ENERGY SUPPLY AGREEMENT
This Energy Supply Agreement ("Agreement") is made and entered into
this 22nd day of January, 1997 by and among Heinz USA, a Division of X.X. Xxxxx
Company, a Pennsylvania corporation having its principal place of business at
0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 ("Heinz"), Allegheny Development
Corporation, a Pennsylvania corporation having its principal place of business
at Xxxxxxxxxxx Corporate Center, 000 Xxxxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx,
XX 00000 ("ADC") and Duquesne Energy, Inc., a Pennsylvania corporation having
its principal place of business at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx,
XX 00000-0000 ("DEN").
W I T N E S S E T H :
WHEREAS, Heinz currently utilizes energy produced by an
inside-the-fence energy facility (the "Energy Facility") that provides energy in
the form of steam, electricity and compressed air to its Pittsburgh,
Pennsylvania manufacturing plant;
WHEREAS, ADC is in the business of, and has considerable expertise in,
energy and fuel management, energy facility development, cogeneration,
independent power production and utility management services; and
WHEREAS, DEN, an affiliate of ADC, has complementary expertise in
energy and fuel procurement;
WHEREAS, Heinz, ADC and DEN desire to enter into a contractual
arrangement pursuant to which (i) ADC would provide to Heinz electricity, steam
energy, and compressed air and (ii) DEN would procure the coal required to
produce such energy, each under the terms more specifically set herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants, agreements and conditions set forth herein, Heinz, ADC and DEN,
intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the following terms shall have
the following meanings for the purposes of this Agreement, and shall include the
plural as well as the singular form:
"Agreement" shall have the meaning set forth in the first paragraph of
this Agreement.
"Baseline UECCE" shall have the meaning set forth in Section 3.01(b)
hereof.
"Baseline UECCS" shall have the meaning set forth in Section 3.01(b)
hereof.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Pennsylvania.
"Calendar Year" means any twelve-month period commencing on January 1
and ending the following December 31.
"Consolidating Statement" means the monthly invoice generated by ADC
on behalf of itself and DEN under Section 3.02 hereof that itemizes the payments
to be made to ADC and DEN by Heinz hereunder, including, without limitation, the
payments required under Sections 3.01 hereof.
"Current Capacity" means with respect to (i) electric energy, the
maximum steady state full load capacity of two turbine generators (2 times
3,000kW); and (ii) compressed air, the maximum capacity of the Energy Facility's
installed compressed air system (5,300 cfm) as of the Effective Date. Current
Capacity with respect to steam means the maximum steady state full load capacity
of the operating coal/natural gas fired boilers at the Energy Facility
(operating coal/natural gas fired boilers for this purpose means boilers 1,2,3
and 4). Current Capacity for steam shall be equal to 160,000 lbs of coal fired
steam per hour during the Initial Capacity Measuring Period. Should an opacity
excursion occur preventing the Energy Facility from achieving 160,000 lbs of
coal fired steam per hour as required herein, Current Capacity for steam shall
be reduced to 150,000 lbs of coal fired steam per hour. After the conclusion of
the Initial Capacity Measuring Period and for the remainder of the Term, Current
Capacity for steam shall be equal to the greater of (i) 170,000 lbs of coal
fired steam per hour or (ii) actual steady state full load capacity.
"Demand Energy Charge" means the charge set forth under Section
3.01(a) hereof.
"Effective Date" means the first Business Day after this Agreement has
been executed and delivered by each of Heinz, ADC and DEN.
"Energy Consumption Charges" means the charges stated under Section
3.01(b) hereof.
"Energy Facility" means the cogeneration facility that provides energy
in the form of steam, electricity and compressed air to the Manufacturing
Facility.
"Energy Facility Improvements" means certain proposed initial capital
improvements, modifications and upgrades to the Energy Facility to be
implemented by ADC within 18-24 months after the Effective Date.
"Force Majeure" shall mean, but not be limited to, acts of God,
storms, war, official strikes or industrial disputes beyond the control of the
Parties (provided each Party shall use every reasonable effort in good faith to
resolve any such strike or dispute), acts of the public enemy, quarantine,
epidemic, blockade, civil disturbance, riots, insurrection, fire, rules or
regulations of any governmental authority having or claiming jurisdiction,
compliance with which is beyond a party's reasonable control and which makes
continuance of operations impossible, or any other cause beyond the reasonable
control of such Party, whether or not similar to the causes specified herein.
Loss of all or substantially all of the Energy Facility or the use thereof due
to destruction, damage or rendition of the Energy Facility unfit for normal use
for any reason whatsoever shall constitute Force Majeure. Inability of any Party
to secure funds, arrange bank loans or other financing, or to obtain credit
shall not be regarded as Force Majeure. The inability of ADC or DEN to obtain
fuel shall not be regarded as Force Majeure.
"Initial Capacity Measuring Period" means the period prior to the time
that the steam capacity related Energy Facility Improvements are completed
(which for the purposes of this definition shall in any event not extend beyond
the last day of the eighteenth (18th calendar month) commencing after the
Effective Date).
"kwh" means kilowatt hour.
"mlb" means thousand pounds.
"Manufacturing Facility" means all of the manufacturing plant that is
owned and operated by Heinz and located at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, XX
00000.
"Manufacturing Interruption" shall mean either (i) any interruption in
Heinz's production of finished goods at the Manufacturing Facility or (ii) any
delay of more than 30 minutes in the commencement by Heinz of its production
schedule at the Manufacturing Facility.
"Party" means Heinz, ADC or DEN, severally, and "Parties" means Heinz,
ADC and DEN, collectively.
"Payment Commencement Date" means the first day of the first calendar
month following the Effective Date.
