terms and conditions of this Section 8.5.
8.5.1 Contractor shall deliver to Owner and Independent
Engineer a Notice requesting return of Retainage withheld as of the
date of such Notice (the "RETAINAGE RELEASE REQUEST"). Owner's review
and acceptance of the Retainage Release Request
26
EXECUTION COPY
shall be subject to the procedures set forth in Section 8.3.2 with
respect to review and acceptance of a Notice of Final Completion. Upon
Owner's determination, with the concurrence of the Independent
Engineer, that all conditions for Final Completion other than the
conditions of Section 8.3.1(c) and Section 8.3.1(q) have been
satisfied, Owner shall provide Notice of such determination to
Contractor, and the "RETAINAGE RELEASE DATE" shall be the date Owner
receives the Retainage Release Request from Contractor which is
accepted by Owner and Independent Engineer. If Owner and Independent
Engineer fail to respond within the periods specified in Section 8.3.2,
at the expiration of the applicable time period the Retainage Release
Date shall be deemed to have occurred on the date Owner received the
relevant Retainage Release Request from Contractor.
8.5.2 Owner shall release to Contractor all Retainage withheld
as of the Retainage Release Date within ten (10) Business Days
following the earlier of the date of Owner's Notice accepting
Contractor's Retainage Release Request or the expiration of the
applicable time period which gives rise to a deemed occurrence of the
Retainage Release Date, as provided in Section 8.5.1.
8.5.3 Contractor shall continue to conduct the Process Tests
until the condition set forth in Section 8.3.1(c) has been met. All
payments made to Contractor following the Retainage Release Date (other
than Retainage released pursuant to the Retainage Release Request)
shall be subject to the requirements of Article 12, including, without
limitation, Retainage as provided in Section 12.6.
8.5.4 Promptly after Contractor's determination, in its
judgment, that the condition set forth in Section 8.3.1(c) has been
met, Contractor shall submit a Notice of Final Completion which shall
be processed pursuant to Section 8.3.2; provided, however, that
Contractor shall not be obligated to meet any conditions for Final
Completion other than the conditions set forth in Section 8.3.1(c) and
Section 8.3.1(q). Following issuance of a Certificate of Final
Completion and determination of the Final Completion Date, Contractor
shall submit a Final Request for Payment which shall be subject to the
requirements and conditions of Section 12.7. Upon Contractor's
compliance with such conditions and Owner's approval of such Final
Request for Payment, Owner shall pay to Contractor the amount due
thereunder and shall release any remaining Retainage.
ARTICLE 9. WARRANTIES RELATED TO THE WORK
9.1 IN GENERAL.
9.1.1 Contractor represents, warrants and agrees as follows:
(a) that all materials and equipment furnished under this
Agreement shall (i) be new unless otherwise specified
in the Scope Document, (ii) be free from any charge,
encumbrance, lien or other security interest, and
(iii) conform to the specifications and description
set forth in this Agreement;
(b) that all Work will be of high quality, free from
Defects and faults and other Defects of manufacture,
construction or design, and in specific conformity
with this Agreement;
27
EXECUTION COPY
(c) that, if required by Owner, Contractor will furnish
satisfactory evidence as to the kind and quality of
all equipment;
(d) that the Work performed under this Agreement and all
the equipment furnished, used or installed in the
construction of the Facility shall be performed or
furnished in a timely and professional manner in
accordance with manufacturers' requirements and
Prudent Industry Practices, and shall conform in all
respects with the Scope Document and the other
requirements of this Agreement;
(e) that every aspect of the Work will be performed and
the Facility will be designed, engineered, supplied,
commissioned, tested, constructed, and installed all
in accordance with the requirements of this
Agreement, including Section 3.3, the Scope Document
and the Performance Guarantees; and
(f) that all Work shall be performed in compliance with,
and the Facility shall meet and be capable of
operating in compliance with, all applicable
requirements of any Governmental Rules and
Governmental Approvals.
9.1.2 Contractor's duties, liabilities and obligations to re-perform or
correct Work extend only to Defects, and do not extend to any repairs,
adjustments, alterations, replacements or maintenance that may be required as a
result of normal wear and tear in the operation of the Facility, normal
degradation in the performance of the Facility or any equipment therein, or as a
result of (a) improper repair or alteration by Owner or any Person under the
control of Owner (except Contractor or any Subcontractor when acting under this
Agreement or if acting as Operator); (b) misuse, negligence or damage by Owner
or any Person under the control of Owner, except by Contractor or any
Subcontractor when acting under this Agreement or if acting as Operator (and
Contractor makes no warranty and has no liability for defect or damage resulting
from any such misuse or negligence); (c) operation of the Facility using any
feedstock to the Front End other than Start-up and Testing Feedstock or Used
Oil; or (d) operation, maintenance or repair by Owner or any Person under the
control of Owner (except by Contractor or any Subcontractor when acting under
this Agreement or if acting as Operator) inconsistent with the Facility
operations and maintenance manuals or Prudent Industry Practices. Specifically
excluded from the warranties in this Article 9 is Contractor's obligation, after
Minimum Performance Criteria have been met, to achieve the Performance
Guarantees prior to Substantial Completion, for which failure of achievement
Owner's sole and exclusive remedy shall be the payment of Buy-Down Amounts,
subject to the terms and conditions of this Agreement; provided, however, that
such exclusion shall in no way be construed to relieve Contractor of its
obligation to correct Defects after Substantial Completion and through the
Warranty Period.
9.2 CORRECTION OF NONCONFORMING OR DEFECTIVE WORK.
9.2.1 During the performance of Work hereunder and the Warranty Period,
when either (a) Contractor actually discovers any Defect or (b) Owner notifies
Contractor
28
EXECUTION COPY
of a Defect pursuant to Section 9.6 and directs Contractor to remedy
such Defect, Contractor shall re-perform correctly any engineering or
design Work, perform or cause to be performed remedial construction
work or rework (whether required to effect any re-performed engineering
or design Work or otherwise required), refinish or remove and replace
any item of equipment, component of equipment or materials or systems,
and generally take or cause to be taken such action as may be required
to remedy such Defect with conforming materials. Contractor shall
commence remedial efforts with respect to any such Defect, or cause
such efforts to be commenced, promptly after receipt of Owner's notice
pursuant to Section 9.6; provided, however, that no such notice shall
be required in the event of a Defect discovered by Contractor, and
Contractor shall commence remedial Work promptly following such
discovery. Where Owner notifies Contractor of a Defect pursuant to
Section 9.6 and directs Contractor to remedy such Defect, unless
Contractor has disputed the existence of the Defect in writing provided
to Owner no later than seven (7) Days from Contractor's receipt of
Owner's notice of such Defect, Contractor shall bear the expense of
refinishing or of removal and replacement, as the case may be, and
shall bear Contractor's cost of making good other Work affected by such
removal and replacement, and no extension of time will be allowed for
the correction of Defects. If, during the Warranty Period or at any
time after Substantial Completion, Contractor does not promptly remedy
such Defects or commence to remedy such Defects, Owner may do so. All
of Owner's expenses of remedying a Defect shall be charged to
Contractor and may be deducted from any funds then due to Contractor
under this Agreement or, if sufficient funds are unavailable,
Contractor shall immediately reimburse Owner for such costs on demand
from Owner. In the event that Contractor fails to reimburse Owner for
such costs, Owner shall be entitled to draw on the Surety Bond, the
Retainage and/or the Warranty Bond for an amount equal to such costs
(plus interest at the Contract Interest Rate); provided, however, that
in the event Contractor has disputed responsibility for such costs in
accordance with the procedures set forth in Article 21, such remedies
may be exercised in the event Contractor is determined to be
responsible for such costs and has failed to reimburse Owner as
required by such determination.
9.2.2 Contractor and Owner agree that it may be more
practical, convenient, or operationally efficient (including in the
event of an emergency) for Owner to repair or correct certain Defects
than for Contractor to repair or correct such Defects. In the event
that Owner determines, in the exercise of its reasonable judgment, that
it is more practical, convenient or operationally efficient for Owner
to repair or correct a Defect, then Owner may elect, with the consent
of Contractor (such consent not to be unreasonably withheld or
delayed), to repair or correct such Defect, and Contractor shall
reimburse Owner for the costs incurred by Owner in connection with
repair of such Defect immediately after demand from Owner. Contractor
agrees and acknowledges that Owner is qualified to perform such repair
or correction. Contractor may supervise and/or inspect the repair or
correction in process. The warranty obligations of Contractor will
remain in full force and effect for the remainder of Warranty Period,
notwithstanding that the repair or correction was performed by Owner.
9.2.3 Neither any Final Completion Certificate nor Final
Payment nor any provision in this Agreement (other than expiration of
the Warranty Period) shall relieve
29
EXECUTION COPY
Contractor of responsibility for Defects and, unless specified,
Contractor shall, at its expense, remedy all Defects and pay for any
damage to other Work resulting therefrom, which shall appear during the
Warranty Period. If after expiration of the Warranty Period, any other
Defects appear, Contractor will provide Owner access to all existing
diagnostic design and engineering data at Contractor's offices to
assist Owner.
9.2.4 Contractor shall, at all times during the Warranty
Period, maintain sufficient personnel to respond promptly to Owner's
request for diagnostic or warranty work. At any time during the
Warranty Period, Contractor shall promptly conduct (at Contractor's
expense) such tests, inspection or other diagnostic services related to
potential warranty claims if Owner reasonably believes that a Defect
exists. In the event that such diagnostic services reveal any Defects,
any and all Defects shall be corrected immediately at Contractor's
expense.
9.2.5 Contractor shall, in the course of correcting any
Defects, do so in good faith coordination with Owner's schedule of
operations so as to minimize any adverse effect on the operations of
the Facility.
9.2.6 For clarity, and without prejudice to the scope of
Contractor's warranty obligations as set forth in this Article 9,
Contractor shall be obligated to correct all Defects arising during the
period from Substantial Completion to the commencement of the Warranty
Period.
9.3 LIMITATION ON WARRANTIES. EXCEPT FOR THE EXPRESS WARRANTIES SET
FORTH IN THIS AGREEMENT, CONTRACTOR DOES NOT MAKE ANY OTHER EXPRESS WARRANTIES
OR REPRESENTATIONS, OR ANY IMPLIED WARRANTIES OR REPRESENTATIONS, OF ANY KIND
WHATEVER RELATING EITHER TO THIS AGREEMENT OR THE SERVICES, EQUIPMENT OR
MATERIALS TO BE SUPPLIED BY CONTRACTOR UNDER THIS AGREEMENT OR TO THE FACILITY,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. ALL SUCH OTHER WARRANTIES AND REPRESENTATIONS ARE HEREBY DISCLAIMED.
9.4 SUBCONTRACTOR WARRANTIES. Contractor shall obtain for Owner
commercially available warranties from Subcontractors. Such warranties shall
extend for not less than the Warranty Period and shall obligate the respective
Subcontractors to refinish, remove and replace nonconforming or Defective Work
or equipment in substantially the same manner and on terms and conditions
substantially similar to those contained herein. Contractor shall determine if
any extended warranties on major equipment are available for purchase and the
cost to Contractor or Owner, and Contractor shall so advise Owner prior to
executing the purchase order. Owner shall elect whether or not to purchase such
extended warranty. Any Subcontractor warranty still in effect upon the earlier
to occur of the expiration of the Warranty Period and the reaching of any
liability cap imposed on Contractor's warranty obligations hereunder shall be
assigned to Owner. During the Warranty Period Contractor shall be responsible at
its own expense for enforcing all Subcontractor warranties. Contractor shall
also advise Owner of the availability of any improved warranties.
30
EXECUTION COPY
9.5 WARRANTY PERIOD.
9.5.1 Contractor's warranty obligations and liabilities under
this Article 9,
(a) shall commence on the date that is ninety (90) Days after the
Guaranteed Substantial Completion Date, if the Substantial
Completion Date occurs on or before the Guaranteed Substantial
Completion Date, or
(b) if the Substantial Completion Date occurs after the Guaranteed
Substantial Completion Date, shall commence on the earlier of
(i) the date that is ninety (90) Days after the Substantial
Completion Date or (ii) the Final Completion Date,
and in either case shall cease upon the expiration of the period ending twelve
(12) months after such commencement date (the "WARRANTY PERIOD"). The Warranty
Period for any Work required to be re-performed, refinished, repaired, corrected
or replaced or otherwise remedied under this Article 9 shall be extended for a
period of twelve (12) months from the time of completion of such remedy;
provided, however, that no further extension of the Warranty Period shall be
made with respect to correction of Defects in such remedial Work arising during
such extended twelve (12) month period.
9.6 NOTICE. Owner shall deliver notice to Contractor of any claim for
remediation of a Defect under this Article 9 after actual discovery thereof by
Owner within the Warranty Period. Such notice shall be given as soon as
reasonably practicable, but in no event later than fifteen (15) Days after the
expiration of the Warranty Period. Any such notice of a Defect shall state with
reasonable specificity the reasons supporting Owner's belief concerning the
alleged Defect.
ARTICLE 10. SECURITY
10.1 SURETY BOND. To secure Contractor's performance of its obligations
hereunder, on or before the date of execution and delivery of this Agreement,
Contractor shall furnish Owner with the Surety Bond. Contractor waives any right
to payment of any amounts owing from Owner to Contractor hereunder, and Owner
shall have no obligation to pay such amounts to Contractor, unless and until
Contractor shall have furnished Owner with the executed Surety Bond. Owner shall
pay Contractor the cost of the Surety Bond, and the Contract Price shall be
changed to incorporate such cost on or prior to issuance of the Notice to
Proceed.
10.2 WARRANTY BOND. To secure Contractor's performance of its
obligations during the Warranty Period, on or before the commencement of the
Warranty Period, Contractor shall furnish Owner with the Warranty Bond.
Contractor shall cause the Warranty Bond to remain in full force and effect
throughout the Warranty Period.
ARTICLE 11. CONTRACTOR COMPENSATION
11.1 CONTRACT PRICE.
11.1.1 This Agreement is a fixed-price, lump sum, date certain
contract. The total cost for performance of the Work shall be the
Contract Price.
31
EXECUTION COPY
11.1.2 The Contract Price shall be Contractor's complete
compensation for the Work, in consideration for which Contractor shall
provide to Owner the Facility complete and in fully operational
condition, completed in every detail within the time and for the
purpose designated in this Agreement, and do and furnish everything
necessary in connection therewith or inferred thereby, including,
without limitation, the provision of all equipment, materials, labor,
transportation and services (including intellectual property rights) to
be provided hereunder, the payment of any fees and royalties imposed
with respect to any equipment, materials, labor or services, the
payment of all taxes applicable to Contractor, the training of
Contractor's or any Subcontractor's personnel and the payment of all
Subcontractors.
11.1.3 The Contract Price may only be modified pursuant to a
Change Order.
11.2 TAXES. The Contract Price includes, and Contractor shall pay and
be responsible for, all taxes, including all duties, levies and charges assessed
on the Work (specifically excluding, however, all sales taxes, collectively
"SALES TAXES"), or any part thereof, or on Contractor, its Subcontractors or
their employees by any Governmental Unit. If any tax exemptions, reductions,
allowances or privileges may be available to Owner in the State of Ohio or
elsewhere, Contractor shall cooperate with Owner and use its reasonable
endeavors to enable Owner to benefit from any such tax savings to the maximum
allowable extent. Owner has provided Contractor with a blanket exemption from
sales taxes, as provided by the State of Ohio. Owner shall explicitly advise
Contractor as to which items of the Work are taxable by the State of Ohio. To
comply with its obligations under this Section 11.2, Contractor shall provide
Owner its actual costs for materials utilized by Contractor in the construction
of buildings. With respect to all other taxable items, Contractor shall provide
Owner statements setting forth Contractor's total cost of such items in
conformance with Owner's directions. Owner shall remit all Ohio sales taxes
directly to the State of Ohio. Contractor shall provide its suppliers and
Subcontractors with the aforementioned blanket sales tax exemption. Contractor
acknowledges that Owner has put into effect a plan to minimize Sales Taxes
payable in the State of Ohio and whereby any such Sales Taxes shall be paid
directly by Owner, however, to the extent that any Sales Taxes must be paid by
Contractor or any Subcontractor with respect to the performance of the Work,
such Sales Taxes will be reimbursed within thirty (30) Days of Contractor's
invoice therefor, such invoice to be accompanied by evidence of payment and such
information as Owner may reasonably request to substantiate the obligation
imposed on Contractor to pay such tax.
ARTICLE 12. INVOICING AND PAYMENTS
12.1 PAYMENT--GENERAL.
12.1.1 Owner shall pay Contractor the Contract Price in
accordance with the Milestone Payment Plan, subject to Sections 12.6
and 12.8 and the procedure set forth in this Article 12. The Milestone
Payment Plan consists of the Project Milestone Payment Schedule and the
Project Cash Flow Schedule. The Milestone Payment Plan is intended to
cause payments to approximate the agreed value of engineering,
procurement, construction, commissioning and testing performed by
Contractor. The Milestone Payment Plan shall be used as the basis for
preparation of Requests for Payment as set
32
EXECUTION COPY
forth below, and, except as otherwise set forth herein, shall establish
the amount to be paid to Contractor on an aggregate basis through each
month until Final Completion. Payments shall be made in accordance with
the Milestones achieved under the Project Milestone Payment Schedule.