"Regulatory Requirements" means all legal and regulatory requirements
and permit specifications related to the operation of the Energy Facility, as
the same may be modified from time to time.
"Stipulated Buy-Out Price" means, on any date during the Term, the
amount determined in accordance with Schedule A, B, or C of Exhibit B hereto.
"Term" shall mean the fifteen (15) year period commencing on the
Effective Date.
ARTICLE II
ANNUAL ENERGY PURCHASE AND
SUPPLY REQUIREMENTS
2.01 Energy Supply and Purchase Requirements. Commencing on the
Payment Commencement Date, ADC hereby agrees to sell and Heinz hereby agrees to
purchase, (i) all of the steam required from time to time to meet the
operational demands of the Manufacturing Facility up to, but not exceeding,
942,000 mlbs per Calendar Year and (ii) electric energy required in connection
with the operation of the Manufacturing Facility that exceeds the annual minimum
take or pay obligation under Heinz's primary electric supply contract (which
take or pay obligation shall in no event be greater than 20 million kwh during
any Calendar Year), to the extent steam demand at an annual average rate of not
less than 24.36 kwhs per mlbs of steam production permits. If ADC fails to meet
the annual average rate of 24.36 kwhs per mlbs of steam produced, ADC shall pay
Heinz the difference between the then current purchased primary electrical cost
per kwh and the then current Baseline UECCE, multiplied by the total kwh
shortfall. Total kwh shortfall shall equal the difference between 24.36 and the
actual annual average kwh per mlbs of steam produced , multiplied by the actual
mlbs of steam produced. Without limiting the generality of the foregoing, ADC
shall use best efforts to supply electrical energy so that Heinz may purchase no
more than the annual minimum take or pay obligation under Heinz's primary
electric supply contract. ADC shall supply compressed air required in connection
with the operation of the Manufacturing Facility, provided, and solely to the
extent that, it is able to do so by utilizing the Current Capacity. DEN shall
procure all coal or coal-based xxxxxx fuel required to produce the energy to be
delivered to Heinz under this Agreement.
2.02 Term. Except as otherwise provided herein, the term of this
Agreement (the "Term") shall commence on the Effective Date and shall terminate
on the 15th anniversary of the Effective Date, unless extended by mutual
agreement of the Parties.
2.03 Increased Steam Demand Requirements. In the event that the steam
demand of the Manufacturing Facility exceeds 942,000 mlbs in any Calendar Year,
Heinz, at its option, may (i) institute at its sole expense such improvements,
upgrades, overhauls or replacements at the Energy Facility as are required to
increase steam production; (ii) requisition coal-fired steam (up to, but not
exceeding, 58,000 mlbs in any Calendar Year) that would otherwise be exported to
third parties; or (iii) require the operation of the gas-fired Boiler Number 8
and/or natural gas burners on Boilers Number 1 through 4 to provide additional
steam in amounts up to, but not exceeding 120,000 pounds per hour above Current
Capacity; provided, however, that to the extent any of the boilers described in
the previous sentence is off-line to allow ADC to perform maintenance thereon,
and Heinz has consented to such boiler or boilers being off-line, Current
Capacity shall be reduced by the capacity of such off-line boiler or boilers. If
the steam demand of the Manufacturing Facility exceeds the combined threshold
amounts established under Sections 2.01(i) and 2.03(ii) (1,000,000 mlbs), ADC
shall determine whether sufficient quantities of coal-fired steam can be made
available to Heinz without compromising ADC's export obligations to third
parties ("Excess Coal-Fired Steam"). Excess Coal-Fired Steam will be made
available to Heinz at Heinz's request. Any steam required that exceeds the
available Excess Coal- Fired Steam will be made available to Heinz only upon
Heinz's exercise of its option under 2.03(i) or (iii).
2.04 Peak Demand Requirements. In the event that steam demand of the
Manufacturing Facility at any time exceeds Current Capacity, ADC will operate
gas-fired Boiler Number 8 and/or natural gas burners on Boilers Number 1 through
4 to increase steam production to the required level during the peak demand
period; provided, however, that to the extent any of the boilers described in
the previous sentence is off-line to allow ADC to perform maintenance thereon,
and Heinz has consented to such boiler or boilers being off-line, Current
Capacity shall be reduced by the capacity of such off-line boiler or boilers. If
Heinz at any time determines that it would be advisable to deal with peak demand
requirements in another fashion, Heinz may exercise its option to institute
improvements, upgrades, overhauls or replacements under Section 2.03(i) or take
such other actions as it may deem appropriate.
2.05 Interruption in Energy Services. The parties acknowledge that
from time to time there may be brief interruptions in the delivery of steam,
electric energy or compressed air hereunder. Exhibit D hereto sets forth and
defines the number and nature of such interruptions that reasonably can be
expected to occur during any Calendar Year. If in any Calendar Year
interruptions in the delivery of steam, electric energy or compressed air (i)
exceed the applicable thresholds set forth on Exhibit D and (ii) cause a
Manufacturing Interruption, ADC shall pay to Heinz $20,000 (as adjusted during
the Term for inflation based on the Consumer Price Index) per incident that
exceeds the stated thresholds. Such payment shall be made within twenty (20)
days following of the occurrence of the incident and shall be deemed to
constitute liquidated damages and not a penalty. To the extent an incident
commences prior to 11:00 p.m., and continues beyond midnight of that same
calendar day, each portion of such incident occurring after midnight on that
calendar day and on each subsequent calendar day shall be deemed a separate
incident for the purposes of this Section 2.05. ADC and Heinz acknowledge that
any expenses, costs or damages that are likely to be incurred as a result of the
incidents contemplated under this Section 2.05 would be difficult to ascertain
and agrees that payment of the amount stated herein constitutes a fair and
reasonable estimate of the liquidated damages that are likely to be suffered by
Heinz. No liquidated damages shall be paid by ADC to Heinz under this Section
2.05 with respect to any manufacturing interruption caused by (i) an event
constituting Force Majeure or (ii) any failure of any solely inert system
(including, without limitation, the main steam header piping) unaffected by
operating or maintenance practices or negligence (including, without limitation,
any water hammer) related to the Energy Facility. For purposes of this Section
2.05 only, "Force Majeure" shall not include any event caused by the negligence
of, or failure to comply with the terms of this Agreement by, ADC.
Notwithstanding and in addition to the liquidated damages provided for above, in
the event of a "Manufacturing Interruption", Heinz shall have the right to
obtain energy services from an alternative source and to the extent such
alternative energy services are more expensive than the services to be provided
hereunder, ADC shall pay a sum to Heinz equal to the additional cost of such
alternative energy services.
2.06 Steam Specifications. Steam delivered to the Manufacturing
Facility hereunder shall satisfy (i) the Regulatory Requirements applicable to
food processing operations as established from time to time by the United States
Department of Agriculture or other governmental body having jurisdiction over
the operation of the Manufacturing Facility and (ii) Oregon Tilth standards (as
a reference, such steam to meet the following nominal conditions: 115 psig and
365o F to the factory, 220 psig and 415o F to the carrot room, 600 psig and 750o
F to the rig room, and 7 to 10 psig and 220 o F to the factory and offices). Any
increase in cost associated with delivered steam that is incurred by ADC as a
result of changes in Regulatory Requirements or Oregon Tilth standards that
become effective after the Effective Date shall be recovered by ADC through an
adjustment to the energy charges payable under Article III. Any such adjustment
shall be made after consultation with and subject to the agreement of Heinz.
2.07 Electrical Energy Specifications. The electrical energy delivered
to the Manufacturing Facility shall satisfy the now current primary electrical
utility requirements and now current Manufacturing Facility requirements with
regard to service voltage and power quality.
2.08 Compressed Air Specifications. The compressed air delivered to
the Manufacturing Facility shall satisfy the now current Manufacturing Facility
requirements with respect to particulate, oil and moisture content
ARTICLE III
PAYMENTS FOR ENERGY SERVICES
3.01 Energy Charges.
(a) Demand Energy Charge. Commencing on the Payment Commencement Date,
Heinz shall pay to ADC a monthly fixed charge equal to $181,516.00 which has
been calculated based upon Current Capacity and Regulatory Requirements in
effect on the date of this Agreement (the "Demand Energy Charge"). Any
reasonable costs associated with changes in Regulatory Requirements
(individually, a "New Regulatory Cost" and collectively, "New Regulatory
Costs"), including without limitation, construction, engineering and consulting
fees of unaffiliated third parties, increased reporting or compliance costs and
legal fees, and excluding costs resulting from Energy Facility Improvements or
the export of steam, shall result in a one-time or recurring adjustment to the
Demand Energy Charge. Any New Regulatory Cost that is a one-time charge shall be
itemized on the first Consolidating Statement delivered to Heinz after the New
Regulatory Cost is incurred. New Regulatory Costs that are recurring in nature
(such as the amortization of capital costs associated with modifications to the
Energy Facility necessary to achieve compliance with changes in Regulatory
Requirements) shall be recouped through a mutually agreed-upon adjustment to the
on-going Demand Energy Charge and reflected on the Consolidating Statement
commencing with the first month after such New Regulatory Costs are incurred.
(b) Baseline Unit Energy Consumption Charges. The initial base monthly
unit energy consumption charges for steam and electricity (collectively, the
"Baseline Unit Energy Consumption Charges") shall be: (i) $2.75 per mlb of steam
("Baseline UECCS") and (ii) $.02 per kwh of electricity (the "Baseline UECCE").
Commencing on the Payment Commencement Date, Heinz shall pay to DEN and ADC,
respectively, monthly consumption charges equal to:
(i) in the case of DEN, $x per mlb of steam delivered to the
Manufacturing Facility during the previous calendar month, with
"x" being equal to:
1,220 x 1,000 x Actual Coal Price per Ton
Coal Heating Value (Btu's/Ton) x .82;
in no event shall "x" exceed the then current Baseline UECCS;
(ii) In the case of ADC, $y per each mlb of steam and the then
current Baseline UECCE per each kwh of electricity delivered to
the Manufacturing Facility during the previous calendar month,
with "y" being equal to the then current Baseline UECCS minus x
as calculated under subsection (i) above.
The initial Baseline Unit Energy Consumption Charges shall remain constant for
the sixty (60) month period (the "Initial Unit Energy Period") commencing on the
Payment Commencement Date. Thereafter, the Baseline Unit Energy Consumption
Charges shall be adjusted annually in accordance with the Producer Price Index
for Southern Appalachian Coal for Industrial Users (PPI 11211-412) (the "SAC
Index") to compensate for market changes in fuel costs. At the conclusion of the
48th month in the Initial Unit Energy Period, the average of the SAC Index rates
for the previous twelve (12) months (the "Base Index Rate") shall be
established. Upon the first day immediately following the expiration of the
Initial Unit Energy Period (the "Recalculation Date") and on each anniversary of
the Recalculation Date thereafter, the average of the SAC Index rates for the
previous twelve (12) months (the "Current Index Rate") shall be divided by the
Base Index Rate and the quotient shall be deemed to be the "Market Index
Factor", which in no event shall be less than one (1). On the Recalculation Date
and each subsequent anniversary thereof, the initial Baseline Unit Energy
Consumption Charges shall be adjusted by the effective Market Index Factor.