12.1.2 No payment made hereunder, nor any partial or entire
use of the Work by Owner, shall be construed to be acceptance or
approval of that part of the Work to which such payment or use relates
nor to relieve Contractor of any of its obligations hereunder.
12.2 REQUEST FOR PAYMENT. On or before the tenth (10th) Day of each
month during the performance of the Work, Contractor shall submit to Owner for
its approval a request for payment ("REQUEST FOR PAYMENT"). Each Request for
Payment shall include the following:
12.2.1 INVOICE. Each Request for Payment shall include an
invoice ("INVOICE") which describes each of the Milestones set forth in
the Project Milestone Payment Schedule which Contractor has completed
during the previous month and which requests payment of an amount not
to exceed the amount computed as follows:
(a) the sum of the amounts set forth in the Project Milestone
Payment Schedule for completion of the Milestones that
Contractor certifies to be complete in the Request for
Payment; less
(b) ten percent (10%) of the sum of the amounts set forth on the
Project Milestone Payment Schedule for the completion of those
Milestones that Contractor certifies to be complete in the
Request for Payment ("RETAINAGE"); less
(c) the aggregate amount of prior payments from Owner to
Contractor;
provided, however, that, except for the Final Payment made pursuant to
Section 12.7 hereof, in no event shall the cumulative amount paid for
the performance of the Work through the end of any month exceed the
cumulative amounts set forth opposite such month on the Project Cash
Flow Schedule, unless Work and related payments are accelerated
pursuant to a revised Project Schedule and Milestone Payment Plan
approved by Owner and Lender.
12.2.2 CERTIFICATION BY CONTRACTOR. In each Request for
Payment, Contractor shall certify that:
(a) such Request for Payment represents the amount to which
Contractor is entitled pursuant to the terms of this
Agreement;
(b) the Milestones described therein as satisfied have been
satisfied as agreed with Owner and the Independent Engineer;
(c) the aggregate amount of prior payments from Owner to
Contractor specified in the Invoice as "paid" have been paid;
and
33
EXECUTION COPY
(d) Contractor has paid, or will pay with the Owner's next monthly
payment to Contractor, all amounts that are due and owing to
Contractor's Subcontractors, subject only to such disputed
amounts as are specified by Contractor in the Progress Report.
12.2.3 SUBCONTRACTOR WAIVERS. Commencing with Contractor's
second Request for Payment hereunder, Contractor shall submit with each
Request for Payment a partial lien waiver in the form of Exhibit N-1
from each Subcontractor whose subcontract price exceeds ten thousand
dollars ($10,000).
12.2.4 MONTHLY PROGRESS REPORT. Contractor shall submit as
part of each Request for Payment a monthly progress report (a "PROGRESS
REPORT"), which shall be in such form as may reasonably be requested by
Owner, and which shall include, without limitation, the following:
(a) documentary evidence sufficient for Lender and Owner to
establish in their sole discretion that each Milestone
described in the Invoice has been completed;
(b) a description of the Work performed during the relevant
period, categorized by engineering, procurement, construction
and startup;
(c) a description of Work to be performed during the next period;
(d) a list of all Change Orders;
(e) a list of all items procured;
(f) safety;
(g) a vendor inspection schedule;
(h) quality control;
(i) an updated Project Schedule showing progress to date, any
failures to meet Milestones, and the current schedule of
activities;
(j) a discussion of any problems encountered during the relevant
period and remedies effected or planned;
(k) a description of any payment or other disputes with
Subcontractors;
(l) Subcontractor partial lien waivers in compliance with the
requirements of Section 12.2.3, in the form attached hereto as
Exhibit N-1.
(m) Contractor's certificate in compliance with the requirements
of Section 12.2.2, together with Contractor's partial lien
waiver in the form attached hereto as Exhibit N-3.
34
EXECUTION COPY
12.3 FAILURE TO PAY SUBCONTRACTORS. Contractor shall indemnify the
Owner-Indemnified Parties for, protect the Owner-Indemnified Parties against,
defend the Owner-Indemnified Parties from, and save and hold the
Owner-Indemnified Parties harmless from, all liabilities, claims, damages,
losses, and expenses (including reasonable attorneys' fees and court costs) that
may be imposed on, suffered or incurred by, or asserted against, any
Owner-Indemnified Party, that arise out of, or result from, events or
circumstances in any way related to, or arising out of any amount that
Contractor shall have failed to pay to any Subcontractor as compensation for the
performance of any portion of the Work, and Contractor shall assume the defense
of any suit or proceeding in connection therewith, pursuant to Section 18.3.
Owner shall not have the right to discharge or otherwise satisfy any claim by a
Subcontractor unless such Subcontractor files or imposes a Lien. In such event,
Owner's rights shall be governed by Section 3.7. Contractor's obligations in
this Section 12.3 shall in no way limit Contractor's rights under Section 3.7.
12.4 DEFICIENT REQUESTS FOR PAYMENT. Contractor shall not submit for
Owner's review and approval any Request for Payment which is nonconforming,
incomplete or inaccurate or which lacks the detail, specificity or supporting
documentation required by this Article 12. Owner and Lender shall review each
Request for Payment and may make exceptions deemed necessary or appropriate if
and to the extent such Request for Payment is deficient in any such manner. Any
Request for Payment which is deficient shall not, to the extent of any such
deficiency, constitute a valid and proper Request for Payment, and Contractor
shall be required to resubmit said Request for Payment, to the extent of any
such deficiency, in proper form before Owner incurs any obligation to make
payment of any amounts in respect of which said Request for Payment was
deficient. Owner shall pay to Contractor any amounts in respect of which said
Request for Payment was not deficient. Contractor's obligation to resubmit a
Request for Payment because of a deficiency is conditioned upon Contractor's
receipt of written notice from Owner which describes such deficiency in
reasonable detail. Contractor specifically agrees that it shall not request in
any Request for Payment the payment of any sum attributable to Work which has
been rejected by Owner or Contractor or which otherwise constitutes or relates
to a Subcontractor's application for payment, xxxxxxxx or invoices which
Contractor disputes or for any other reason does not intend to pay. A revised
Request for Payment correcting any deficiencies shall be paid by Owner in
accordance with Section 12.5.
12.5 MILESTONE PAYMENTS. If Owner shall receive a valid and true
Request for Payment including all documentation described in this Article 12
(including the Progress Report and supporting documentation), Owner shall make
payment to Contractor, or shall cause Lender to make payment to Contractor, in
the amount approved by Owner and Lender (which, in the event of a deficient
Request for Payment, shall be limited to amounts in respect of which such
Request for Payment was not deficient), subject to Sections 12.6 and 12.8, on or
before the date which is thirty (30) Days after the date Owner received such
Request for Payment.
12.6 RETAINAGE. To secure Contractor's performance of its obligations
hereunder, Contractor acknowledges and agrees that the Retainage shall be
retained from each Milestone Payment due Contractor by Owner pursuant to Section
12.5. Contractor further acknowledges that in the event amounts are due under
this Agreement from Contractor to Owner (including
35
EXECUTION COPY
Liquidated Damages payments, indemnity payments, reimbursement payments to Owner
for curing Defects and payments of damages resulting from a breach of this
Agreement), and such amounts are not paid when due, Owner shall have the right
to demand amounts under the Retainage equal to the amount owing by Contractor
(plus interest at the Contract Interest Rate).
12.7 FINAL PAYMENT.
12.7.1 After the Final Completion Date, Contractor shall
submit a final Progress Report and a final Request for Payment ("FINAL
REQUEST FOR PAYMENT") which shall set forth all amounts due and
remaining unpaid to it, and upon approval thereof by Owner, Owner shall
pay to Contractor the amount due under such Final Request for Payment
("FINAL PAYMENT"). Final Payment shall include release of any remaining
Retainage. Owner shall have no obligation to make Final Payment until
Contractor shall have delivered to Owner the final Contractor and
Subcontractor lien waivers required by Section 8.3.1(g).
12.7.2 Acceptance by Contractor of the Final Payment shall
constitute a release of Owner and every officer, employee and agent
thereof from all liens (whether statutory or otherwise and including
mechanics' or suppliers' liens), claims and liability hereunder with
respect to any Work performed or furnished in connection with this
Agreement, or for any act or omission of Owner or of any person
relating to or affecting this Agreement.
12.8 HOLDBACKS. Any provision hereof to the contrary notwithstanding,
upon the occurrence and continuance of any of the following events, Owner, upon
Notice to Contractor, may, but shall have no obligation to, withhold or retain
such portion (including all) of any payment due to Contractor under this
Agreement as reasonably necessary to ensure the performance of the Work or to
protect fully Owner's rights hereunder:
12.8.1 a Contractor Event of Default shall have occurred;
12.8.2 Contractor shall have improperly failed to make timely
payment of any taxes or other amounts due by Contractor as required by
this Agreement; or
12.8.3 Contractor shall have failed to cause the prosecution
of the Work to conform to the Project Schedule within thirty (30) Days
of receiving a notice from Owner to accelerate the Work (unless the
delay is specifically excused under the terms of this Agreement).
12.9 OFFSET. In the event Contractor owes Owner any amounts under this
Agreement and such amounts remain unpaid for thirty (30) Days after notice
thereof, Owner may offset such amounts from any future Milestone Payments.
12.10 CONTRACTOR'S CONTINUING OBLIGATION TO PERFORM. Contractor shall
not cease or reduce the rate of performance of the Work on account of any
exercise or attempted exercise by Owner of its rights of Holdback or offset
under this Article 12.
36
EXECUTION COPY
12.11 APPLICATION OF MONEYS. Contractor shall use the sums paid to it
pursuant to this Article 12 for the purpose of performing the Work and
designing, furnishing, equipping, testing and commissioning the Facility in
accordance with the Scope Document and this Agreement; provided, however, that
no provision hereof shall be construed to require Owner or Lender to see to the
proper disposition or application of the moneys so paid to Contractor.
ARTICLE 13. FORCE MAJEURE
13.1 FORCE MAJEURE EVENT
13.1.1 DEFINITION. For purposes of this Agreement, "FORCE
MAJEURE EVENT" means any act or event that prevents or delays the
affected Party from performing its obligations (other than the payment
of money) under this Agreement or from complying with any conditions
required to be complied with under this Agreement, but only if and to
the extent that such act or event is beyond the reasonable control of,
and does not arise out of the negligent act or omission of, the
affected Party and such Party has been unable by the exercise of
commercially reasonable effort to overcome or mitigate the effects of
such act or event. Force Majeure Events shall include, but not be
limited to, the following events and their direct consequences (it
being understood that if a causing event is within the reasonable
control of the affected Party, the direct consequences shall also be
deemed to be within such Party's reasonable control):
(a) flood, lightning, unusually severe storm or other
unusually severe weather conditions;
(b) earthquake, landslides, fire, or explosion;
(c) acts of declared or undeclared war, threat of
imminent violence, sabotage, revolution, terrorism,
riot, or civil disturbance; and
(d) strikes and/or other work stoppage and/or slow-downs
that are nationwide or affect an entire sector of the
relevant national economy.
A Force Majeure Event (as defined herein) to the extent applicable to a
Subcontractor, constitutes a Force Majeure Event for Contractor, to the
extent that it adversely affects performance of the Work.
13.1.2 EXCLUSIONs. Force Majeure Events shall expressly not
include the following conditions, except and to the extent that the
following conditions result directly from a Force Majeure Event:
(a) late delivery of machinery, equipment or any other
item of the Work, materials, spare parts or
consumables for the Facility;
(b) a delay in the performance of Contractor, any
Subcontractor, any agent of Contractor or any
Subcontractor or any assignee of Contractor or
failure of any such Person to comply with, and
complete, the obligations specified in this Agreement
in a timely manner; and
37
EXECUTION COPY
(c) normal wear and tear or random flaws in materials or
equipment or breakdowns in equipment.
13.2 EXCUSE FROM PERFORMANCE FOR FORCE MAJEURE EVENT. If either Party
is rendered wholly or partly unable to perform its obligations under this
Agreement because of a Force Majeure Event, that Party will be excused from
whatever performance is affected by the Force Majeure Event (other than payment
of money) to the extent so affected; provided, however, that:
(a) the non-performing Party gives the other Party Notice of the
Force Majeure Event within twenty (20) Days following the
start of such Force Majeure Event. To the extent possible,
such Notice shall describe the particulars of the occurrence,
including an estimation of its expected duration and probable
impact on the performance of such Party's obligation hereunder
to the extent practicable, and thereafter continues to furnish
timely regular reports with respect thereto during the
continuation of the Force Majeure Event. To the extent any
such particulars or estimation cannot be given with such
Notice, they shall be provided at such time as is possible in
the circumstances, but in no event later than forty five (45)
Days following the start of such Force Majeure Event;
(b) the suspension of performance is of no greater scope and of no
longer duration than is reasonably required by the Force
Majeure Event (it being understood by the Parties that the
Party who had suspended performance due to the Force Majeure
Event shall have a reasonable time period to resume such
performance after the termination of such Force Majeure Event;
provided, further, that such Party uses reasonable efforts to
resume such performance as soon as practicable);
(c) the non-performing Party exercises all reasonable efforts to
mitigate or limit damages to the other Party;
(d) the non-performing Party uses reasonable efforts to continue
to perform its obligations hereunder and to correct or cure
the event or condition excusing performance; and
(e) when the non-performing Party is able to resume performance of
its obligations under this Agreement, that Party shall give
the other Party prompt Notice to that effect and shall
promptly resume performance hereunder.
13.3 BURDEN OF PROOF. In the event that the Parties are unable in good
faith to agree that a Force Majeure Event has occurred, the Parties shall submit
the issue to dispute resolution pursuant to Article 21; provided, however, that
the burden of proof as to whether a Force Majeure Event has occurred shall be
upon the Party claiming a Force Majeure Event.
13.4 OWNER SELF-HELP. If within a reasonable time after a Force Majeure
Event that has caused Contractor to suspend or delay the Work, Owner issues an
Owner Directive that directs certain action, and Contractor has failed to take
such action as Contractor could lawfully
38
EXECUTION COPY
and reasonably initiate in accordance with such Owner Directive, Owner may,
after consultation with Contractor, initiate such reasonable measures, at
Owner's expense, as will be designed to remove or relieve such Force Majeure
Event or its direct or indirect effects and thereafter Contractor will resume
full or partial performance of the Work. The existence of Owner's remedy under
this Section 13.4 shall not prejudice any other remedies available to Owner
under this Agreement.
ARTICLE 14. SUSPENSION
14.1 OWNER'S RIGHT TO SUSPEND
14.1.1 Owner may at any time or from time to time, and for any
reason, suspend the Work or any portion thereof by giving Notice to
Contractor. Such suspension shall continue for the period specified in
Owner's Notice. At any time after the effective date of the suspension,
Owner may require Contractor to resume performance of the Work as soon
as reasonably practicable.
14.1.2 Without limitation of Owner's general right to suspend
as provided in Section 14.1.1, with respect to any proposed Change
Order, Owner may deliver a Notice to Contractor directing Contractor in
writing to suspend work, for a maximum of ten (10) Days, on that
portion of the Work affected by a contemplated change (whether or not
such change will require a modification to the Scope Document) pending
Owner's decision on such change, and the Guaranteed Substantial
Completion Date shall be extended pursuant to Section 14.4.
14.2 OBLIGATION OF CONTRACTOR. In the event the Work is suspended by
Owner as provided in Section 14.1, Contractor shall:
14.2.1 discontinue the Work to the extent practical and
specified in the Notice;
14.2.2 place no further orders or subcontracts for material,
services, or facilities other than to the extent specified in the
Notice;
14.2.3 use reasonable efforts to obtain suspension upon
reasonably satisfactory terms to Owner of all orders, subcontracts and
rental agreements to the extent they relate to performance of suspended
Work;
14.2.4 continue to protect and maintain the Work including
those portions that have been suspended, to the extent specified in the
Notice;
14.2.5 keep its organization (other than craft labor) and
equipment committed to the Work on a standby basis, to the extent
specified in the Notice; and
14.2.6 take other reasonable steps to minimize costs
associated with such suspension.
39
EXECUTION COPY
14.3 CONTRACTOR'S RIGHT OF SUSPENSION. In the event of a default by
Owner in making a payment required under Article 12, Contractor shall have a
limited right to suspend all or any portion of the Work by delivering Notice to
Owner; but only if:
(a) such payment default shall have continued for a period of
sixty (60) consecutive Days,
(b) Owner shall have failed to cure such default within ten (10)
Days after receipt from Contractor of Notice of such default,
(c) such default shall be in respect of a payment about which
there is no dispute as to amount, and
(d) the failure by Owner to make such payment shall not be an
exercise by Owner of its rights under Article 12 or pursuant
to any other provision of this Agreement.
The suspension under this Section 14.3 shall terminate upon receipt by
Contractor of the payment referred to in Contractor's Notice, at which time
Contractor shall immediately recommence performance of the Work.
14.4 EXTENSION OF TIME. In the case of any suspension(s) of the Work
pursuant to this Article 14, the Guaranteed Substantial Completion Date and the
Guaranteed Final Completion Date shall be extended by a period that Contractor
demonstrates is reasonably necessary to make up for the suspension, but not to
exceed the duration of the suspension (including a reasonable time for
remobilization), and the Project Schedule and any other schedule affected by
such suspension shall be adjusted by Contractor, in consultation with Owner and
subject to Owner's and Lender's prior written consent, which consent shall not
be unreasonably withheld. Any such extension or modification may be implemented
only by a Change Order.
14.5 COMPENSATION OF CONTRACTOR. In the case of any suspension(s) of
the Work pursuant to this Article 14, Owner shall compensate Contractor for
those direct costs that are both
(a) attributable solely to a suspension of items of Work, and
(b) documented by Contractor to the reasonable satisfaction of
Owner.
All claims by Contractor for compensation under this Article 14 must be made
within thirty (30) Days after the suspension has ended and the Work has been
either terminated or resumed. Owner shall pay Contractor for such direct costs
incurred under this Article 14 as a part of the next monthly payment, in
accordance with Article 12.
ARTICLE 15. DEFAULT AND TERMINATION
15.1 CONTRACTOR DEFAULT. The occurrence of any of the events set forth
below shall constitute a "CONTRACTOR EVENT OF DEFAULT" under this Agreement:
40
EXECUTION COPY
15.1.1 Contractor becomes insolvent, or generally does not pay its
debts as they become due, or admits in writing its inability to pay its debts,
or makes an assignment for the benefit of creditors;
15.1.2 Contractor files a petition for relief under any present or
future law regarding bankruptcy, reorganization or other relief to debtors, or,
makes a general assignment for the benefit of its creditors, or applies for a
receiver, trustee, custodian or liquidator for Contractor, or any of its
property, or files a petition, or commences any other procedure to liquidate or
dissolve Contractor;
15.1.3 Contractor fails to effect a full dismissal of any involuntary
petition under any present or future law regarding bankruptcy, reorganization or
other relief to debtors, that is filed against Contractor prior to the earlier
of (a) the entry of any order granting relief sought in the involuntary
petition, or (b) thirty (30) Days after the date of filing of the petition;
15.1.4 Contractor fails to pay (i) any amounts payable under Article
22, Section 15.2.2 or Section 3.7, or (ii) any other amounts in excess of fifty
thousand dollars ($50,000) in the aggregate payable under any provision of this
Agreement within thirty (30) Days after the due date therefor;
15.1.5 Contractor fails to comply with any Governmental Rule or
Governmental Approval in any material respect, and Contractor fails to remedy
either such failure within ten (10) Business Days after receipt of a Notice from
Owner of the occurrence or existence of such failure or, if such remedy cannot
reasonably be completed within such period, Contractor fails promptly to
commence and diligently pursue remedial action within such period and conclude
such action as soon as practicable but in any event within thirty (30) Days;
15.1.6 Contractor fails to discharge any Lien or to provide adequate
assurances or security therefor as required by Section 3.7, and (i) Contractor
fails to remedy same within ten (10) Business Days after the earlier of receipt
of a Notice from Owner of the occurrence or existence of such failure or the
date Contractor becomes aware or reasonably should have become aware of the
occurrence or existence of such failure or, (ii) if Owner has elected to
discharge such Lien as provided by Section 3.7, Contractor fails promptly to
reimburse Owner within ten (10) Business Days after receipt of a Notice from
Owner demanding such reimbursement;
15.1.7 Any representation or warranty made by Contractor in this
Agreement was or becomes incorrect or misleading in any material respect and
Contractor fails to remedy same within ten (10) Business Days after receipt of
Notice from Owner of the occurrence or existence of such event or condition, or,
if such remedy cannot reasonably be completed within such period, Contractor
fails promptly to commence and diligently pursue remedial action within such
period and conclude such action as soon as practicable but in any event within
thirty (30) Days;
41
EXECUTION COPY
15.1.8 The termination, repudiation, failure to maintain or
default under the Surety Bond; provided, however, that in the event
termination of the Surety Bond is due to insolvency of the surety,
Contractor shall be granted thirty (30) Days from the date of such
termination within which to replace the Surety Bond with a replacement
surety bond or other security acceptable to Owner and Lender that
provides no less security than the Surety Bond, and a Contractor Event
of Default shall occur only (i) upon a failure of Contractor to provide
such substitute security within such thirty (30) Day period, or (ii)
immediately, and without opportunity to cure, in the event a separate
event that gives rise to a Contractor Event of Default occurs within
such thirty (30) Day period;
15.1.9 Contractor assigns or transfers this Agreement or any
right or interest herein except as expressly permitted under Article
20;
15.1.10 Contractor fails to achieve the Substantial Completion
Date by the Date Certain;
15.1.11 Contractor fails to maintain the insurance coverages
required under Article 16; provided, however, that in the event lapse
of insurance coverage required by Section 16.1.1 is due to insolvency
of the insurer, Contractor shall be granted five (5) Business Days from
the date of such lapse within which to replace such coverage with
coverage meeting the relevant requirements of Article 16, and a
Contractor Event of Default shall occur only (i) upon a failure of
Contractor to provide such replacement coverage within such period of
five (5) Business Days, or (ii) immediately, and without opportunity to
cure, in the event a separate event that gives rise to a Contractor
Event of Default occurs within such period of five (5) Business Days;
15.1.12 Contractor shall abandon the Work on the Facility and
fail to resume the Work (or commence diligent re-mobilization) within
five (5) Business Days after receipt of Notice from Owner;
15.1.13 There occurs a material default by Contractor in its
performance under any other provision of this Agreement and Contractor
fails to remedy same within ten (10) Business Days after receipt of
Notice from Owner of the occurrence or existence of such default, or,
if such remedy cannot reasonably be completed within such period,
Contractor fails promptly to commence and diligently pursue remedial
action within such period and conclude such action as soon as
practicable but in any event within thirty (30) Days; or
15.1.14 There occurs a default by Contractor in its
performance under the Coordination Agreement.
15.2 OWNER'S DEFAULT REMEDIES AGAINST CONTRACTOR. If a Contractor Event
of Default shall have occurred and be continuing, in addition to any other
rights and remedies available to Owner hereunder or at law or in equity, Owner
shall have any or all of the following rights and remedies:
15.2.1 Owner, without prejudice to any of its other rights or
remedies, may terminate this Agreement by a Notice of termination to
Contractor.
42
EXECUTION COPY
15.2.2 Owner, without incurring any liability to Contractor, shall have
the right to have the Work (or a scope of work substantially similar to the
Work) finished by another EPC contractor of Owner's choosing. In such event:
15.2.2.1 If requested by Owner, Contractor shall take any or
all of the following actions: (i) withdraw from the Site, (ii) assign
to Owner or its assigns at such time as Owner may request (either
before or after a new EPC contractor has been selected to finish the
Work) such of Contractor's subcontracts as Owner may request, (iii)
remove such materials, equipment, tools and instruments used and any
debris or waste materials generated by Contractor in the performance of
the Work as Owner may direct, (iv) deliver to Owner all temporary
facilities (other than leased facilities) related to the Work; and (v)
deliver to Owner all materials, designs, equipment, purchase orders,
correspondence, schedules, drawings, and facilities of Contractor that
Owner deems necessary to complete the Work.
15.2.2.2 Contractor shall be liable to Owner for the costs
reasonably incurred by Owner resulting therefrom, including (a) the
costs for such other EPC contractor, including costs associated with
accelerated construction activities to achieve Substantial Completion
by the Date Certain, if applicable, compensation for professional
services and any financing costs, (b) the costs of administering such
other EPC contract, and (c) Owner's and Lender's legal fees associated
with the foregoing. Such costs for which Contractor is liable under
this Section 15.2.2 (and for the cost, if any, of Contractor's failure
to perform as may be requested pursuant to Section 15.2.2.1) may be
deducted by Owner out of monies due, or that may at any time thereafter
become due, to Contractor. If such costs exceed the unpaid balance of
the Contract Price, then Contractor shall be liable for and shall
promptly, but in any event not more than ten (10) Business Days after
Notice from Owner, pay to Owner the amount of such excess, excluding
changes in the Work approved by Owner following such Contractor Event
of Default, subject to Section 15.2.5. Owner shall use reasonable
efforts to mitigate its damages following the replacement of Contractor
with another EPC contractor.
15.2.2.3 In the event Owner exercises its rights in accordance
with this Section 15.2.2 and enters into an agreement with another EPC
contractor to complete the Work and such contractor commences work at
the Site, then:
(i) Contractor shall have no further liability or
obligation to perform the Work (except as set forth
in clause (ii) below) and Owner shall have no further
liability or obligation to make payments to
Contractor for the Work except as set forth in
Section 15.2.3;
(ii) Contractor shall have no further liability or
obligation to comply with its warranty obligations
under Article 9 to the extent the new EPC contractor
agrees to provide such warranties to cover the Work
performed by Contractor on terms that are
substantially the same for Owner as set forth in this
Agreement, provided that if the
43
EXECUTION COPY
new EPC contractor does not provide such warranties
on terms that are substantially the same for Owner as
set forth in this Agreement then Contractor shall
continue to be liable for the warranty obligations in
Article 9 of this Agreement;
(iii) Contractor shall have no further liability or
obligation to conduct the Performance Tests; and
(iv) except for Liquidated Damages which had accrued but
were unpaid as of the date Owner entered into an
agreement with another EPC contractor to complete the
Work and Contractor withdrew from the Site,
Contractor shall have no further obligation or
liability to pay Liquidated Damages;
provided, however, that the remaining obligations of Owner and
Contractor under this Agreement shall remain effective unless otherwise
terminated as set forth herein; and provided further that,
notwithstanding anything to the contrary set forth in this Section
15.2.2.3, Contractor shall remain obligated to make any and all
payments in accordance with Section 15.2.2.2.
15.2.2.4 In the event Owner exercises any of its rights in
accordance with Section 15.2.2.1 and Contractor complies with Owner's
request which compliance prevents Contractor from performing the Work,
then Contractor's obligations to perform the Work shall be suspended
until (i) Owner enters into an agreement with another EPC contractor to
complete the Work and such contractor commences work at the Site, in
which case the provisions of Section 15.2.2.3 shall apply, or (ii)
Owner requests Contractor in writing to recommence the Work, in which
case Contractor shall recommence the Work following reasonably
necessary time for remobilization.
15.2.3 Contractor shall promptly submit to Owner an invoice for
Milestone Payments and other payments owed as of the date of termination or as
of the date Owner has entered into an agreement with another EPC contractor and
such contractor has commenced work at the Site, plus a prorated portion of the
Milestone Payment immediately next due after the date of termination or the date
Owner has entered into an agreement with another EPC contractor and such
contractor has commenced work at the Site, for Work completed. If Owner elects
not to complete the Work with a replacement EPC contractor as provided in
Section 15.2.2, then Owner shall pay Contractor such amounts (unless disputed)
within thirty (30) Days of Contractor's invoice. If Owner elects to complete the
Work and its costs are less than the Contract Price, such amounts (unless
disputed) shall become due and payable to Contractor thirty (30) Days following
Owner's final payment to the replacement EPC contractor, subject to setoff of
any amounts due Owner pursuant to Section 15.2.2.
15.2.4 Owner may, in addition to any other remedy it may have in equity
or at law: (i) exercise its rights under the Surety Bond; and/or (ii) take title
to Retainage amounts and Holdback amounts, in each case as an offset or to
satisfy any amounts due
44
EXECUTION COPY
under this Agreement (including, without limitation, Liquidated
Damages, indemnity payments or damages for breaches of this Agreement
by Contractor).
15.2.5 Notwithstanding anything in this Agreement to the
actual or apparent contrary, in no event shall Owner's remedies in the
event of the occurrence of a Contractor Event of Default entitle Owner
to any remedies (individually or cumulatively) that would result in
Contractor being liable for damages in excess of the limits of
liability (based upon the nature of the default) set forth in Article
23.
15.3 TERMINATION BY OWNER FOR CONVENIENCE. Owner may, in its sole
discretion, terminate this Agreement or terminate the Work in part, at any time,
without a Contractor Event of Default, in accordance with this Section 15.3.
Owner shall exercise such right of termination by giving reasonable Notice of
termination to Contractor.
15.3.1 PAYMENTS TO CONTRACTOR UPON TERMINATION FOR
CONVENIENCE.
(a) If a Notice of termination is received by Contractor
pursuant to this Section 15.3 prior to the Notice to
Proceed Date, Contractor shall not receive any
compensation for such termination.
(b) If, after the Notice to Proceed Date and before Final
Completion, Owner elects to terminate this Agreement
pursuant to this Section 15.3, Owner shall pay
Contractor the Milestone Payments, without reduction
for retainage, and other payments owed as of the date
of Owner's Notice of termination for Work completed,
plus a prorated portion of the Milestone Payment
immediately next due for Work completed, without
deduction for retainage, plus all retainage retained
from each Milestone Payment previously paid, plus all
Contractor's costs reasonably incurred incident to
the termination, including actual and reasonable
Subcontractor cancellation costs, demobilization
costs, and all impact costs for any work performed
after termination consistent with Prudent Industry
Practices; provided, however, that the amount owed
pursuant to this Section 15.3.1 shall be subject to
adjustment to the extent any Work contains Defects;
and, provided, further, that Contractor shall use its
reasonable efforts to minimize costs that arise
between the date of its receipt of a Notice of
termination and the effective date thereof, including
by promptly notifying its Subcontractors of such
termination.
(c) Contractor shall promptly submit to Owner an
accounting of amounts owed in accordance with Section
15.3.1(b). Owner shall pay Contractor such amounts
(unless disputed) not later than thirty (30) Days
after receipt of Contractor's accounting; provided,
however, that Owner may withhold a portion of the
payment to the extent that Contractor has not
delivered to Owner a portion of the Work for which
payment has been or under Section 15.3.1(b) will be
made.
45
EXECUTION COPY
15.3.2 LIABILITY OF CONTRACTOR UPON TERMINATION FOR
CONVENIENCE. If Owner terminates this Agreement without Contractor
default, then the liability of Contractor to Owner arising from or
relating to the Work shall thereupon cease, other than (a) the
obligation to complete termination activities, (b) liability for
injuries to persons or damage to third party property occurring prior
to the termination of the Work, to the extent caused by Contractor's or
any Subcontractor's fault or negligence, and (c) Contractor's
obligations under Section 3.6, regardless of whether any such liability
may be based on contract, guarantee, warranty, professional liability
or otherwise.
15.3.3 OTHER EFFECTS OF TERMINATION FOR CONVENIENCE.
15.3.3.1 If requested by Owner, Contractor shall (i)
withdraw from the Site, (ii) assign to Owner such of
Contractor's subcontracts as Owner may request (upon which
Contractor shall be released from any further obligation or
liability to Owner with respect to such subcontracts), (iii)
remove such materials, equipment, tools and instruments used
and any debris or waste materials generated by Contractor in
the performance of the Work as Owner may direct, and (iv)
deliver to Owner all EPC Data and Information and temporary
facilities as Owner shall have paid for or pays for upon
termination.
15.3.3.2 Owner and Contractor shall use reasonable
efforts to mitigate costs incident to termination of Work,
continuing executory obligations, and cancellation charges.
Contractor shall execute all documents and take all other
reasonable steps requested by Owner or its assignee which may
be required or reasonably necessary to vest in Owner or its
assignee all rights, set-offs, benefits, and titles necessary
to such assumption by Owner or its assignee of such
obligations.
15.4 OWNER DEFAULT. It shall be an "OWNER EVENT OF DEFAULT" under this
Agreement if Owner fails to make any payment to Contractor when due pursuant to
the terms of this Agreement and Owner fails to remedy same within thirty (30)
Days after receipt of Notice from Contractor of the occurrence or existence of
such failure. In the event of an Owner Event of Default, Contractor, in addition
to any other rights and remedies available to Contractor, may terminate this
Agreement by written Notice of termination to Owner, whereupon the provisions of
Sections 15.3.1(b) and (c) shall apply, or Contractor may continue to perform
its obligations under this Agreement; provided, however, that this Section 15.4
shall not limit Owner's right to terminate this Agreement under Section 15.3.
ARTICLE 16. INSURANCE
16.1 CONTRACTOR FURNISHED INSURANCE.
16.1.1 CONTRACTOR COVERAGES. Contractor shall procure and
maintain in full force and effect, during the time periods specified
below, the following categories of insurance coverages, with insurance
carriers authorized to do business in Ohio having a Best Rating of at
least "A-, 9" or better, unless otherwise approved by Owner, such
approval not to be unreasonably withheld.
46
EXECUTION COPY
16.1.1.1 Commercial General Liability Insurance. Coverage against
claims for bodily injury (including death) and third party property damage. Such
insurance shall be on an occurrence basis from the Notice to Proceed Date until
the end of the Warranty Period and shall provide coverage for completed
operations (which coverage shall remain in effect for a period of two (2) years
following the Final Completion Date), blanket contractual, explosion, collapse
and underground coverage, broad form property damage and personal injury
insurance with a limit of one million dollars ($1,000,000) for each occurrence
for combined bodily injury and property damage, two million dollars ($2,000,000)
general aggregate, and two million dollars ($2,000,000) completed operations
aggregate.