(c) Baseline Unit Energy Consumption Charges Applicable to Increased
Steam Demand. Baseline Unit Energy Consumption Charges payable in connection
with (i) requisitioned coal-fired steam under Section 2.03(ii) and Excess
Coal-Fired Steam, if any, shall equal the lowest unit energy charge in effect
and payable by any third party to ADC for export steam and (ii) the production
of gas-fired steam under Sections 2.03(iii) and 2.04 shall be determined by
adding (i) the current Baseline Unit Energy Consumption charge for steam and
(ii) a charge associated with the difference between the then current energy
cost of natural gas versus coal fired steam as calculated in accordance with
Exhibit C hereto.
(d) If at any time during the Term Heinz demonstrates to through the
production of a bona fide third party offer that (i) the Demand Energy Charge
and the Baseline Unit Energy Consumption Charges do not reflect fair market
rates and (ii) it could materially reduce the aggregate annual cost paid by
Heinz for steam and electricity under this Agreement by more than $250,000, then
Heinz may exercise its termination rights under Section 7.03 hereof.
(e) The Parties hereby confirm that the energy charges set forth in
this Section 3.01 have been negotiated at arms-length, reflect the fair market
value of the energy services supplied to Heinz and have been calculated so as to
include the cost to ADC and DEN, respectively, for fuel, chemicals, consumables,
ash hauling and disposal and other ancillary costs incurred in connection with
the supply of energy services hereunder.
3.02 Billing and Payment Mechanism. ADC shall submit to Heinz a
monthly invoice (the "Consolidating Statement") itemizing the charges payable to
each of ADC and DEN under this Article III. Each invoice submitted to Heinz for
energy services furnished hereunder shall contain the steam and electric meter
reading for the previous and the current month and shall be due and payable
twenty (20) days after receipt of invoice by Heinz. If Heinz shall contend that
the Consolidating Statement is erroneous or unreasonable, the Parties shall
promptly meet with respect thereto. The payment obligation for the portion of
any Consolidating Statement that is in dispute shall be suspended until the
Parties resolve the dispute. In case a meter is temporarily out of repair, the
quantity of services used during the time that the meter is out of repair shall
be reasonably estimated by ADC (and concurred in by Heinz, which concurrence
shall not be unreasonably withheld), upon the basis of the amount of services
registered by the meter when in proper working order under similar circumstances
(taking into account the duration of such period, the season, prevailing
temperatures and other factors). Within approximately six (6) months after the
Payment Commencement Date subject to equipment availability and Manufacturing
Facility operating cycle, ADC shall install and implement an integrated
circuit/CRT based Energy Distribution Monitoring System under which it will
provide Heinz with a real-time, daily and month-to-date summary of energy
consumption and delivery conditions. The Parties shall mutually agree and
designate a third party to calibrate the metering devices on an annual basis,
with calibration costs to be paid by ADC . Any Party may in its discretion
arrange for additional meter calibrations. The costs associated with these
additional activities shall be the sole responsibility of the requesting Party.
Prior to any meter calibration, the Parties shall meet to review the proposed
activity. The Parties agree to review meter calibration results in effect on the
Effective Date; after installation of the Energy Distribution Monitoring System,
metering corrections may alter the fiscal year 1996 baseline steam production
assumption (which is currently 811,118 mlbs), and the Parties agree to estimate
the corrected fiscal year 1996 baseline steam production figure and recalculate
the Baseline UECCS and the electricity to steam ratio set forth in Section 2.01
to mutually agreed upon figures; provided that the product of the new fiscal
year 1996 baseline steam production figure multiplied by the recalculated
Baseline UECCS equals $2,230,575. Steam and electric meters in place and
operational on the Effective Date shall be utilized by ADC and will be read by
ADC (i) on a daily basis during the Term at 12:00 noon; and (ii) on December 31
of each year during the Term at 12:00 midnight. Steam and electric meters in
place and operational on the Effective Date will be upgraded in connection with
the installation of the Energy Distribution Monitoring System. ADC agrees to
permit Heinz and its representatives to audit ADC's meter reading and billing
records to verify any and all fees and charges payable under this Section 3.02.
ADC agrees to keep such readings and records in satisfactory form and content
for a period of three (3) years after submittal of the Consolidating Statement
to permit such audit and verification. The price payable for any compressed air
delivered to Heinz under this Agreement shall be zero dollars. A form of
Consolidating Statement is attached hereto on Exhibit A.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Heinz. Heinz represents and
warrants to ADC that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Effective Date:
(i) Heinz is a division of a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and has all requisite corporate power and authority to
own and operate its properties and to carry on its business as now
conducted and as proposed to be conducted, and enter into and carry
out the terms of this Agreement.
(ii) The execution, delivery and performance by Heinz of this
Agreement have been duly authorized by all necessary corporate action
on the part of Heinz, and none of such execution, delivery or
performance shall violate any law, governmental rule, regulation or
order binding on Heinz or the articles of incorporation of by-laws of
Heinz or contravene the provisions of, or constitute a default under
any mortgage, loan agreement, deed of trust, or other agreement or
contract to which Heinz is a party by which it or its properties may
be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of Heinz and constitutes the valid and legally
binding obligation of Heinz.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of Heinz is
required as a condition to the valid execution, delivery or
performance of this Agreement by Heinz.
4.02 Representations and Warranties of ADC. ADC represents and
warrants to Heinz that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Effective Date:
(i) ADC is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has
all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted and enter into and carry out the terms of
this Agreement.