16.1.1.2 Comprehensive Automobile Liability. Coverage against liability
arising out of any auto (including all owned, leased, non-owned and hired
vehicles) with limits of one million dollars ($1,000,000) combined single limit
for bodily injury and property damage each accident, which shall cover the
period from the Notice to Proceed Date until the end of the Warranty Period.
16.1.1.3 Workers Compensation Insurance. As required by state laws for
all employees of Contractor, including employer's liability insurance for all
employees of Contractor with limits of one million dollars ($1,000,000) bodily
injury for each accident, one million dollars ($1,000,000) bodily injury by
disease for each employee, and one million dollars ($1,000,000) bodily injury
disease policy limit. If required, Longshoreman's and Harbor Worker's
Compensation Act and Xxxxx Act coverage will be included. Such insurance shall
cover the period from the Notice to Proceed Date until the end of the Warranty
Period.
16.1.1.4 Umbrella/Excess Liability Insurance. Excess liability
insurance on an occurrence basis from the Notice to Proceed Date until the Final
Completion Date, providing coverage in excess of underlying insurance described
in Sections 16.1.1.1, 16.1.1.2 and 16.1.1.3 which is at least as broad as each
and every one of the underlying policies with limits of twenty million dollars
($20,000,000) per occurrence and annual aggregate limit.
16.1.1.5 Watercraft Liability. If watercraft are used during
construction, Owner and Contractor shall negotiate the details of any insurance
coverage prior to the use of such watercraft.
16.1.1.6 Aircraft Insurance. If the performance of the Work requires
the use of any aircraft that is owned, leased or chartered by the Contractor or
its Subcontractors, aircraft liability insurance with a ten million dollars
($10,000,000) minimum limit per occurrence for property damage and bodily
injury, including passengers and crew.
47
EXECUTION COPY
16.1.2 OTHER REQUIREMENTS.
16.1.2.1 Commercial General and Excess Liability Insurance
carried pursuant to Sections 16.1.1.1 and 16.1.1.4 shall provide a
separation of insureds and severability of interest provision which
shall provide that, inasmuch as the policy is written to cover more
than one insured, all terms, conditions, insuring agreements and
endorsements, with the exception of limits of liability, shall operate
in the same manner as if there were a separate policy covering each
insured.
16.1.2.2 Contractor and Lender shall be included as insureds
in the policies in Section 16.2. Owner and Lender shall be additional
insureds in the policies in Sections 16.1.1.1, 16.1.1.2, 16.1.1.4,
16.1.1.5 and 16.1.1.6 as a result of their respective liabilities
arising from the Work. Owner and Contractor will mutually agree on
other entities to be included as insureds or additional insureds. All
insurance required of Contractor shall include a waiver of subrogation
in favor of Owner and Lender and shall be primary and not excess to or
on a contributing basis with any similar project specific insurance or
self-insurance maintained by Owner and Lender. The loss payee for
policies in Sections 16.2.1.1, 16.2.1.4 and 16.2.1.6 shall be
Contractor, up to a maximum of one million dollars ($1,000,000) in
respect of each claim, and Lender to the extent a claim exceeds one
million dollars ($1,000,000). Lender shall be the loss payees for the
policies under Section 16.2.1.5 and 16.2.1.7.
16.1.2.3 All policies shall provide that they may not be
canceled, non-renewed, or changed with respect to the requirements of
this Article 16 without forty five (45) Days prior written Notice to
Owner and Lender, with the exception of ten (10) Days for nonpayment of
premium.
16.1.3 INSURANCE POLICIES/CERTIFICATES. As a condition to the issuance
of the Notice to Proceed (or as otherwise specified above), Contractor shall
furnish Owner with evidence of the insurance required by this Section 16.1,
signed by a duly authorized representative for its insurer(s), in a format of
insurance certificate(s) reasonably satisfactory to Owner and Lender, including
reference to the endorsements as required by this Section 16.1. All such
insurance certificates shall include, but not be limited to, the type of
insurance, the limits of insurance, the policy term, the name(s) of the
insurance company (or companies).
16.1.4 GENERAL INTERPRETATION OF CONTRACTOR INSURANCE OBLIGATIONS.
Deductibles, limits, and coverages stated in Section 16.1 are subject to
reasonable commercial availability in the market place and may change as a
result of restrictions, reductions, and/or cancellations of cover of the
insurance and/or material increases in cost of such insurance. Owner, Lender and
Contractor shall negotiate in good faith the effects of any such changes.
16.1.5 SUBCONTRACTOR INSURANCE. Before permitting any Subcontractors to
perform any Work on the Site, Contractor shall obtain a certificate of insurance
from
48
EXECUTION COPY
each such Subcontractor evidencing that such Subcontractor has obtained
insurance in such amounts and against such risks as is consistent with
Contractor's customary practices for such types of subcontracts for projects of
similar type and capacity as the Facility, provided that such insurance shall at
least be in such amounts and against such risks as is customarily carried by
persons engaged in similar businesses in the same geographic area.
16.1.6 WAIVER OF SUBROGATION. All insurance policies supplied by
Contractor shall include a waiver of any right of subrogation of the insurers
thereunder against Owner, the Subcontractors, Lender and all their assigns,
subsidiaries, affiliates, employees, insurers and underwriters and of any right
of the insurers to any set-off or counterclaim or any other deduction, whether
by attachment or otherwise, in respect of any liability of any such person
insured under any such policy.
16.1.7 NO LIMITATION OF LIABILITY. The required coverages referred to
and set forth in this Article shall in no way affect, nor are they intended as a
limitation of, Contractor's liability with respect to its performance of the
Work except as expressly provided elsewhere.
16.2 OWNER FURNISHED INSURANCE.
16.2.1 OWNER COVERAGES. Owner shall procure and maintain in full force
and effect, during the periods of time specified below, the following insurance
coverage, with insurance carriers authorized to do business in Ohio, having a
Best Rating of at least "A-, 9" or better, unless otherwise approved by
Contractor, such approval not to be unreasonably withheld.
16.2.1.1 Permanent Property Insurance. Beginning on the Notice
to Proceed Date and until the Final Completion Date, Owner shall
maintain at Owner's cost and expense "all-risk" property insurance
(including boiler and machinery) subject to normal policy exclusions
for the full replacement cost of the Facility, including business
interruption coverage. Contractor and Lender shall be additional
insureds as their interests may appear. Owner shall obtain waivers of
subrogation in favor of Contractor, its Affiliates and Subcontractors
and Lender from its permanent property insurers.
16.2.1.2 Commercial General Liability Insurance. From the
Notice to Proceed Date and until the Final Completion Date, coverage
against claims for bodily injury (including death) and third party
property damage. Such insurance shall be on an occurrence basis and
shall provide coverage for products -completed operations, blanket
contractual, explosion, collapse and underground coverage, broad form
property damage and personal injury insurance with a limit of one
million dollars ($1,000,000) for each occurrence for combined bodily
injury and property damage, two million dollars ($2,000,000) general
aggregate, and two million dollars ($2,000,000) products and completed
operations aggregate. Except to the extent coverage is afforded Owner
as additional insured under the insurance described in Sections
16.1.1.1 and 16.1.1.4, Owner's
49
EXECUTION COPY
insurance under this Section shall be primary and not excess to or on a
contributing basis with the insurance carried by Contractor under
Sections 16.1.1.1 and 16.1.1.4. Owner shall obtain waivers of
subrogation in favor of Contractor, its Affiliates and Subcontractors
and Lender from its commercial general liability insurers.
16.2.1.3 Pollution Legal Liability Insurance. From the Notice
to Proceed Date, and for at least one (1) year after the Final
Completion Date, Pollution Legal Liability Insurance coverage with
limits of at least ten million dollars ($10,000,000) insuring Owner,
Contractor and its Subcontractors for clean up costs on and/or off the
Site, as well as bodily injury and property damage to third parties on
and/or off the Site. The coverage shall include Contractor and its
Subcontractors and Lender as additional insureds and shall provide for
a waiver of subrogation in favor of Contractor, its Affiliates and
Subcontractors and Lender. Owner shall provide Contractor with a copy
of the agreed to policy form and completed application of such
Pollution Legal Liability Insurance at least ten (10) Business Days
prior to issuance of the Notice to Proceed and Contractor shall provide
Owner with any comments on the form within five (5) Business Days after
receipt of such form. Owner shall make reasonable efforts to
incorporate any requested changes by Contractor. Notwithstanding
anything to the contrary in Section 16.1, this insurance shall be
primary and not excess to or on a contributing basis with any insurance
carried by Contractor.
16.2.1.4 Builders Risk Insurance. Coverage shall be provided
on an "all risk" basis insuring the Facility and all materials and
equipment to be incorporated therein (excluding Contractor's tools and
equipment), and include coverage for physical loss or damage caused by
acts of God including windstorm, hail, lightning, tornado, earthquake,
flood, and volcanic eruption. The insurance shall be provided on a
replacement cost basis and shall not include any coinsurance penalty
provision. The limits of insurance shall not be less than the full
replacement cost value of the completed plant with sublimits
permissible for the perils of inland transit, temporary off site
storage, windstorm, hail, lightning, tornado, earthquake, flood and
volcanic eruption. The policy shall provide coverage for (1) removal of
debris, (2) inland transit, (3) off-site storage coverage, (4)
expediting expense, (5) demolition and increased cost of construction,
(6) cold and hot performance testing coverage, and (7) physical loss or
damage resulting from design error, faulty workmanship or defective
material (minimum DE-4 or LEG-2 coverage extension, subject to
commercial availability). Coverage shall be effected at the Notice to
Proceed Date and shall cease on the Final Completion Date. The
deductible for all such insurance shall not exceed: (i) five hundred
thousand dollars ($500,000) for performance testing coverage, (ii) five
hundred thousand dollars ($500,000) for windstorm, hail, lightning,
tornado, earthquake, flood, and volcanic eruption, and (iii) two
hundred fifty thousand dollars ($250,000) for all other physical damage
losses. Contractor and Lender shall be included as additional insureds
in such policy, and such coverage shall include Contractor's temporary
facilities at the Site.
50
EXECUTION COPY
16.2.1.5 Delay in Start Up Insurance. Insuring against delay
of Substantial Completion beyond the Guaranteed Substantial Completion
Date and against delay of Final Completion beyond the Guaranteed Final
Completion Date as a result of physical loss or damage covered by the
Builder's Risk insurance policy described in Section 16.2.1.4 above,
including contingent delay resulting from physical loss or damage to
materials and equipment at the facilities of manufacturers or suppliers
who are first tier Subcontractors. Such coverage shall have limits in
per occurrence amount equal to twelve (12) months of continuing
expenses and debt service including but not limited to interest expense
and such other kinds of insurable loss as Owner may direct Contractor
to schedule, with a twelve (12) month indemnity period. The policy
deductible shall not exceed forty-five (45) Days waiting period.
16.2.1.6 Marine Cargo Insurance. Owner shall procure Marine
Cargo Insurance on a warehouse to warehouse basis, insuring equipment
to be installed and/or temporary contract works in the Facility against
physical loss or damage arising from customary "all risk" marine perils
(including war, strikes, riots, and civil commotion) while in transit
by water and/or air. The policy limit will equal one hundred and ten
percent (110%) of the largest single shipment cost (including freight
and insurance), plus any customs duties. Coverage shall be effective
forty five (45) Days prior to the first shipment of equipment or
material to be shipped and shall remain in effect until completion of
all shipments. The deductible for all such insurance shall not exceed
fifty thousand dollars ($50,000) per occurrence.
16.2.1.7 Marine Cargo Delay in Start Up Insurance. Insuring
against delay of Substantial Completion beyond the Guaranteed
Substantial Completion Date and against delay of Final Completion
beyond the Guaranteed Final Completion Date as a result of physical
loss or damage covered by the Marine Cargo insurance policy described
in Section 16.2.1.6 above. Such coverage shall have limits on a per
occurrence basis insuring the equivalent of twelve (12) months Owner's
debt service, including but not limited to interest expense and such
other kinds of insurable loss as Owner may direct Contractor to
schedule with a twelve (12) month indemnity period. Coverage shall be
effective forty five (45) Days prior to the first shipment of equipment
or material to be shipped and shall remain in effect until completion
of all shipments. The policy deductible shall not exceed thirty (30)
Days waiting period.
16.2.1.8 Owner Evidence. Owner shall furnish Contractor with
evidence of the insurance required by this Section 16.2 signed by a
duly authorized representative for its insurer(s), in a format of
insurance certificate(s) reasonably satisfactory to Contractor,
including reference to the endorsements as required by this Section
16.2. All such insurance certificates shall include, but not be limited
to, the type of insurance, the limits of insurance, the policy term,
the name(s) of the insurance company (or companies). Owner shall
furnish Contractor certificates evidencing coverage prior to the Notice
to Proceed Date and a copy of the Pollution Insurance policy within
ninety (90) Days thereafter.
51
EXECUTION COPY
All such insurance certificates shall represent that the
policies may not be canceled or changed with respect to the
requirements of this Section 16.2 without forty five (45) Days
prior written notice to Contractor, with the exception of ten
(10) Days for nonpayment of premium.
16.2.2 WAIVER OF SUBROGATION. All insurance policies supplied
by Owner shall include a waiver of any right of subrogation of the
insurers thereunder against Contractor, the Subcontractors, Lender and
all their assigns, subsidiaries, affiliates, employees, insurers and
underwriters and of any right of the insurers to any set-off or
counterclaim or any other deduction, whether by attachment or
otherwise, in respect of any liability of any such person insured under
any such policy.
ARTICLE 17. TITLE AND RISK OF LOSS
17.1 PROVISION OF CLEAR TITLE. Contractor warrants good title to all
materials, equipment, tools and supplies that it or its Subcontractors furnish
and that become part of the Facility or are purchased for Owner for the
operation, maintenance, or repair thereof. Title to all or a portion of said
materials, equipment, tools and supplies shall pass to Owner upon the earliest
of (a) payment for such materials, equipment, tools or supplies, (b) the date
such materials, equipment, tools or supplies are delivered to the Site, (c)
termination of this Agreement, or (d) the Substantial Completion Date. All
drawings, specifications, documents, engineering and other data furnished or to
be furnished by Contractor in performing the Work are property of Owner and may
be used by Owner for any purpose relating to the Facility, including operation,
maintenance, repair and alteration of the Facility. Contractor shall take or
cause to be taken all steps reasonably necessary under Governmental Rules to
protect Owner's title and to protect Owner against claims by other parties with
respect thereto.
17.2 CARE, CUSTODY AND CONTROL; RISK OF LOSS. From the Notice to
Proceed Date until the earlier to occur of the Substantial Completion Date or
termination of this Agreement, Contractor shall retain care, custody and control
of, and bear the risk of physical loss or damage to, the Facility, materials and
supplies to be incorporated into the Facility that are at or in transit to the
Site, temporary facilities and Contractor's equipment. Contractor shall retain
such care, custody and control, and such risk of loss, notwithstanding that
title to materials and equipment incorporated or to be incorporated into the
Facility will have passed to Owner as provided in Section 17.1, and
notwithstanding that physical loss or damage may be caused by Owner, its
Affiliates or its other contractors.
17.3 SAFE DELIVERY. Contractor shall be responsible for the safe
delivery of all materials, equipment, supplies and other items to the Site.
ARTICLE 18. INDEMNIFICATION
18.1 GENERAL INDEMNIFICATION OBLIGATIONS.
18.1.1 CONTRACTOR'S INDEMNIFICATION OBLIGATION. Without
limiting other rights and remedies of Owner under this Agreement, to
the fullest extent permitted by law, Contractor assumes liability for,
and agrees to indemnify, protect and defend, save and
52
EXECUTION COPY
hold harmless Owner, its Affiliates, any Lender, the Independent
Engineer, the Operator, and their respective members, employees,
agents, officers, assigns, partners, directors and anyone else acting
for or on behalf of them and any of their respective assigns (each, an
"OWNER-INDEMNIFIED PARTY"), from and against all liabilities, claims,
damages, losses, and expenses (including reasonable attorneys' fees and
court costs) that may be imposed on, suffered or incurred by, or
asserted against, any Owner-Indemnified Party, that arise out of, or
result from, events or circumstances in any way related to, or arising
out of:
(a) Contractor's (or any Subcontractor's) fraud, negligence,
intentional act or omission, willful misconduct or breach of
Government Rules or Government Approvals relating to the Work,
the Site, the Facility and/or this Agreement;
(b) design, materials, engineering, construction or workmanship of
Contractor or any Subcontractor or the execution of the Work;
(c) breach of this Agreement by Contractor;
(d) any third-party claims (including lien claims) relating to the
Work, the Site (if such claim relates to the period of
Contractor's or any Subcontractor's performance of the Work),
and/or this Agreement;
(e) claims by any Governmental Unit for taxes based on income or
profits of Contractor with respect to any payment for the Work
made to or earned by Contractor under the terms of this
Agreement or based on employee or payroll taxes with respect
to Contractor's employees, and losses and liabilities arising
from any legal obligation that Owner may have, in Owner's sole
discretion, to withhold amounts from, or deduct any tax at the
source from, payments due to Contractor (which in each case
shall be treated as paid to Contractor for purposes of this
Agreement) or the assertion of any tax payable by Contractor
or any Subcontractor against Owner;
(f) the performance of the Work under any workers' compensation,
disability or similar benefit act;
(g) the vitiation of any insurance policies due to Contractor's or
any Subcontractor's breach of warranty, declaration or
condition contained in any insurance policy, including the
provision of false and misleading information;
(h) the performance of the Work under Government Rules or
Government Approvals relating to the protection of adjacent
landowners; or
(i) any claim, loss or penalty arising in connection with
Hazardous Wastes or Materials generated at the Site by
Contractor or its Subcontractors or suppliers in performing
the Work and for the handling by any of the foregoing other
than in accordance with Governmental Rules, Governmental
Approvals and Prudent Industry Practices, or otherwise arising
in connection with any and all liabilities assumed by or
allocated to Contractor pursuant to Section 3.6;
53
EXECUTION COPY
except as may be caused by Owner's negligence or willful misconduct.
18.1.2 OWNER'S INDEMNIFICATION OBLIGATION. Without limiting
other rights and remedies of Contractor under this Agreement, to the
fullest extent permitted by law, Owner assumes liability for, and
agrees to indemnify, protect and defend, save and hold harmless
Contractor, its Affiliates, and their respective members, employees,
agents, officers, assigns, partners, directors and anyone else acting
for or on behalf of them and any of their respective assigns (each, a
"CONTRACTOR-INDEMNIFIED PARTY") from and against all liabilities,
claims, damages, losses, and expenses (including reasonable attorneys'
fees and court costs) that may be imposed on, suffered or incurred by,
or asserted against, any Contractor-Indemnified Party, that arise out
of, or result from, events or circumstances in any way related to, or
arising out of:
(a) Owner's fraud, negligence, intentional act or omission,
willful misconduct or breach of Government Rules or Government
Approvals relating to the Work, the Site, the Facility and/or
this Agreement;
(b) breach of this Agreement by Owner;
(c) claims by any Governmental Unit for payment of sales taxes or
for employee or payroll taxes with respect to Owner's
employees;
(d) the vitiation of any insurance policies due to Owner's breach
of warranty, declaration or condition contained in any
insurance policy, including the provision of false and/or
misleading information; or
(e) any claim, loss or penalty arising in connection with
Hazardous Wastes or Materials existing at the Site prior to
commencement of the Work or transported to the Site by Owner
or by Owner's contractors or suppliers and for the handling by
any of the foregoing other than in accordance with
Governmental Rules, Governmental Approvals and Prudent
Industry Practices, or otherwise arising in connection with
any and all liabilities assumed by or allocated to Owner
pursuant to Section 2.7, but not including any liabilities
allocated to Contractor pursuant to Section 3.6;
except as may be caused by Contractor's negligence or willful
misconduct.
18.2 INDEMNITIES AGAINST INTELLECTUAL PROPERTY INFRINGEMENT.
18.2.1 CONTRACTOR'S IP INDEMNITIES. Contractor shall defend,
indemnify and hold harmless each Owner-Indemnified Party against all
liabilities, claims, losses, damages and expenses (including attorneys'
fees and court costs) arising from or reasonably incurred in defending
any claim or legal action for unauthorized disclosure or use of any
trade secrets, or of patent, copyright or trademark infringement
arising from Contractor's performance or that of its Subcontractors
under this Agreement or asserted against Owner that (i) concerns any
equipment, materials, supplies, or other items provided by Contractor
or any Subcontractor under this Agreement, or (ii) is based upon
54
EXECUTION COPY
or arises out of the performance of the Work by Contractor or any
Subcontractor, or (iii) is based upon or arises out of the design or
construction and use of any item or unit incorporated in the Facility.
Excluded from this indemnity obligation are claims related to the Pro
Terra(TM) Process covered by Owner's indemnity in Section 18.2.2. Owner
shall provide Contractor with reasonably prompt Notice of any claim or
legal action for infringement.
18.2.2 OWNER'S IP INDEMNITIES. Owner shall defend, indemnify
and hold harmless each Contractor-Indemnified Party against all
liabilities, claims, losses, damages and expenses (including attorneys'
fees and court costs) arising from any claim or legal action for
unauthorized disclosure or use of any trade secrets, or of patent,
copyright or trademark infringement arising out of the Pro Terra(TM)
Process in connection with this Agreement. Excluded from this indemnity
obligation are (a) claims related to ownership rights covered by
Contractor's indemnity in Section 18.2.1, and (b) modifications,
alterations, additions or changes to the Work which modify the Pro
Terra(TM) Process made by Contractor after the date of this Agreement
other than pursuant to a Change Order approved or directed by Owner.
Contractor shall provide Owner with reasonably prompt Notice of any
claim or legal action for infringement. It is understood and agreed
that payments pursuant to the indemnification set forth in this Section
18.2.2 shall be subject to terms of subordination to be set forth in a
subordination agreement to be agreed among Lender, Contractor, Owner
and Technology Facility Provider.
18.2.3 INJUNCTION. If Owner is enjoined from completion of the
Facility or any part thereof or from the use, operation or enjoyment of
the Facility or any part thereof as a result of a claim or legal action
or any litigation based on intellectual property infringement covered
by Contractor's indemnification obligations in Section 18.2.1, then
Contractor shall use its best efforts to promptly arrange to have such
injunction removed at no cost to Owner. Contractor shall not be
entitled to a Change Order in connection with efforts expended
complying with this Section 18.2.3.
18.2.4 CURE RIGHT. In the event of any claim or legal action
for infringement covered by a Party's indemnification obligations in
Section 18.2, the indemnifying Party shall have the right, at its
option and at its expense, either to promptly procure for the
indemnitee the rights alleged to have been infringed or to promptly
modify the infringing item in a way satisfactory to the indemnitee, so
that it becomes noninfringing.
18.3 PROCEDURES. In the event any suit or other proceedings for any
claim, loss, damage, cost, charge or expense covered by the indemnities under
this Article 18 should be brought against an indemnitee, the indemnitor hereby
covenants and agrees to assume the defense thereof and defend the same at
indemnitor's own expense and to pay any and all costs, charges, attorney's fees,
and other expenses, and any and all judgments that may be incurred by, or
obtained against the indemnitee, in such suits or other proceedings. In the
event of any judgment or other lien being placed upon the property of a Party in
any such suits or other proceedings, the indemnitor will cause the same to be
dissolved and discharged as provided in Section 3.7 or as otherwise agreed by
the indemnitee.
55
EXECUTION COPY
18.4 CONDITIONS. Each Party's obligations with respect to claims and
suits covered by this Article 18 are subject to the conditions that (a) the
indemnitee gives the indemnitor reasonably prompt notice of any such claim or
suit; (b) the indemnitee cooperates in the defense of any such claim or suit;
and (c) the indemnitor has sole control of the defense of such claim or suit to
the extent of the indemnitor's liability for any such claim or suit; provided,
however, that (i) upon the indemnitee's request, the indemnitor shall confirm in
writing its obligation to indemnify the indemnitee pursuant to this Article 18,
(ii) the indemnitor shall have the right to be represented therein by advisory
counsel of its own selection and at its own expense, and (iii) if the defendants
in any such action include both indemnitor and indemnitee and the indemnitee
shall have reasonably concluded that there may be legal defenses available to it
which are inconsistent with those available to the indemnitor, the indemnitee
shall have the right to select separate counsel reasonably acceptable to the
indemnitor to participate in the defense of such action on its own behalf at the
expense of the indemnitor; provided, further, that indemnitor shall not settle
any such claim or suit without the prior consent of the indemnitee, such consent
not to be unreasonably withheld.
ARTICLE 19. CONFIDENTIAL AND PROPRIETARY INFORMATION
19.1 CONFIDENTIALITY. Any information belonging to a Party which is
designated in writing as "Proprietary" or "Confidential" and disclosed to the
other Party incident to the performance of Work pursuant to this Agreement is
disclosed in confidence and the transferee shall not publish or otherwise
disclose it to others without the prior written approval of the transferor;
provided, however, that nothing herein shall limit either Party's rights to
disclose information which (a) was in such Party's possession prior to this
Agreement without restriction; (b) is or becomes available within the public
domain without fault of the non-disclosing Party; (c) is received by either
Party from a third party without restriction and not in breach of this
Agreement; or (d) is independently developed by either Party without reliance on
any Proprietary or Confidential information disclosed by the other Party.
Notwithstanding the foregoing, without the prior written approval of the other
Party: (i) Owner shall have the right to provide any information regarding or
supplied by Contractor or any Subcontractor as may be required in conjunction
with any Financing Agreement, and to Owner's employees, the Independent
Engineer, process licensors, and consultants in connection with the construction
of the Facility; provided, however, that the receiving party has executed a
confidentiality agreement; (ii) Owner shall have the right to provide any
information regarding or supplied by Contractor or any Subcontractor to any
Governmental Unit having jurisdiction and asserting a right to obtain such
information (but Owner shall promptly advise Contractor of any request for such
information by such Governmental Unit and shall cooperate in giving Contractor
an opportunity to present objections or requests for limitation to such
Governmental Unit); (iii) Owner shall have the right to disclose Contractor's
confidential information to Owner's Affiliates; provided, however, that Owner
shall first advise any such Affiliate of the obligations set forth in this
Article 19 and shall be responsible for a breach thereof by any of them; and
(iv) Owner shall have the right to provide any information regarding or supplied
by Contractor or any Subcontractor to Owner's employees, agents, consultants,
contractors, process licensors and any other Person to the extent required in
conjunction with Owner's exercise of its ownership rights under Section 19.2 and
Section 19.3; provided, however, that the receiving party has executed a
confidentiality agreement; (iv) Contractor shall have the right to disclose
Owner's confidential information to its Affiliates; provided, however, that
Contractor shall first advise any such Affiliate of the
56
EXECUTION COPY
obligations set forth in this Article 19 and shall be responsible for a breach
thereof by any of them; and (v) Contractor shall have the right to provide to
any Subcontractor any information necessary to complete the Work; provided,
however, that such Subcontractor has executed a confidentiality undertaking to
Contractor covering Owner's confidential information that is substantially
similar to the provisions of this Article 19, or otherwise with Owner's consent.
The receiving Party shall maintain such Proprietary or Confidential information
received from the disclosing Party for a period of ten (10) years from the
receipt of such information. All information related to the Pro Terra(TM)
Process shall be proprietary and confidential information of Owner subject to
the terms of this Section 19.1.
19.2 EPC DATA AND INFORMATION. All EPC Data and Information shall
become the exclusive property of Owner. All available EPC Data and Information
shall be delivered to Owner in reproducible form (or in such form as may be
required in the Scope Document) at the Substantial Completion Date, and all
final EPC Data and Information shall be delivered to Owner in such form upon the
earlier of the Final Completion Date, termination of this Agreement and any
earlier date as may be specified in this Agreement; and Owner thereafter shall
have full right to use such EPC Data and Information for any purpose without any
claim on Contractor's part for additional compensation by reason of such use.
Contractor may retain copies of and use EPC Data and Information; provided,
however, that Contractor shall not use EPC Data and Information in connection
with any used oil refining facility.
19.3 INVENTIONS.
19.3.1 Contractor shall disclose promptly to Owner all
inventions which Contractor, its employees, agents or Subcontractors
may conceive or first reduce to practice, which are based on or derived
from proprietary information received from Owner. All right, title and
interest in and to such inventions, whether or not disclosed to Owner
by Contractor, shall belong to Owner or its designee. Owner hereby
grants Contractor a fully-paid nonexclusive irrevocable nontransferable
license in respect of such inventions; provided, however, that
Contractor shall not use or license for use any such invention in any
used oil refining facility.
19.3.2 All right, title and interest in and to any inventions
which Contractor, its employees, agents or Subcontractors conceive or
first reduce to practice during the course of the Work and which are
not subject to the provisions of Section 19.3.1 shall belong to
Contractor or its designee. Contractor hereby grants Owner a fully-paid
nonexclusive irrevocable nontransferable license in respect of such
inventions for use in any facility.
19.4 LICENSES. Contractor agrees to grant and hereby grants to Owner
(and shall procure for Owner from Subcontractors) a fully-paid nonexclusive
irrevocable license, under all patents, copyrights, design rights, trade secrets
and other intellectual property now or during the term of this Agreement owned
or controlled by Contractor or its Subcontractors, to the extent necessary for
the operation, maintenance, repair or required alteration of the Facility,
whether by Owner's employees or by agents or contractors of Owner who have
agreed to comply with the provisions of Section 19.1, and to the extent
incorporated in the EPC Data and Information. Owner shall have the right to make
as many copies of such proprietary or confidential information as may be
necessary or desirable for the purposes permitted by such license.
57
EXECUTION COPY
ARTICLE 20. ASSIGNMENT
20.1 ASSIGNMENT BY OWNER. Without the prior consent of Contractor,
Owner may upon thirty (30) Days advance Notice assign all or part of its right,
title and interest in this Agreement (i) to any of its Affiliates, (ii) to any
company that is at least equally creditworthy as Owner and that assumes all of
Owner's obligations under this Agreement, and succeeds to all or substantially
all of the assets of Owner and agrees in writing to assume and be bound by all
Owner's obligations under this Agreement, or (iii) in connection with the
financing of the Facility. In addition, Owner may assign all or part of its
right, title and interest in this Agreement to any other Person with the prior
written approval of Contractor, such approval not to be unreasonably withheld or
delayed.
20.2 ASSIGNMENT BY CONTRACTOR. Contractor may upon thirty (30) Days
advance Notice to Owner assign its rights to receive payment under this
Agreement; provided, however, that (i) Contractor may not assign its rights to
receive payment under this Agreement for a period in excess of ninety (90) days
from the date of such assignment, (ii) the payments may not be assigned pursuant
to this Section 20.2 except to obtain financing which is used solely to pay for
services, goods or materials provided with respect to the design, engineering,
procurement, construction, commissioning, startup and testing of the Facility,
or to a vendor otherwise entitled to payments in such amounts; and (iii) such
assignment of Contractor's rights to receive payment under this Agreement shall
not have an adverse affect on Owner's or Lender's rights under this Agreement.
Contractor's assignment or subcontracting of any of its Work shall, without the
prior written consent of Owner, be ineffective to relieve Contractor of its
responsibility for the Work assigned or subcontracted. With Owner's prior
written approval, Contractor may assign all or part of its right, title, and
interest in this Agreement to any Person.
20.3 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the successors and permitted assigns of the Parties.
ARTICLE 21. DISPUTE RESOLUTION
21.1 RESOLUTION OF DISPUTES RELATED TO FAILURE OF PROCESS TEST. Any
dispute concerning whether a failure or deficiency in the performance of the
Facility on or after the Substantial Completion Date is due to a Defect, and
whether Contractor is entitled to a Change Order under Article 4 in connection
with the performance of remedial work on or after the Substantial Completion
Date required to address such failure or deficiency, shall be resolved in
accordance with the binding dispute resolution procedures set forth in the
Coordination Agreement. The determination rendered thereunder shall be binding
on the Parties for purposes of this Agreement.
21.2 RESOLUTION OF ALL OTHER DISPUTES.
21.2.1 RESOLUTION BY THE PARTIES.
21.2.1.1 Each of Contractor and Owner shall designate
in writing to the other Party from time to time a member of
senior management who shall be
58
EXECUTION COPY
authorized to resolve any dispute relating to the subject
matter of this Agreement in an equitable manner and, unless
otherwise expressly provided herein, to exercise the authority
of such Party to make decisions by mutual agreement.
21.2.1.2 Any dispute may be presented by either Party
for resolution under this Section 21.2.1 by Notice to the
members of management designated by the respective Parties'
under Section 21.2.1.1. The Parties agree (1) to attempt to
resolve all disputes arising hereunder promptly, equitably and
in a good faith manner, and (2) to provide each other with
reasonable access during normal business hours to any and all
non-privileged records, information and data pertaining to any
such dispute.
21.2.1.3 If any dispute is not resolved between the
Parties pursuant to this Section 21.2.1 within fifteen (15)
Days from receipt of the Notice required under Section
21.2.1.2, then each Party, without further delay, shall have
the right to submit the dispute to be settled exclusively and
finally by binding arbitration in accordance with Section
21.2.2, except for technical disputes, which shall be resolved
in accordance with Section 21.2.3.
21.2.2 ARBITRATION.
21.2.2.1 It is specifically understood and agreed
that any dispute, controversy or claim under this Agreement
that cannot be resolved between the Parties, including any
matter relating to the interpretation of this Agreement but
excluding any matter to be submitted for resolution under the
Coordination Agreement pursuant to Section 21.1 or to the
Technical Arbitrator pursuant to Section 21.2.3, shall be
submitted to arbitration irrespective of the magnitude
thereof, the amount in dispute or whether such dispute would
otherwise be considered justiciable or ripe for resolution by
any court or arbitral tribunal. A Party commencing arbitration
under this Section 21.2.2 or Section 21.2.3 shall so advise
the other Party by Notice, which Notice shall identify the
issues asserted to be in dispute, the previous steps taken to
resolve the dispute as provided in this Section 21.2.2, the
applicable provisions of this Agreement, a proposed resolution
of the issues, and the maximum monetary award being sought, if
any.