(ii) The execution, delivery and performance by ADC of this Agreement
have been duly authorized by all necessary corporate action on the
part of ADC, and none of such execution, delivery or performance shall
violate any law, governmental rule, regulation or order binding on ADC
or the articles of incorporation of by-laws of ADC or contravene the
provisions of, or constitute a default under any mortgage, loan
agreement, deed of trust, or other agreement or contract to which ADC
is a party by which it or its properties may be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of ADC and constitutes the valid and legally
binding obligation of ADC.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of ADC is required
as a condition to the valid execution, delivery or performance of this
Agreement by ADC.
4.03 Representations and Warranties of DEN. DEN represents and
warrants to Heinz that the following statements are true and correct as of the
date hereof and covenants that they shall be true as of the Effective Date:
(i) DEN is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has
all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted and enter into and carry out the terms of
this Agreement.
(ii) The execution, delivery and performance by DEN of this Agreement
have been duly authorized by all necessary corporate action on the
part of DEN, and none of such execution, delivery or performance shall
violate any law, governmental rule, regulation or order binding on DEN
or the articles of incorporation of by-laws of DEN or contravene the
provisions of, or constitute a default under any mortgage, loan
agreement, deed of trust, or other agreement or contract to which DEN
is a party by which it or its properties may be bound.
(iii) This Agreement has been duly executed and delivered by the duly
authorized officers of DEN and constitutes the valid and legally
binding obligation of DEN.
(iv) No consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of DEN is required
as a condition to the valid execution, delivery or performance of this
Agreement by DEN.
ARTICLE V
DEFAULT
5.01 Default, Insolvency and Remedies of Heinz and ADC.
(a) The following events shall be deemed to be acts of default ("Acts
of Default") by Heinz or ADC under this Agreement regardless of the pendency of
any bankruptcy, reorganization, receivership, insolvency or other proceeding
which has or might have the effect of preventing such Party from complying with
the terms of this Agreement:
(i) Failure to pay any sums to be paid hereunder within thirty (30)
days after the date the payment is due, provided that the sum shall
have remained unpaid for (20) days after written notice of such
failure has been given to the defaulting Party.
(ii) Failure to comply with any term, provision, representation,
warranty or covenant of this Agreement, other than the payment of
money required to be paid hereunder, if such failure (x) reasonably
can be cured and is not cured within ninety (90) days after written
notice thereof or (y) reasonably cannot be cured within ninety (90)
days after written notice thereof and the defaulting Party has not
commenced to cure such failure within such period and thereafter
proceeded with reasonable diligence and good faith to accomplish a
cure; provided, however, all violations of federal, state and local
environmental and/or safety laws and regulations that may have a
materially adverse effect on the operations of the Energy Facility or
the Manufacturing Facility or result in the imposition of material
monetary penalties on Heinz must be cured in accordance with the
requirements and within the time frames of the applicable governmental
law, regulation or agency.
(iii) Filing, or consent to the filing of a petition for relief or
reorganization or arrangement or any other petition in bankruptcy by
Heinz or ADC, for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction; or Heinz or ADC shall make an
assignment for the benefit of creditors; or a Heinz or ADC shall
consent to the appointment of a custodian, receiver, trustee, or other
officer with similar powers, for substantially all of Heinz or ADC's
property or be adjudicated insolvent; or an order for relief shall be
entered against Heinz or ADC in any case or proceeding for liquidation
or reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding upon liquidation of all or any part of Heinz or ADC's
property; or any petition for any such relief shall be filed against a
Heinz or ADC and shall not be dismissed within sixty (60) days.
(b) Upon the occurrence of any Act of Default, the non-defaulting
Party may, at its option, and in addition to any other rights the non-defaulting
Party may have at law or in equity, terminate this Agreement by notice to the
other Party, or enforce, by all proper and legal suits and other means, its
rights hereunder, including, without limitation, the collection of sums due
hereunder, without terminating this Agreement, and should it be necessary for
any Party to take any legal action in connection with such enforcement, the
defaulting Party shall pay such other Party all costs, including reasonable
attorneys' fees so incurred, all without prejudice to any remedies that might
otherwise be used by any Party for recovery of arrearages of sums due hereunder
or damages as herein provided.
(c) The Parties hereby agree that no failure by DEN to procure fuel as
contemplated by this Agreement shall constitute a default under this Agreement.
Should such a failure occur, ADC shall be responsible for procurement of fuel
from an alternative source. In such event, all Baseline Unit Energy Consumption
Charges payable under Article III shall be payable to ADC during such period of
failure by DEN. Any failure by DEN to procure fuel shall not alleviate ADC's
obligations to provide steam or electrical energy under this Agreement.
ARTICLE VI
FORCE MAJEURE
6.01 Effect. In the event that any Party is rendered unable, by reason
of an event of Force Majeure, to perform, wholly or in part, any obligation or
commitment set forth in this Agreement, then, provided such Party gives prompt
written notice describing the particulars of such event, including, but not
limited to, the nature of the occurrence and its expected duration, and
continues to furnish monthly reports with respect thereto during the period of
the Force Majeure, the obligations of both Parties, except for obligations to
pay money (including, without limitation, the Demand Energy Charge), shall be
suspended to the extent and for the period of such Force Majeure condition;
provided, however, that (a) the suspension of performance is of no greater scope
and no longer duration than is required by the Force Majeure and (b) the Party
whose performance is being excused shall use its reasonable efforts to perform
its obligations hereunder and remedy its inability to perform.
6.02 Termination for Force Majeure. If a Force Majeure continues which
prevents any Party from performing an obligation hereunder for more than six (6)
consecutive months, any Party may terminate this Agreement upon thirty (30) days
prior written notice.