21.2.2.2 Each arbitration between the Parties shall
be finally settled in Dallas, Texas, conducted pursuant to the
then applicable Commercial Arbitration Rules of the American
Arbitration Association.
21.2.2.3 The arbitration shall be conducted before a
tribunal composed of three arbitrators. Each Party shall
appoint an arbitrator, obtain its appointee's acceptance of
such appointment and deliver written notification of such
appointment and acceptance to the other Party within fifteen
(15) Days after receipt of a Notice of arbitration. The two
(2) Party-appointed arbitrators shall jointly appoint the
third (who shall be the chairperson), obtain the acceptance of
such appointment and deliver written notification of such
appointment to the Parties within five (5) Business Days after
their appointment and acceptance.
59
EXECUTION COPY
21.2.2.4 If a Party fails to appoint its arbitrator
within a period of fifteen (15) Days after receiving Notice of
the arbitration, or if the two (2) arbitrators appointed
cannot agree upon the third arbitrator within a period of
fifteen (15) Days after appointment of the second arbitrator,
then such arbitrator shall be appointed by the American
Arbitration Association or as otherwise agreed to by the
Parties.
21.2.2.5 Any arbitration commenced hereunder shall be
completed within ninety (90) Days of the appointment of the
tribunal absent agreement of the Parties to such arbitration.
The Parties shall be entitled to no discovery, provided,
however, that the tribunal may permit document discovery upon
a showing of good cause. All direct testimony shall be offered
by way of affidavit. The Party submitting an affidavit shall
make the affiant available for cross-examination before the
tribunal. The Parties waive any claim to any damages excluded
by Section 23.3 and the tribunal is specifically divested of
any power to award such damages. All decisions of the tribunal
shall be pursuant to a majority vote. Any interim or final
award shall be rendered by written decision. The judgment of
the tribunal shall be final and binding (i.e., not subject to
appeal) on the Parties and an arbitration award may be entered
in any state or Federal court having jurisdiction thereof.
21.2.2.6 Only persons who are engineers, attorneys,
financial advisors, former judges, managers, executives and
other professionals with not less than ten (10) years of
experience in the financing, legal affairs, ownership,
construction, operation and/or maintenance of oil refining or
petrochemical plants in the United States shall be appointed
as arbitrators. No arbitrator shall be a present employee or
agent of either Party or any Affiliate of either Party or have
a conflict of interest of any kind and the Parties do not
waive such conflict.
21.2.2.7 Each Party shall bear its own costs with
respect to its own legal counsel and consultants and as
otherwise individually incurred as a result of its
participation in an arbitration under this Section 21.2.2.
Owner and Contractor shall each bear one-half (1/2) of the
costs, fees and expenses of the arbitrators and the conduct of
the arbitration by the arbitrators, except as the arbitrators
may otherwise decide in the interests of equity. Any dispute
regarding which costs are to be incurred individually by, or
are to be divided equally between, the Parties shall be
resolved by the arbitrators.
21.2.3 TECHNICAL DISPUTES. If any dispute hereunder (other
than a dispute to be resolved under Section 21.1) involves technical
issues, either Party may request that such matter be referred to a
mutually acceptable independent engineer with substantial experience in
the engineering, construction and/or operation of oil refining or
petrochemical plants in the United States ("TECHNICAL ARBITRATOR") for
resolution in an expedited manner pursuant to procedures and timing to
be mutually agreed upon by the Parties. The Parties shall exercise
reasonable efforts to agree, not later than ninety (90) Days prior to
the Mechanical Completion Date as set forth in the Project Schedule, on
a list of not less than three (3) Persons that the Parties are willing
to accept as the Technical
60
EXECUTION COPY
Arbitrator and who are willing to so serve, and the Technical
Arbitrator may be selected from such list by the Party requesting
referral of the matter to a Technical Arbitrator. In the event that (i)
a technical dispute arises prior to agreement on the list of Technical
Arbitrators, or (ii) none of the Technical Arbitrators on the list is
able or willing to serve at the time the dispute is referred, the
Parties shall attempt to agree on an alternate Technical Arbitrator. If
the Parties are unable to reach an agreement on such alternate
Technical Arbitrator, or on procedures governing such arbitration (in
each case in the sole discretion of each Party) in any case within five
(5) Business Days after the initial request, then either Party may
require that the Technical Arbitrator be appointed by the American
Arbitration Association and the governing procedures and timing shall
be determined by the Technical Arbitrator so appointed. All such
proceedings shall be conducted in Dallas, Texas. The Technical
Arbitrator shall render a written determination on the matter in
dispute to both parties within fifteen (15) Days of the matter being
referred to him or her. If the Technical Arbitrator fails to render a
determination within the required time, either Party, upon five (5)
Business Days Notice to the other Party, may refer the matter to
arbitration pursuant to Section 21.2.2. The finding of the Technical
Arbitrator with respect to any technical issues so presented to it for
resolution hereunder shall be binding upon the Parties. Owner and
Contractor shall each bear one-half (1/2) of the out-of-pocket costs
and expenses of any technical dispute resolution under this Section
21.2.3.
21.2.4 SUBCONTRACTORS AND THIRD PARTIES. In the event that
Contractor and Owner enter into any binding arbitration proceedings,
the Parties agree to take all reasonable actions to include all
possible parties, including Subcontractors and other third parties, who
have agreed to binding arbitration and may have an interest in or
liability with respect to, or may provide one of the Parties with a
defense to or mitigating factors concerning, the dispute and shall
consent to joinder to, and a consolidated resolution of issues in, that
proceeding. In the event of any third party claim where the indemnitor
does not assume the defense of such third party claim, nothing in this
Section 21.2 shall prevent the indemnitee from impleading the
indemnitor or otherwise joining the indemnitor to any litigation
relating to such third party claim.
21.2.5 TIME PERIODS. The time periods in this Section 21.2 may
be modified by mutual agreement.
21.3 OTHER REMEDIES. Neither Party shall be precluded hereby from
seeking, from the courts of any jurisdiction, provisional or equitable remedies
of a type not available in arbitration, including without limitation, temporary
restraining orders and preliminary or permanent injunctions, nor shall the
pursuit of such provisional or equitable relief constitute a waiver or
modification of such Party's rights and obligations unless such waiver is
expressed in writing and signed by such Party.
21.4 PERFORMANCE DURING DISPUTE. Notwithstanding the existence of a
dispute between Owner and Contractor and regardless of whether such dispute is
the subject of dispute resolution pursuant to Section 21.1 or Section 21.2,
neither Owner nor Contractor shall be entitled to suspend or otherwise delay the
performance of its obligations under this Agreement except the obligation to pay
money to the extent such payment is in dispute. This Agreement
61
EXECUTION COPY
and the rights and obligations of the Parties shall remain in full force and
effect during an arbitration proceeding. If applicable, as part of its final
decision the arbitral tribunal may decide whether and on what terms this
Agreement shall be terminated.
ARTICLE 22. PERFORMANCE GUARANTEES AND LIQUIDATED DAMAGES
22.1 SCHEDULE.
22.1.1 GUARANTEES. Contractor guarantees that
(a) it shall achieve Substantial Completion not later
than the date that is five hundred and seventy eight
(578) Days after the Notice to Proceed Date, as such
guaranteed date may be adjusted pursuant to this
Agreement (the "GUARANTEED SUBSTANTIAL COMPLETION
DATE"); and
(b) it shall achieve the Final Completion Date within
ninety (90) Days after the Substantial Completion
Date (the "GUARANTEED FINAL COMPLETION DATE").
22.1.2 LIQUIDATED DAMAGES FOR DELAY.
22.1.2.1 Contractor understands that if the
Substantial Completion Date is not achieved by the Guaranteed
Substantial Completion Date, Owner will suffer substantial
damages, including loss of profits, revenue, additional
finance charges, "idle plant" costs, and other operating
charges. Therefore, Contractor specifically agrees that if the
Substantial Completion Date is not achieved by the Guaranteed
Substantial Completion Date, Contractor shall pay Owner, as
liquidated damages, the Delay Liquidated Damages for each Day
or part thereof by which the Substantial Completion Date is
delayed beyond the Guaranteed Substantial Completion Date,
commencing on the date following the Guaranteed Substantial
Completion Date and ending on the Substantial Completion Date
or the Date Certain, whichever first occurs. The obligation to
pay Delay Liquidated Damages shall be subject to the
following:
(a) Delay Liquidated Damages shall be calculated in
accordance with Exhibit J.
(b) Delay Liquidated Damages shall be paid by Contractor
to Owner no later than fifteen (15) Business Days
following Owner's invoice therefor, for any Delay
Liquidated Damages which have accrued during the
preceding calendar month.
(c) For each Day, not to exceed fifteen (15) Days, that
Contractor is unable to perform Work as a result of a
physical loss or damage covered by the Builder's Risk
insurance policy described in Section 16.2.1.4 or by
the Marine Cargo insurance policy described in
Section 16.2.1.6, Contractor shall be entitled to an
automatic Day-for-Day extension of the Guaranteed
Substantial Completion Date, which extension shall be
effected by a
62
EXECUTION COPY
Change Order that shall be issued by Owner and shall
not require the prior consent of Lender.
22.1.2.2 If Contractor is required to pay Delay
Liquidated Damages under Section 22.1.2.1, such obligation to
pay Delay Liquidated Damages (other than damages theretofore
accrued) shall cease to accrue upon the occurrence of the
Substantial Completion Date.
22.2 PERFORMANCE.
22.2.1 GUARANTEES. Contractor guarantees that the Front End
shall achieve the Front End Performance Guarantee, that the Back End
Unit will achieve the Back End Performance Guarantee, and that the
Facility will successfully meet all requirements of the Substantial
Completion Discharge and Emissions Verification Run set forth in
Exhibit M (the "PERFORMANCE GUARANTEES").
22.2.2 BUY-DOWN.
22.2.2.1 If, before the Date Certain,
(a) Contractor has satisfied all requirements
for Substantial Completion other than
demonstrating that the Facility shall have
satisfied either or both of the Front End
Performance Guarantee and the Back End
Performance Guarantee; and
(b) Contractor's most recent Front End
Performance Test has satisfied the Front End
Minimum Performance Criteria and the most
recent Back End Performance Tests have
satisfied the Back End Minimum Performance
Criteria;
then Contractor shall have the option to pay Owner the
Buy-Down Amounts based on Contractor's most recently completed
Front End Performance Test and/or Back End Performance Tests,
as the case may be.
22.2.2.2 If Contractor has not exercised the option
provided in Section 22.2.2.1, and at the Date Certain
Contractor meets the criteria set forth in Section 22.2.2.1(a)
and (b), Contractor shall pay Owner the Buy-Down Amounts based
on Contractor's most recently completed Front End Performance
Test and/or Back End Performance Tests, as the case may be.
22.2.2.3 Contractor shall pay the full Buy-Down
Amounts as a condition to Substantial Completion, and shall
submit payment prior to or together with submission of its
Notice of Substantial Completion. In either of the
circumstances of Section 22.2.2.1 and Section 22.2.2.2, the
Notice of Substantial Completion shall be submitted no later
than the Date Certain.
22.3 LIQUIDATED DAMAGES GENERALLY. Owner and Contractor agree that the
Delay Liquidated Damages and the Buy-Down Amounts are liquidated damages, and in
the
63
EXECUTION COPY
circumstances that they are payable (a) it would be extremely difficult to
determine the actual damages of Owner, (b) the agreed liquidated damages are a
fair and reasonable estimate of the actual damages that would be suffered by
Owner, (c) in no event shall the amount of any such agreed-upon liquidated
damages constitute a penalty for Contractor, and (d) they are the sole remedy
for the relevant default. For the avoidance of doubt, Delay Liquidated Damages
are intended to compensate Owner for harm (which it is agreed has been
liquidated in the manner set forth herein) incurred because Contractor's
achievement of the Substantial Completion Date is delayed beyond the Guaranteed
Substantial Completion Date and up to the Date Certain, as provided in Section
22.1.2, and Buy-Down Amounts, in the circumstances in which they are permitted
to be paid, are intended to compensate Owner for harm (which it is agreed has
been liquidated in the manner set forth herein) incurred because of Contractor's
failure to meet the Front End Performance Guarantee and/or the Back End
Performance Guarantee after having achieved the Minimum Performance Criteria, as
provided in Section 22.2.2, and neither Delay Liquidated Damages nor Buy-Down
Amounts are intended to compensate Owner in the event Contractor fails to meet
any other obligations under this Agreement or for delays beyond the Date Certain
or for performance shortfalls below the Minimum Performance Criteria. Contractor
hereby waives, to the extent permitted by applicable law, any defense as to the
validity of any agreed-upon liquidated damages in this Agreement on the grounds
that such liquidated damages are void as penalties. All Liquidated Damages are
subject to the limitations in Article 23.
ARTICLE 23. LIMITATION OF LIABILITY
23.1 LIMITATION OF CONTRACTOR'S LIABILITY. The monetary liability of
Contractor to Owner arising from or relating to the Work or in connection with
this Agreement shall be limited as specified in this Section 23.1 regardless of
whether any such liability may be based on statute, contract, guarantee,
warranty, professional liability, fault, negligence (in whole or in part),
strict liability or otherwise, and Owner hereby releases Contractor from any
liability in excess of the amounts respectively specified.
23.1.1 LIMITATION ON TOTAL LIABILITY.
23.1.1.1 In the event Owner terminates this Agreement
prior to the Notice to Proceed Date pursuant to Section 15.3,
Contractor shall have no liability to Owner hereunder, except
with respect to the obligation of confidentiality set forth in
Section 19.1.
23.1.1.2 From the Notice to Proceed Date until the
Substantial Completion Date, Contractor's total aggregate
liability shall not exceed one hundred percent (100%) of the
Contract Price.
23.1.1.3 If Contractor has achieved the Substantial
Completion Date, then Contractor's total aggregate liability
during the period from the Substantial Completion Date until
the commencement of the Warranty Period shall not exceed
twenty five percent (25%) of the Contract Price.
64
EXECUTION COPY
23.1.1.4 The aggregate costs and liability incurred
by Contractor to meet its warranty obligations under Article 9
during the Warranty Period shall not exceed twenty percent
(25%) of the Contract Price.
23.1.2 EXCLUSIONS.
23.1.2.1 The following shall not count towards the
liability limitations set forth in Section 23.1.1:
(a) Contractor's obligations under Sections 3.7,
12.3, and 17.1 as well as third party indemnification
obligations under Article 18.
(b) Costs incurred by Contractor that are reimbursed
or paid from the proceeds of any insurance required to be
obtained under the terms of this Agreement.
23.1.2.2 Any liability incurred by Contractor during
the period from the Substantial Completion Date until the
commencement of the Warranty Period, other than costs and
liability incurred by Contractor during such period to correct
any Defect arising during such period, shall be excluded for
purposes of the limitation set forth in Section 23.1.1.4. Any
costs and liability incurred by Contractor during the period
from the Substantial Completion Date until the commencement of
the Warranty Period to correct any Defect arising during such
period shall be included for purposes of the limitation set
forth in Section 23.1.1.4.
23.1.2.3 Any obligation of Contractor to pay Delay
Liquidated Damages that exists after the Substantial
Completion Date shall be excluded for purposes of the
limitations set forth in Section 23.1.1.3 and Section
23.1.1.4.
23.2 FACILITY PERFORMANCE FAILURES OR DEFICIENCIES AFTER SUBSTANTIAL
COMPLETION. Notwithstanding any other provision of this Agreement to the
contrary, on and after the Substantial Completion Date, Contractor shall not be
liable in connection with any failure of or deficiency in the performance of the
Facility except only to the extent a Defect is present, and Contractor shall
only be liable to remedy such Defect in accordance with Article 9. On and after
the Substantial Completion Date, any failure or deficiency in the performance of
the Facility that is caused by inaccurate or incomplete information set forth in
section 3 of Book 1 of the Scope Document shall not be a failure or deficiency
caused by a Defect. Any dispute with respect to whether a failure or deficiency
in the performance of the Facility on or after the Substantial Completion Date
is due to a Defect shall be resolved under the Coordination Agreement, as
provided in Section 21.1.
23.3 CONSEQUENTIAL DAMAGES. Notwithstanding anything stated to the
contrary in this Agreement, except as otherwise provided in this Section 23.3,
in no event shall Contractor or Owner be liable to the other, either
individually or jointly and irrespective of whether alleged by way of indemnity,
breach of contract, breach of warranty, tort (including negligence), strict
liability, or any other legal theory, and whether arising before or after the
Final Completion Date, for, and Contractor and Owner each hereby waives any
right to, damages that constitute
65
EXECUTION COPY
incidental, special, indirect, or consequential damages of any nature
whatsoever, including, without limitation, losses or damages caused by reason of
shutdowns, loss of use of equipment or systems, loss of profits or revenue, loss
of contracts, cost of capital, interest charges or claims of Owner's customers.
The provisions of this Section 23.3 shall not be interpreted to limit
Contractor's obligations (a) to pay to Owner Delay Liquidated Damages and
Buy-Down Amounts pursuant to Sections 22.1.2 and 22.2.2, respectively, (b) to
make any payments set forth in Section 15.2.2, (c) to remove any liens, claims,
security interests or other encumbrances pursuant to Section 3.7, (d) to make
any indemnification payments required under Section 12.3 and any third-party
indemnification payments required under Article 18, (e) to perform warranty Work
in accordance with Article 9, and (f) to buy-out Punch List Items in accordance
with Section 8.4.2. The provisions of this Section 23.3 shall not be interpreted
to limit Owner's obligations (a) to pay to Contractor any amount pursuant to
Sections 4.3.4, 4.6.2.4, 4.6.3 and 10.1, and (b) to make any third-party
indemnification payments required under Article 18.
ARTICLE 24. REPRESENTATIONS AND WARRANTIES
24.1 BY CONTRACTOR. Contractor represents, as of the date hereof, and
hereby warrants that:
24.1.1 EXISTENCE AND POWERS. Contractor is a limited liability
company validly existing and in good standing under the laws of the
State of Texas, with full power and authority to enter into and to
perform its obligations under this Agreement.
24.1.2 DUE AUTHORIZATION AND BINDING OBLIGATION. This
Agreement has been duly authorized, executed and delivered by all
necessary company action of Contractor and constitutes a legal, valid
and binding obligation of Contractor, enforceable against Contractor in
accordance with its terms, except as the same may be limited by
equitable principles or bankruptcy, insolvency or other similar laws
affecting creditors' rights from time to time in effect.
24.1.3 NO CONFLICT. Neither the execution nor delivery by
Contractor of this Agreement, nor the performance by Contractor of its
obligations hereunder, (i) violates any Governmental Rule applicable to
Contractor, (ii) violates Contractor's articles of association or
by-laws, or (iii) to Contractor's knowledge, conflicts with, violates
or results in the material breach of any term or condition of any
order, judgment or decree of a Governmental Unit, or of any agreement
or instrument, to which Contractor is a party or by which Contractor or
any of its properties or assets are bound, or constitutes a material
default under any of the foregoing.
24.1.4 NO LITIGATION. To Contractor's knowledge, there is no
action, lawsuit or proceeding, at law or in equity, before or by any
court, governmental or arbitral body, pending or threatened against
Contractor, in which an unfavorable decision, ruling or finding could
reasonably be expected to have a material and adverse effect on the
execution and delivery of this Agreement by Contractor or on the
ability of Contractor to perform its obligations hereunder.
66
EXECUTION COPY
24.1.5 PROFESSIONAL SKILLS. Contractor has all the required
skills, experience and capacity necessary to perform the Work in a
timely and professional manner, utilizing sound engineering principles,
project management procedures and supervisory procedures, all in
accordance with Prudent Industry Practices. Contractor has the
experience and skills necessary to determine, and Contractor has
reasonably determined, that Contractor can perform the Work for the
Contract Price.
24.1.6 SITE CONDITIONS. Contractor has investigated the Site
and each other location where any portion of the Work shall be
performed and surrounding locations, including both surface and
subsurface conditions, to the full extent it deems necessary for its
purposes and is familiar with and has satisfied itself with respect to
the nature and location of the Work, and the general and local
conditions with respect to environment, transportation, access, waste
disposal, handling and storage of materials, availability and quality
of electric power, availability and condition of roads, climatic
conditions and seasons, physical conditions at the Site and the
surrounding area as a whole, topography and ground surface conditions,
sound attenuation conditions, subsurface geology and conditions, nature
and quantity of surface and subsurface materials (including, without
limitation, man-made materials or conditions) to be encountered (other
than Hazardous Wastes or Materials), and location of underground
utilities, and equipment and facilities needed prior to and during
performance of all Contractor's obligations under this Agreement (the
foregoing collectively the "SITE CONDITIONS").
24.1.7 OWNER-PROVIDED INFORMATION. Owner may provide or may
have provided Contractor with copies of certain studies, reports or
other information and Contractor acknowledges that all such information
has been or will be provided as background information and as an
accommodation to Contractor. Contractor further acknowledges that,
unless specifically provided otherwise in this Agreement (including
with respect to Contractor's right to rely on the Environmental Reports
as provided in Section 3.6), Owner makes no representations or
warranties with respect to the accuracy of such documents or the
information or opinions therein contained or expressed.
24.1.8 FINANCIAL CONDITION. Contractor is financially solvent,
able to pay its debts as they mature, and possessed of sufficient
working capital to complete its obligations under this Agreement.
Contractor is able to furnish the plant, tools, materials, supplies,
equipment, labor, and design services needed for the Facility, is
experienced in and competent to perform the Work, both construction and
design, contemplated by this Agreement, and is qualified to do the
Work.
24.1.9 LICENSES. Contractor and all Persons who will perform
any portion of the Work have and will have all business and
professional certifications required by Governmental Rules to perform
the services under this Agreement.
24.1.10 INTELLECTUAL PROPERTY RIGHTS. Contractor owns or has
the right to use all the patents, trademarks, service marks, tradenames
and copyrights, and all licenses, franchises, permits or rights with
respect to the foregoing, necessary to perform the Work and to carry on
its business as presently conducted and presently planned to be
conducted without conflict with the rights of others. No materials,
method, design, process or
67
EXECUTION COPY
technology utilised in the Work or incorporated in the Facility shall
be such as to give rise to any claim against Owner for infringement of
any patent or other proprietary right of any third party, and
Contractor shall take all necessary action to procure that Owner shall
have full and unimpeded rights regarding the operation, modification,
revamp, repair and maintenance of the Facility or replacement of all or
any part of the Facility.
24.1.11 BUILDING CODES. The Facility can and shall be built in
conformity with applicable building codes, construction-related
regulations and construction-related directives of all Governmental
Units.
24.2 BY OWNER. Owner represents, as of the date hereof, and hereby
warrants that:
24.2.1 EXISTENCE AND POWERS. Owner is a limited partnership
validly existing and in good standing under the laws of the State of
Delaware with full power and authority to enter into and to perform its
obligations under this Agreement.
24.2.2 DUE AUTHORIZATION AND BINDING OBLIGATION. This
Agreement has been duly authorized, executed and delivered by all
necessary corporate and partnership action of Owner and constitutes a
legal, valid and binding obligation of Owner, enforceable against Owner
in accordance with its terms, except as the same may be limited by
equitable principles or bankruptcy, insolvency or other similar laws
affecting creditors' rights from time to time in effect.
24.2.3 NO CONFLICT. Neither the execution nor delivery by
Owner of this Agreement, nor the performance by Owner of its
obligations hereunder, (i) violates any Governmental Rule applicable to
Owner or (ii) to Owner's knowledge, conflicts with, violates or results
in the material breach of any term or condition of any order, judgment
or decree of a Governmental Unit, or of any agreement or instrument, to
which Owner is a party or by which Owner or any of its properties or
assets are bound, or constitutes a material default under any of the
foregoing.
24.2.4 NO LITIGATION. To Owner's knowledge, there is no
action, lawsuit or proceeding, at law or in equity, before or by any
court, governmental or arbitral body, pending or threatened against
Owner, in which an unfavorable decision, ruling or finding could
reasonably be expected to have a material and adverse effect on the
execution and delivery of this Agreement by Owner or on the ability of
Owner to perform its obligations hereunder.
ARTICLE 25. REPRESENTATIVES AND NOTICES/COMMUNICATIONS
25.1 DESIGNATION AND FUNCTION OF AUTHORIZED REPRESENTATIVES. On or
before the Notice to Proceed Date (i) Contractor shall appoint and identify to
Owner the Project Manager, and (ii) Owner shall appoint and identify to
Contractor the Owner Representative. The Parties shall exchange written Notice
of such appointments. Owner may, from time to time, replace the Owner
Representative by giving Notice to Contractor, and Contractor may, from time to
time, replace its Project Manager by giving Notice to Owner. The Project Manager
and the Owner Representative shall each act on behalf of his or her respective
Party as the single point of contact with the other Party for purposes of this
Agreement and shall be generally available to
68
EXECUTION COPY
the other Party during normal business hours. The Project Manager shall have
full responsibility for the Work. No directions or approvals given by any Person
other than the Project Manager (or his or her designees, as set forth in
writing) shall be binding upon Contractor and no directions or approvals given
by any Person other than the Owner Representative (or his or her designees, as
set forth in writing) shall be binding upon Owner. The Project Manager and the
Owner Representative are authorized to execute Change Orders, but neither the
Project Manager nor the Owner Representative is authorized to amend or modify
this Agreement except to the extent provided in Article 4.
25.2 NOTICES.
25.2.1 Where, pursuant to the terms and conditions of this
Agreement, "NOTICE" (i.e., with initial capitalization) is required to
be given to a Party, such Notice shall be directed to the following:
If to Contractor: PETROFAC LLC
0000 XXX Xxxx 000 Xxxxx, XX 00000
Attn: D. Xxxxx Xxxxxx
Facsimile: (000) 000-0000
With Copy (such copy not to constitute Notice):
Xxxxx Xxxxxxx
000 Xxxxxxx Xxxx Xxx. Xxxxxx X00
0XX Xxxxxx Xxxxxxx
Facsimile: x00 00 0 000 0000
If to Owner: PROBEX WELLSVILLE, L.P.
One Galleria Tower
00000 Xxxx Xx. Xxx. 0000
Xxxxxx, XX 00000 Attn: Xxxxx X. XxXxxx
Facsimile: (000) 000-0000
69
EXECUTION COPY
With Copy (such copy not to constitute Notice):
Xxxxxxx X. Xxxxxxxxx, Esq.
Akin, Gump Xxxxxxx, Xxxxx & Xxxx, L.L.P
0000 Xxx Xxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
25.2.2 Every Notice and notice shall be in writing and either
be: (a) delivered personally; (b) sent by certified mail, return
receipt requested; (c) sent by a recognized overnight mail or courier
service with delivery receipt requested; or (d) sent by facsimile
transfer, with electronic confirmation of receipt. Any change of
information with respect to the designated recipient of a Notice or
notice shall be made in accordance with this Section 25.2, directed to
all Persons at that time entitled to receive Notice or notice, as the
case may be. All Notices and notices shall be effective when received
by the Party or Person to whom addressed.
25.3 TECHNICAL COMMUNICATIONS. Any technical or other communications
pertaining to the Work, other than Notices, but including "NOTICES" (i.e., with
no initial capitalization), shall be between Contractor's Project Manager and
the Owner Representative or other representatives appointed by the Project
Manager or the Owner Representative. The Parties shall implement mutually
agreed-upon procedures for the exchange of information for purposes of planning
and executing the Work. Information furnished by either Party on which the other
Party wants to rely shall be documented in writing and signed by both Parties.
ARTICLE 26. MISCELLANEOUS
26.1 INDEPENDENT CONTRACTOR. Contractor is an independent contractor,
and nothing contained herein shall be construed as constituting any relationship
with Owner other than that of an independent contractor, nor shall it be
construed as creating any relationship whatsoever between Owner and Contractor's
employees. The status of Contractor as an independent contractor shall not be
affected by any seconding of employees from Contractor to Owner or from Owner to
Contractor that may be agreed to by the Parties.
26.2 EFFECT OF INVALID PROVISIONS. The invalidity or unenforceability
of any portion or provision of this Agreement shall not affect the validity or
enforceability of any other portion or provision. Any invalid or unenforceable
portion or provision shall be deemed severed from this Agreement. The Parties
shall negotiate an equitable adjustment in such portions or provisions of this
Agreement to effect the underlying purposes of this Agreement.
26.3 ORDER OF PRECEDENCE. In the event there is a conflict among
provisions of this Agreement, all provisions in the body of this Agreement and
of Exhibit A shall take precedence over all other Exhibits.
70
EXECUTION COPY
26.4 SURVIVAL; TIME LIMITATION. The provisions of Sections 3.7, 15.2,
15.3, and 17.1, and Articles 18, 19, 21, 23, and 26 shall survive the
termination and close-out of this Agreement.
26.5 ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto,
constitutes the entire agreement between the Parties and supersedes all other
agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to, but only to the extent
of, the subject matter hereof, and neither Party hereto shall be bound by nor
charged with any oral or written agreements, representations, warranties,
statements, promises or understandings not specifically set forth in this
Agreement, including the Exhibits hereto.
26.6 MODIFICATION IN WRITING. No oral or written modification of this
Agreement by any officer, agent or employee of Contractor or Owner, either
before or after execution of this Agreement, shall be of any force or effect
unless such modification is in writing and signed by a duly authorized
representative of each Party.
26.7 CONTINUING OBLIGATIONS. The waiver of any breach or failure to
enforce any of the terms, covenants or conditions of this Agreement shall not in
any way affect, limit, modify or waive the future enforcement of such terms,
covenants or conditions, any course of dealing or custom of the trade
notwithstanding.
26.8 HEADINGS. The headings contained herein are included solely for
the convenience of the Parties and are not part of this Agreement.
26.9 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of New York including all
matters of construction, validity and performance, without giving effect to any
choice of law rules thereof which may direct the application of the laws of
another jurisdiction (other than section 5-1401 of the New York General
Obligations Law, which shall apply). This Agreement is being entered into with
full consideration of the provisions of New York General Obligations Law
sections 5-322.1, 5-323 and 5-324, and with the belief that none of the
provisions set forth in this Agreement are prohibited by New York law. The
Parties intend and expect that the apportionment of potential liability as set
forth in this Agreement shall be valid and enforceable under New York law.
26.10 REMEDIES CUMULATIVE. Subject to the limitations of liability set
forth in Article 23, the Parties agree that the rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies at
law, in equity or otherwise.
[SIGNATURE PAGE FOLLOWS]
71
EXECUTION COPY
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and delivered as of the date first above written.
PROBEX WELLSVILLE, L.P. PETROFAC LLC
By: Probex Wellsville Holding I, Inc.,
its General Partner
By: By:
--------------------------- ---------------------------------
Name: Name:
------------------------- -------------------------------
Title: Title:
------------------------ ------------------------------
72
EXECUTION COPY
EXHIBIT A
DEFINITIONS AND RULES OF USAGE
Part I: Rules of Usage
The terms defined below have the meanings set forth below for all
purposes, and such meanings are equally applicable to both the singular and
plural forms of the terms defined. "Include", "includes" and "including" shall
be deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import. "Writing", "written" and
comparable terms refer to printing, typing, lithography and other means of
reproducing words in a visible form. Any instrument defined or referred to below
or in any instrument that is governed by this Exhibit means such instrument as
may be from time to time amended, modified or supplemented, including by waiver
or consent and references to all attachments thereto and instruments
incorporated therein. References to a person are, unless the context otherwise
requires, also to its successors and assigns. "Hereof", "herein", "hereunder"
and comparable terms refer to the entire instrument in which such terms are used
and not to any particular article, section or other subdivision thereof or
attachment thereto. References to any gender include, unless the context
otherwise requires, references to all genders, and references to the singular
include, unless the context otherwise requires, references to the plural and
vice versa. "Shall" and "will" have equal force and effect. References in an
instrument to "Article", "Section" or another subdivision or to an attachment
are, unless the context otherwise requires, to an article, section or
subdivision of or an attachment to such instrument.
Part II: Definitions
"AAA" means the American Arbitration Association.
"AFFIDAVIT OF NOTICE OF COMMENCEMENT" is defined in Section 3.7.2.
"AFFILIATE" means any Person which, directly or indirectly, controls,
is controlled by, or is under common control with a Party. For the purposes of
this definition, "control" (including with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to a
Party, means the power to direct or cause the direction of the management and
policies of such Party, directly or indirectly, whether through the ownership of
voting securities or by contract or otherwise.
"AGREEMENT" means this Agreement for Engineering, Procurement and
Construction Services, including all Exhibits hereto, as amended or restated
from time to time.
"APPROVED VENDORS LIST" means the list of approved vendors set forth on
Exhibit D.
"BACK END FEEDSTOCK" means, as applicable, either of the processed oils
(light and heavy) to be used as feedstock for the Back End Unit, as specified in
Exhibit M, at times herein referred to as "Light Back End Feedstock" and "Heavy
Back End Feedstock".
"BACK END FEEDSTOCK TANKS" means the tanks in which Back End Feedstock
is stored immediately prior to treatment.
1
EXECUTION COPY
"BACK END FINISHING PROCESS LICENSOR" means that Person with whom Owner
enters a license agreement for the use of proprietary information and technology
in connection with the operation of the Back End Unit.
"BACK END MINIMUM PERFORMANCE CRITERIA" means, during and in accordance
with the requirements of the Back End Performance Tests, demonstration of no
less than ninety-five percent (95%) of the specified minimum feedstock
processing rates (as percentages of the Back End Performance Guarantee
processing rate specified in paragraph 6.1 of Exhibit G and as calculated in
accordance with paragraph 8.0 of Exhibit G) over the specified periods, while
fully meeting all other requirements of the Back End Performance Guarantee
specified in paragraphs 6.2 and 6.3 of Exhibit G.
"BACK END PERFORMANCE GUARANTEE" means Contractor's guarantee of
performance of the Back End as set forth in paragraph 6.0 of Exhibit G.
"BACK END PERFORMANCE TESTS" means both the test for Light Base Oil and
the test for Heavy Base Oil to demonstrate the ability of the Back End Unit to
meet or exceed the Back End Performance Guarantee, such tests to be performed in
accordance with the Test Procedures set forth in Exhibit M.