ARTICLE VII
TERMINATION
7.01 Termination. This Agreement shall terminate (i) upon the
expiration of the Term; or (ii) in accordance with the provisions of Section
7.02, 7.03, 7.04, Article V, or Article VI. If this Agreement is terminated
prior to the end of the Term:
(i) as a result of Force Majeure, Heinz shall pay to ADC the
Stipulated Buy-Out Price calculated in accordance with the terms set
forth on Schedule A of Exhibit B hereto;
(ii) as a result of ADC's exercise of its rights under Section
5.01(b), pursuant to Section 7.02 or pursuant to Section 7.04 (to the
extent the cessation or withdrawal of ADC's access to the steam
producing assets of the Energy Facility does not result from acts or
omissions of ADC which are illegal or in breach of this Agreement or
any material contract between Heinz and ADC), Heinz shall pay to ADC
the Stipulated Buy-Out Price set forth on Schedule B of Exhibit B
hereto;
(iii) pursuant to Section 7.03 hereof, Heinz shall pay ADC the
Stipulated Buy-Out Price set forth on Schedule C of Exhibit B hereto;
and
(iv) as a result of Heinz's exercise of its rights under Section
5.01(b), or pursuant to 7.04 (to the extent the cessation or
withdrawal of ADC's access to the steam producing assets of the Energy
Facility results from acts or omissions of ADC which are illegal or in
breach of this Agreement or any material contract between Heinz and
ADC), no Stipulated Buy-Out Price will be payable to ADC.
7.02 Extended Shutdown or Closure of Manufacturing Facility. If at any
time during the Term, Heinz (i) ceases to operate the Manufacturing Facility (or
materially reduces the Manufacturing Facility's energy consumption requirements)
for a period exceeding six (6) months or (ii) transfers ownership of the
Manufacturing Facility to a third party who (x) does not have the financial
capability acceptable to ADC (such acceptance not to be unreasonably withheld)
to carry out Heinz's obligations under this Agreement and/or (y) does not assume
all of Heinz's obligations under this Agreement, ADC shall have the right to
terminate this Agreement upon thirty (30) days prior written notice to Heinz.
7.03 Termination by Heinz. If at any time during the Term, Heinz
demonstrates through the production of a bona fide third party offer that (i)
the Demand Energy Charge and the Baseline Unit Energy Consumption Charges do not
reflect fair market rates and (ii) could materially reduce the aggregate annual
cost paid by Heinz for steam and electricity under this Agreement by more than
$250,000, Heinz shall have the right to terminate this Agreement upon sixty (60)
days prior written notice to ADC and DE. Prior to any such termination, Heinz
and ADC shall use good faith efforts to renegotiate the terms of the Agreement
in order to address Heinz's concern. If the Parties cannot reach an
accommodation, ADC shall take all reasonable actions to assist Heinz in the
transition period, which shall not exceed 60 days.
7.04 No Access to Steam Producing Assets If at any time during the
Term, ADC is unable to access and operate the steam producing assets at the
Energy Facility, this Agreement shall terminate effective on the date that
access ceases or is withdrawn, provided, however, that if ADC's access is
prohibited by an event constituting Force Majeure hereunder, any termination of
this Agreement shall be governed in accordance with Section 6.02 hereof.
ARTICLE VIII
INDEMNIFICATION
8.01 Reciprocal Indemnification.
(a) Each Party, respectively, as indemnitor, will indemnify, defend
and hold harmless the other Party and its officers, directors, employees,
affiliates, agents and assigns, as indemnitees, from and against any and all
losses, liabilities, damages, demands, claims, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' and accountants' fees, but
excluding amounts described in Section 9.10 hereof (collectively, the "Losses")
asserted against, resulting to, imposed upon or incurred or suffered by any such
indemnitee as a result of, based upon or arising from, the failure by the
indemnitor or its respective agents or employees to comply with any applicable
law, rule, or regulation of any authority having proper jurisdiction, or the
breach or nonfulfillment of any of the representations, covenants or agreements
made by the indemnitor pursuant to this Agreement, excepting only such Losses as
may be caused by the negligence or misconduct of any indemnitee or its
respective agents or employees.
(b) Notwithstanding any provision to the contrary set forth in this
Agreement (other than the liquidated damages provided for in Section 2.05), in
no event shall any Party's liability for any and all Losses exceed $2,500,000
(as adjusted during the Term for inflation based on the consumer price index),
regardless of the form of action or legal theory under which liability may be
asserted.
8.02 Duty to Defend.
(a) Indemnitor, at its sole cost and expense, shall defend with
counsel reasonably satisfactory to indemnitee, any claim, demand, suit, cause of
action or proceeding covered by the indemnities set forth in Section 8.01.
Indemnitor shall have the right to control the defense of any claim, demand,
suit, cause of action or proceeding, provided that the indemnitor shall first
confirm in writing to indemnitee that such claim is within the scope of the
indemnities contained herein and that indemnitor shall pay all amounts required
to be paid in respect of such claim, demand, suit, cause of action or
proceeding. The indemnitee shall have the right, but not the obligation, at its
sole cost and expense, to participate in the defense of any such claim, demand,
suit, cause of action or proceeding. Indemnitee shall have the right at any
time, by notice to indemnitor, to assume exclusive control of the defense of any
claim, demand, suit, cause of action or proceeding at the sole cost and expense
of indemnitor, if (a) indemnitor fails to diligently defend such claim, demand,
suit cause of action or proceeding, (b) there is a conflict in the interests of
indemnitor and indemnitee with respect to such claim, demand, suit, cause of
action or proceeding or (c) at any time during the pendency of such claim,
demand, suit, cause of action or proceeding, indemnitor shall disaffirm its
responsibility for the claim involved. If the indemnitee assumes exclusive
control of the defense of any claim, demand, suit, cause of action, or
proceeding as set forth in the preceding sentence, the indemnitor shall pay all
costs that may be incurred by the indemnitee in such defense. In addition, the
indemnitor shall pay all costs that the indemnitee may incur in enforcing this
indemnity, including without limitation reasonable attorneys' fees, within ten
(10) days after the request therefor.
(b) Indemnitor shall have the right to settle any claim, demand, suit,
cause of action, or proceeding which results only in the payment of money,
Indemnitor shall have no right, without the prior written consent of indemnitee,
to settle any claim, demand, suit, cause of action, or proceeding or settlement
thereof, involves non-monetary obligations of indemnitee.
8.03 Survival. The provisions of this Article VIII shall survive the
Term.
ARTICLE IX
MISCELLANEOUS
9.01 No Partnership or Joint Venture. Nothing in this Agreement shall
be construed as creating a partnership or joint venture between the Parties, or
making any Party an agent or employee of the other Party. No employee of Heinz,
ADC or DEN who renders any service hereunder shall be construed or deemed to be
an employee of any other Party as a result thereof. No Party shall have any
authority, or represent that it has any authority, to bind any other party
contractually.
9.02 Severability. If, pursuant to a final, non-appealable judgment by
a court of competent jurisdiction, any provision of this Agreement is found to
be illegal, invalid or otherwise enforceable, such provision shall be construed
to be deleted from this Agreement and the remainder of it shall remain in full
force and effect as though such provision had not been included herein.
9.03 Entire Agreement. This Agreement and all exhibits thereto
constitute the entire and sole understanding of the Parties with respect to the
matters covered hereby or by any transactions contemplated herein, and
supersedes and cancels any and all oral or written prior agreements,
understandings, statements and representations between the Parties with respect
to the subject matter hereof.
9.04 Waivers and Amendments. No waiver, modification or amendment of a
term, condition or provision of this Agreement shall be valid or of any effect
unless made in writing specifying with particularity the manner and extent of
such waiver, modification or amendment, signed by the Party to be bound or its
duly authorized representative. Any waiver by any Party of any default of the
other shall not affect or impair any right arising from any subsequent default.
9.05 Governing Law. This Agreement and the legal relations between the
Parties shall be governed by and construed in accordance with the internal laws
of the Commonwealth of Pennsylvania, without regard to conflict of law
principles.
9.06 Section Headings. Section headings are inserted herein for
convenience only and are not to be construed as a part of this Agreement or as a
limitation of the scope of the particular sections to which they refer.
9.07 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the respective Parties hereto, their respective successors and
assigns.
9.08 Cooperation. The Parties hereto will cooperate with each other in
every way carrying out the transactions contemplated by this Agreement, in
obtaining any and all required approvals, consents, permits and authorizations,
in filing the notification and reports, if any, which may be required, and in
executing and delivering all documents, instruments and copies thereof as shall
be reasonably agreed upon or as any other Party may reasonably request for the
purpose of carrying out the terms and conditions of this Agreement.
9.09 Attorneys' Fees. In the event of any arbitration or judicial
proceedings relating to this Agreement or the breach thereof, the prevailing
Party or Parties shall be entitled to recover from the losing Party or Parties
its reasonable costs, expenses and attorneys' fees.
9.10 Limitation of Liability. EXCEPT AS SET FORTH IN SECTION 2.05, NO
PARTY SHALL BE LIABLE FOR ANY LOST REVENUE, LOST PROFITS, OR OTHER INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, ARISING OUT OF ANY BREACH OF THIS AGREEMENT OR FAILURE TO PERFORM ITS
OBLIGATIONS HEREUNDER.
9.11 Notices. All notices, forms of approval and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person by telegram, telex or other
standard form of telecommunications and by certified mail, postage prepaid
return receipt requested, addressed as follows:
(a) If to Heinz to: Xxxxx Xxxxxx
Pittsburgh Factory Manager
Heinz USA
P. O. Xxx 00
Xxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
With copies to: Xxx X. Xxxxxxxx
G. M. Manufacturing Services
Heinz USA
P. O. Xxx 00
Xxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Senior Vice President, General Counsel
X. X. Xxxxx Company
X.X. Xxx 00
Xxxxxxxxxx, XX 00000
Fax: ( 000) 000-0000
(b) If to ADC to: Xxxxxx Xxxxxxxxx, President
DQE Energy Services
Xxx XxxxxXxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxxxx, Esquire
DQE, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
(c) If to DEN to: Xxxxxxx XxXxxxx, President
Duquesne Energy, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxx Xxxx, Esquire
Duquesne Energy, Inc.
000 Xxxxxxx Xxxxxx
00-0000
Xxxxxxxxxx, XX 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other address as one Party may have furnished to the others in
writing.
9.12 Assignments. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties hereto and their
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any Party without the
prior written consent of the others, provided, however, that upon receipt of (i)
an appropriate order from the Securities and Exchange Commission under Section
9(a)(2) of the Public Utility Holding Company Act of 1935, as amended, or (ii)
written confirmation reasonably acceptable to Heinz that such an order is not
required, ADC shall assign this Agreement to a special purpose subsidiary of DQE
Energy Services, Inc. that has been formed solely for the purpose of
facilitating this transaction and any subsequent transaction with Heinz and its
affiliates (the "Special Purpose Subsidiary"). After such assignment, all such
references to ADC herein shall be deemed to refer to the Special Purpose
Subsidiary. Nothing contained herein, express or implied, is intended to confer
on any person other than the Parties hereto and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement. Notwithstanding the foregoing, Heinz may assign this
Agreement to any subsidiary, parent company, or corporate affiliate of Heinz, or
to any person or entity that (i) acquires the Manufacturing Facility; (ii) is
reasonably acceptable to ADC, Energy Services or the Special Purpose Subsidiary,
as the case may be; and (iii) agrees to assume all of Heinz's rights and
obligations under this Agreement.