"BACK END PROCESS TESTS" means both the test for Light Base Oil and the
test for Heavy Base Oil to demonstrate the performance of the Back End Unit,
such tests to be performed in accordance with the Test Procedures set forth in
Exhibit M.
"BACK END UNIT" or "BACK END" means that component of the Facility used
to convert Back End Feedstock into Base Oil. For purposes of this definition,
the physical location where the Back End Unit begins shall be the flange where
the Back End Feedstock enters the Back End Feedstock Tanks and the physical
location where the Back End Unit ends is at the outlet flange(s) of the tank(s)
which receive Base Oil.
"BASE OIL" means, as applicable, either of the high quality lubricant
base oils (light or heavy) that are the final product of the Facility, at times
herein referred to as "Light Base Oil" and "Heavy Base Oil", as specified in
Exhibit G.
"BUSINESS DAY" means any Day excluding Saturday, Sunday or legal
holiday in the jurisdiction where the act or obligation is to be performed.
"BUY-DOWN AMOUNT(S)" means any amount(s) to be paid by Contractor as
liquidated damages for a failure to achieve either (a) the Front End Performance
Guarantee or (b) the Back End Performance Guarantee, as referenced in Section
22.2.2 and as calculated in accordance with Exhibit J.
"CHANGE NOTICE" means a written notice to the Contractor of a proposed
Change Order.
"CHANGE ORDER" is defined in Section 4.3.4.
"CHANGE OF LAW" means the enactment, adoption, promulgation, issuance,
modification, revision, change, repeal or cancellation after the date of this
Agreement of or to any
2
EXECUTION COPY
Governmental Rule or any Governmental Approval, that affects Contractor's cost
or schedule related to the performance of its obligations under this Agreement,
or the ability of Contractor to meet any of the Performance Guarantees.
Notwithstanding the prior sentence, a change in Federal, state, county or local
income tax, or in Federal payroll tax, enacted or effective after the date of
this Agreement, shall not be a Change of Law.
"CONTRACT INTEREST RATE" mean interest, accruing on any amount payable
by a Party that is not paid by the date such amount is due, for each Day from
the due date until the date of receipt, at a rate which is the lesser of (a) an
annual rate equal to one percent (1%) above the rate per annum published in the
Wall Street Journal under "Money Rates" as the prime lending rate, or (b) the
maximum rate permitted by applicable law.
"CONTRACT PRICE" means the price for the Work shown as the cumulative
amount of all Milestone Payments in Exhibit E, as adjusted pursuant to the terms
of this Agreement.
"CONTRACTOR" means Petrofac LLC.
"CONTRACTOR EVENT OF DEFAULT" is defined in Section 15.1.
"CONTRACTOR-INDEMNIFIED PARTY" is defined in Section 18.1.2.
"COORDINATION AGREEMENT" means an agreement among Contractor, Owner,
Technology Facility Provider and Lender, in form and substance acceptable to
each of them.
"DATE CERTAIN" means the date that is one hundred and twenty (120) Days
following the Guaranteed Substantial Completion Date.
"DAY" means a calendar day, including Saturdays, Sundays, and holidays.
In the event that an obligation is required to be performed hereunder on or
before a Day which is a specified number of Days after an event, and such Day is
not a Business Day, the obligation shall be required to be performed on or
before the first Business Day following such Day. The preceding sentence shall
not apply to the Performance Tests.
"DEFECT" means any designs, engineering, materials, equipment, tools,
supplies, or installation or any other Work performed or provided by, or within
the responsibility of, Contractor or any of its Subcontractors which
(a) fails to conform to the Scope Document or is of improper or
inferior workmanship; or
(b) is inconsistent with Prudent Industry Practices, and either
(i) could reasonably be expected to adversely affect the
performance of the Facility, or
(ii) could reasonably be expected to adversely affect the
continuous safe operation of the Facility during the
Facility's design life; or
3
EXECUTION COPY
(c) otherwise fails to meet the warranties set forth in
Section 9.1.
"DELAY LIQUIDATED DAMAGES" means the liquidated damages payable by
Contractor for each Day or part thereof that the Substantial Completion Date is
delayed past the Guaranteed Substantial Completion Date, as provided in Section
22.1.2 and as calculated in Exhibit J.
"ENVIRONMENTAL REPORTS" means the Environmental Site Assessment Update,
dated June 2001, prepared by ERM.
"EPC DATA AND INFORMATION" means all drawings, bills of material, data
sheets, calculations, specifications and other documents or information
(including data in electronic or other storage media) prepared by Contractor,
Subcontractors or others for the Work, including Subcontractors' unpriced
quotations, manufacturing reports, test certificates, inspection certificates
and parts lists.
"FACILITY" means the used oil refining facility, more particularly
described in the Scope Document, to be designed and constructed by Contractor on
the Site.
"FINAL COMPLETION" is defined in Section 8.3.1.
"FINAL COMPLETION CERTIFICATE" is defined in Section 8.3.2.
"FINAL COMPLETION DATE" is defined in Section 8.3.2.
"FINAL PAYMENT" is defined in Section 12.7.1.
"FINAL REQUEST FOR PAYMENT" is defined in Section 12.7.1.
"FINANCING AGREEMENTS" means any and all senior loan agreements and
associated notes, bonds, indentures, mortgages, security agreements,
participation agreements and similar documents relating to the construction,
interim, and long-term financing and refinancing of the Facility, including any
modifications, extensions, renewals, or replacements of any of the same.
"FORCE MAJEURE EVENT" is defined in Section 13.1.1.
"FRONT END" means the Facility, other than the Back End Unit.
"FRONT END FEEDSTOCK" means Start-up and Testing Feedstock and Used
Oil.
"FRONT END MINIMUM PERFORMANCE CRITERIA" means, during and in
accordance with the requirements of the Front End Performance Tests,
demonstration of no less than ninety-five percent (95%) of the specified minimum
feedstock processing rates (as percentages of the Front End Performance
Guarantee processing rate specified in paragraph 2.1 of Exhibit G and as
calculated in accordance with paragraph 4.0 of Exhibit G) over the specified
periods, while fully meeting all other requirements of the Front End Performance
Guarantee specified in paragraphs 2.2, 2.3 and 2.4 of Exhibit G.
4
EXECUTION COPY
"FRONT END PERFORMANCE GUARANTEE" means Contractor's guarantee of Front
End performance as specified in paragraph 2.0 of Exhibit G.
"FRONT END PERFORMANCE TEST" means a test to demonstrate that the Front
End meets or exceeds the Front End Performance Guarantee, to be performed in
accordance with the Test Procedures set forth in Exhibit M.
"FRONT END PROCESS TEST" means a test of the Front End conducted using
Used Oil, to be performed in accordance with the Test Procedures set forth in
Exhibit M.
"GOVERNMENTAL APPROVAL" means any authorization, consent, approval,
license, ruling, permit, certification, exemption, or registration by or with
any Governmental Unit required for and specifically applicable to the Facility,
including those listed in Exhibit C, and any interpretation or administration of
any of the foregoing.
"GOVERNMENTAL RULE" means any generally applicable statute, law,
regulation, ordinance, rule, judgment, order, decree, directive, or any similar
form of decision of any Governmental Unit or determination by, or any
interpretation or administration of any of the foregoing.
"GOVERNMENTAL UNIT" means any United States federal, state or local
government, any political subdivision or any governmental, judicial, public or
statutory instrumentality, administrative agency, authority, body or other
entity having jurisdiction over the Work.
"GUARANTEED FINAL COMPLETION DATE" is defined in Section 22.1.1(b).
"GUARANTEED SUBSTANTIAL COMPLETION DATE" is defined in Section
22.1.1(a).
"HAZARDOUS WASTES OR MATERIALS" means any radioactive, hazardous,
toxic, or polluting substance, as defined and/or regulated by a Governmental
Unit pursuant to Governmental Rules applicable to the Work, the Facility, or the
Site, as such Governmental Rules may be amended from time to time, including:
the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9601 et seq.); the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.); the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.); or any provisions of any federal, state or local statute
or regulation whose purpose in whole or in part is the protection of human
health, safety or the environment.
"HEAVY BASE OIL" has the meaning ascribed to such term in the
definition of Base Oil.
"HEAVY BACK END FEEDSTOCK" has the meaning ascribed to such term in the
definition of Back End Feedstock.
"IMMATERIAL NONCONFORMANCE" is defined in Section 6.4.
"INDEPENDENT ENGINEER" means the engineering and consulting firm
described in Section 3.8.
5
EXECUTION COPY
"INDEPENDENT INSURANCE CONSULTANT" means Xxxxx USA Inc. or any
replacement thereof selected by Lender.
"INVOICE" is defined in Section 12.2.1.
"LENDER" means the entities providing Senior Debt, including any
assignee or successor thereto.
"LIENS" is defined in Section 3.7.1.
"LIGHT BASE OIL" has the meaning ascribed to such term in the
definition of Base Oil.
"LIGHT BACK END FEEDSTOCK" has the meaning ascribed to such term in the
definition of Back End Feedstock.
"LIQUIDATED DAMAGES" means, collectively, the Buy-Down Amounts and the
Delay Liquidated Damages.
"MECHANICAL COMPLETION" is defined in Section 7.1.
"MECHANICAL COMPLETION CERTIFICATE" is defined in Section 7.2.
"MECHANICAL COMPLETION DATE" is defined in Section 7.2.
"MILESTONE" means each of the scheduled milestones for the performance
of the Work until Final Completion as set forth in the Project Milestone Payment
Schedule.
"MILESTONE PAYMENT" means a payment in respect of the achievement by
Contractor of a Milestone. All individual Milestone Payments shall be expressed
as a discrete value within the Contract Price.
"MILESTONE PAYMENT PLAN" means a plan according to which Contractor
earns Milestone Payments during the Work in accordance with the provisions of
Article 12 and Exhibit E and Exhibit F.
"MINIMUM PERFORMANCE CRITERIA" means the Front End Minimum Performance
Criteria, the Back End Minimum Performance Criteria, and the successful
performance of the Substantial Completion Discharge and Emissions Verification
Run, as provided in Exhibit M.
"MONTHLY STATUS MEETING" is defined in Section 3.15.
"NON-INSURABLE FORCE MAJEURE EVENT" means any Force Majeure Event
against which at the time in question business interruption insurance cannot be
obtained on commercially reasonable terms, as determined by the Independent
Insurance Consultant, and shall include without limitation those Force Majeure
Events listed in Section 13.1.1(c) to the extent business interruption insurance
for such Force Majeure Event cannot be obtained on commercially reasonable
terms.
"NOTICE" and "NOTICE" are defined in Article 25.
6
EXECUTION COPY
"NOTICE OF FINAL COMPLETION" is defined in Section 8.3.2.
"NOTICE OF MECHANICAL COMPLETION" is defined in Section 7.2.
"NOTICE OF SUBSTANTIAL COMPLETION" is defined in Section 8.2.2.
"NOTICE TO PROCEED" is defined in Section 5.1.
"NOTICE TO PROCEED DATE" is defined in Section 5.1.
"OPERATOR" means the entity retained by Owner to provide operating and
maintenance services for the Facility, which entity may be Owner or an Affiliate
of Owner.
"OWNER" means Probex Wellsville, L.P., a Delaware limited partnership.
"OWNER DIRECTIVE" is defined in Section 4.3.3.
"OWNER EVENT OF DEFAULT" is defined in Section 15.4.
"OWNER-INDEMNIFIED PARTY" is defined in Section 18.1.1.
"OWNER REPRESENTATIVE" means the representative designated by Owner
pursuant to Section 25.1.
"PARTY" means Owner or Contractor, and "PARTIES" means both Owner and
Contractor.
"PERFORMANCE GUARANTEES" is defined in Section 22.2.1.
"PERFORMANCE TESTS" is defined in Section 8.1.1.
"PERSON" means any individual, corporation, voluntary association,
partnership, company, trust, incorporated organization, unincorporated
organization or Government Unit, or any other entity or organization.
"PRO TERRA(TM) PROCESS" means the proprietary process licensed to Owner
or its Affiliates used for the production of high quality lubricant base oils
from Used Oil that sequentially embodies pretreatment, fractionation and
finishing stages.
"PROCESS DISCHARGE AND EMISSIONS VERIFICATION RUN" means a test run of
the Facility using Used Oil and Back End Feedstock produced from Used Oil, to
determine that the waste water and other emissions being discharged from the
Facility are consistent with the design criteria set forth in the Scope
Document, such test to be performed, and the performance of the Facility to be
evaluated, in accordance with the Test Procedures set forth in Exhibit M.
"PROCESS TESTS" is defined in Section 8.1.1.
"PROGRESS REPORT" is defined in Section 12.2.4.
"PROJECT CASH FLOW SCHEDULE" shall mean the schedule attached hereto as
Exhibit F, as
7
EXECUTION COPY
such schedule may be amended from time to time in accordance with the terms
hereof.
"PROJECT MANAGER" means the representative designated by Contractor
pursuant to Section 25.1.
"PROJECT MILESTONE PAYMENT SCHEDULE" means the schedule attached as
Exhibit E, as such schedule may be amended from time to time in accordance with
the terms hereof.
"PROJECT SCHEDULE" means the project schedule attached as Exhibit O.
"PRUDENT INDUSTRY PRACTICES" means those standards, practices, methods,
and procedures that are in conformance with the degree of skill and judgment
normally exercised by recognized engineering and construction firms performing
engineering and construction services for facilities of a similar size, type and
complexity as the Facility.
"PUNCH LIST" means the list of Punch List Items.
"PUNCH LIST ITEMS" means those minor items of the Work, the omission of
which would not adversely affect the safety, performance or reliability of the
Performance Tests or commercial operation of any component of the Facility (for
example, painting, insulation repairs, labels and landscaping).
"REQUEST FOR PAYMENT" is defined in Section 12.2.
"RETAINAGE" is defined in Section 12.2.1(b).
"RETAINAGE RELEASE DATE" is defined in Section 8.5.1.
"RETAINAGE RELEASE REQUEST" is defined in Section 8.5.1.
"SCOPE DOCUMENT" means the ten (10) Books (12 volumes) included as
Exhibit B, as it may be adjusted pursuant to this Agreement.
"SENIOR DEBT" means first priority construction or permanent debt
financing for the Facility being provided by Lender.
"SITE" means the real property on which the Facility and its various
components are located and surrounding locations, including but not limited to
the laydown area, areas for temporary facilities and, as applicable, any
easements or rights-of-way appurtenant thereto, as described and depicted in the
Scope Document.
"SITE ACCESS PLAN" means the document attached as Exhibit H.
"SITE CONDITIONS" is defined in Section 24.1.6.
"START-UP AND TESTING FEEDSTOCK" means feedstock to the Front End, as
specified in Exhibit M.
8
EXECUTION COPY
"SUBCONTRACTOR" means the Back End Finishing Process Licensor and any
Person (including an Affiliate of Contractor) with whom Contractor has entered
into any subcontract, purchase order, or other agreement for such Person to
perform any part of the Work or to provide any materials, equipment or supplies
on behalf of Contractor (including any Person at any tier with whom any
Subcontractor has further subcontracted any part of the Work), including
vendors, suppliers, materialmen and consultants.
"SUBSTANTIAL COMPLETION" is defined in Section 8.2.1.
"SUBSTANTIAL COMPLETION CERTIFICATE" is defined in Section 8.2.2.
"SUBSTANTIAL COMPLETION DATE" is defined in Section 8.2.2.
"SUBSTANTIAL COMPLETION DISCHARGE AND EMISSIONS VERIFICATION RUN" means
a test run of the Facility using Start-up and Testing Feedstock and Back End
Feedstock produced from Start-up and Testing Feedstock, to determine that the
waste water and other emissions being discharged from the Facility are
consistent with the design criteria set forth in the Scope Document, such test
to be performed, and the performance of the Facility to be evaluated, in
accordance with the Test Procedures set forth in Exhibit M.
"SUBSTANTIAL COMPLETION TESTS" is defined in Section 8.1.1.
"SURETY BOND" means a payment bond and a performance bond, each in form
and substance acceptable to Owner, Lender, and Contractor.
"TECHNOLOGY COVER FACILITY" means the credit facility to be obtained by
Owner from the Technology Facility Provider, and which may be drawn upon by
Owner to cover the costs of remediation of any failure or deficiency in the
performance of the Facility evidenced during the Process Tests that is not
caused by a Defect, and which shall serve as a credit enhancement to the holders
of the Senior Debt.
"TECHNOLOGY FACILITY PROVIDER" means the provider of the Technology
Cover Facility.
"TEST PROCEDURES" means the procedures for the Performance Tests as
provided in Exhibit M.
"USED OIL" means feedstock to the Front End, as specified in Exhibit M.
"WARRANTY BOND" means a warranty bond in form and substance acceptable
to Owner, Lender, and Contractor.
"WARRANTY PERIOD" is defined in Section 9.5.1.
"WORK" means all work, services, obligations, duties and
responsibilities assigned to and to be performed or undertaken by Contractor or
its Subcontractors pursuant to this Agreement (including pursuant to a Change
Order), including the provision of all design, engineering, procurement,
construction, startup, commissioning, performance testing and other related
9
EXECUTION COPY
services necessary to complete the Facility as contemplated by this Agreement.
The scope of the Work shall be as described in Section 3.2.
10