9.13 Executive Review. Each Party shall have the right at any time
after good faith efforts have failed to resolve a dispute under this Agreement
related to a material matter effecting the Parties rights and obligations
hereunder, to request review of such matter by the Executive Vice President of
HNA Operations of Heinz, the President of DEN and the Chief Executive Officer of
ADC. Each Party shall exercise its right to request executive review by
providing a written notice to the other Parties. The executives of each Party
shall meet within 30 days of date of such notice is delivered to the other
Parties, and shall engage in good faith efforts to resolve the deadlock. Within
30 days of such meeting, the executives shall provide notice to the Parties
stating whether they have been able to resolve the deadlock and the nature of
their decision if they have resolved the deadlock. Any such decision shall be
binding on the Parties.
9.14 Mediation. If a disagreement exists between the Parties
concerning this Agreement, or a breach thereof, executive review under Section
9.13 is unsuccessful, and the continued failure to settle such disagreement is
likely to have material adverse effect on any Party's rights and obligations
under this Agreement, any Party may elect to submit the matter to mediation
under the Commercial Mediation Rules of the American Arbitration Association. If
any Party so elects, the other Party or Parties shall submit to mediation. The
mediator shall not have the authority to impose a settlement on the Parties.
9.15 Audit Rights. Heinz shall have the right upon reasonable notice
and during normal business hours to examine the books and records maintained by
ADC relating to the purchase and sale of electric and steam energy hereunder.
9.16 Assignment and Assumption of Third Party Supply Contracts. In the
event that ADC proposes to enter into a third party supply arrangement to
facilitate procurement of fuel under Section 5.01(c), ADC shall deliver a copy
of the definitive agreement to Heinz for its review and comment. Provided that
the terms and conditions of the supply agreement are reasonably acceptable to
Heinz, the parties shall enter into an agreement stating that upon any
termination of this Agreement (other than any termination caused by Force
Majeure or an Act of Default by ADC) prior to the end of the Term, ADC shall
assign and Heinz shall assume all of ADC's rights and obligations under the
supply agreement. In connection therewith, Heinz shall indemnify, hold harmless
and defend ADC from any and all claims, liens or charges of any nature
whatsoever that arise out of a breach or nonfulfillment by Heinz of any of its
representations, covenants, agreements or obligations under the supply
agreement, and ADC shall indemnify, hold harmless and defend Heinz from any and
all claims, liens or charges of any nature whatsoever that arise out of a breach
or nonfulfillment by ADC prior to such assignment of any of its representations,
covenants, agreements or obligations under the supply agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATTEST: HEINZ USA
By: ___________________________ By: ___________________________
Title: __________________________
Title: __________________________
ATTEST: ALLEGHENY DEVELOPMENT
CORPORATION
By: ___________________________ By: ___________________________
Title: __________________________
Title: __________________________
ATTEST: DUQUESNE ENERGY, INC.
By: ___________________________ By: ___________________________
Title: __________________________
Title: __________________________
EXHIBIT A
CONSOLIDATING STATEMENT
ENERGY CHARGES
A. Payable to DE:
Steam:
aaa mlbs @ x per mlb $__________
[x to be calculated in accordance with 3.01(b)(i)]
B.
Payable to ADC:
Demand Charge
$----------
Steam:
aaa mlbs @ [UECCS - x]
$----------
Additional charge for natural gas (per Exhibit C)
Cmlbs @ [A-B]
$----------
Electricity
bbb kwhs @ UECCE $__________
Total to ADC$__________
EXHIBIT B
STIPULATED BUY-OUT PRICE
Schedule A
Schedule B
Schedule C
EXHIBIT C
ADDITIONAL CHARGE FOR GAS FIRED STEAM
Steam Conditions: 115 psig (130psia)
480 (degree)F
1266 Btu/lb Sat. Vapor
Condensate Conditions: 78 (degree)F
46 Btu/lb Sat. Liquid
Energy to make steam 1220 Btu/lb added
Boiler Efficiency: 80.00% Natural gas
82.00% Coal
Natural Gas (HHV) 1,030,000 Btu/MCF
1000 Lbs=1Mlb
Calculation for the additional energy cost of
natural gas vs. coal- fired steam to HUSA in $.
A=Energy Cost of Natural Gas fired Steam ($/Mlb)
A=1220 x 1000 x Current Natural Gas Price per MCF
1,030,000 x .80
B=Energy Cost of Coal fired Steam ($/Mlb)
B=1220 x 1000 x Actual Coal Price per Ton
Coal Heating Value (Btu's/Ton) x .82
C=Steam Produced with Natural Gas (Mlbs) =Totalized Steam Production
Above Current Capacity
HUSA Additional Charge for Natural Gas fired Steam in $
HUSA Price = (A - B) x C
Sample Calculation
Assumptions:Coal Price = $37/Ton
Natural Gas Price = $3.70/MCF
Coal Heating Value = 25,000,000 Btu/Ton
Steam Produced With Natural Gas = 3,377 mlbs.
A=1220 x 1000 x $3.70= $5.48 /Mlb
1,030,000 x .80
B=1220 x 1000 x $37= $2.20 /Mlb
25,000,000 x .82
C=3,377Mlbs
HUSA Additional Charge = ($5.48-$2.20) x 3,377
HUSA Additional Charge = $3.28/Mlb x 3,377
HUSA Additional Charge = $11,077
EXHIBIT D
SERVICE INTERRUPTION THRESHOLDS (Per Calendar Year)
Compressed Air
limit of 3 incidents < 100 psig @ the factory < 15 minutes in
duration, or
Steam
limit of 1 incident < 115 psig @ the factory < 30 minutes in duration,
or
Electric Energy
limit of 1 incident of < 30 minutes in duration
