HomeMy WebLinkAboutReso. 1986 - 171 - Agreement for the purchase and sale operation and maintenance 1
RESOLUTION NO. g-14/
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING THE AGREEMENT FOR THE PURCHASE AND SALE, OPERATION
AND MAINTENANCE, AND FUEL SUPPLY OF A CO-GENERATION FACILITY
BETWEEN THE CITY OF REDDING, CAMAGE CORPORATION, AND SIERRA
PACIFIC INDUSTRIES , AND AUTHORIZING THE MAYOR TO SIGN SAME.
WHEREAS , Carnage Corporation, a wholly-owned subsidiary of
Sierra Pacific Industries , intends to construct a co-generation
facility south of Redding which will produce electric energy and
steam or forms of useful thermal energy (such as heat) through
the combustion of wood by-products; and
WHEREAS , Sierra Pacific Industries desires to Ioperate and
manage a sawmill on a parcel of property adjacent to the proposed
co-generation facility; and
WHEREAS, the City of Redding is interested in purchasing the
co-generation facility from Carnage Corporation, and entering into
an agreement with Sierra Pacific Industries for the operation and
maintenance of the facility and for the fuel supply required to
operate the facility; and JI
WHEREAS , staff has concluded that the project, to be known
as the Carnage Co-Generation Project, may reduce the City of
Cm
Redding' s costs of purchasing supplemental power; and
• •
WHEREAS , the City Council has considered this recommendation
and deems it to be in the best interests of the City of Redding
to enter into an agreement which would provide for the purchase
and sale, operation and maintenance, and fuel supply of a co-
generation facility;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the
City of Redding as follows:
1 . That the City Council of the City of Redding hereby
approves the attached Agreement for the Purchase and Sale,
Operation and Maintenance , and Fuel Supply of a Co-Generation
Facility between the City of Redding, Sierra Pacific Industries ,
and Carnage Corporation; and
2 . That the Mayor of the City of Redding is hereby
authorized and directed to sign all necessary documents on behalf
of the City of Redding in connection with said Agreement, and
that the City Clerk is hereby authorized and directed to attest
the signature of the Mayor and to impress the official seal of
the City of Redding on the aforesaid documents, when appropriate;
and
3. That a true copy of the Agreement referred to herein is
attached hereto and made a part hereof.
I HEREBY CERTIFY that the foregoing Resolution was
introduced and read at a regular meeting of the City Council of
-2-
• •
the City of Redding on the 21st day of July , 1986 , and was
duly adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Carter, Gard, Johannessen, & Dahl
NOES : COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: Fulton
ABSTAIN: COUNCIL MEMBERS: None
C
MIIHE DAHLVice
, Mayor
City of Redding
ATTEe/eST:
ETHEL A. NICHOLS, City Clerk
FORM £PROVED:
j// f i_
�"` ` Lam_
RAN.AALL A. HAYS, Cit/Attorney
-3-
1111
2
3
4
AGREEMENT FOR THE PURCHASE AND SALE,
5 OPERATION AND MAINTENANCE, AND FUEL SUPPLY
OF A CO-GENERATION FACILITY
6
7 This Agreement, dated as of July 21, 1986, is between
8 Carnage Corporation, a California corporation ( "Carnage" ) , Sierra
9 Pacific Industries, a California corporation ( "Sierra" ) , and the
10 City of Redding, a municipality located in the State of
11 California ( "Redding" ) .
12 A. Carnage, the owner of certain real property located in
_ Y
13 Shasta County, California, south of Redding, and described more
14 particularly in Exhibit A ( the "Property" ) , intends Jo construct
15 on the property a co-generation facility (the "Facility" ) which
15 will produce electric energy and steam or formsiof useful
17; thermal energy ( such as heat) through the combustion of wood
18 by-products.
19 B. Sierra, which owns and operates several sawmills and
20 co-generation facilities that it has constructed in Northern
21 California, desires to operate and manage a ' sawmill ( the
22 "Sawmill" ) upon a parcel of realII
property that Sierra will
23 lease from Carnage adjacent to the Property.
24 C. Redding desires to purchase the Facility from Carnage
25 and desires to enter into agreements with Sierra for the
26 operation and maintenace of the Facility and for the fuel
27 supply required to operate the Facility.
28
. ,14' •
1 •
1 D. Carnage desires to sell the Facility to Redding and
2 Sierra desires to enter into an operation and maintenance
3 agreement and a fuel supply contract for the Facility with
4 Redding, subject to the terms and conditions hereinafter set
5 forth.
6 ACCORDINGLY, the parties hereto agree as follows:
7 ARTICLE I
8 OBLIGATIONS OF THE PARTIES
9 Section 1 . 1 Obligations of Carnage.
10 (a) Construction of the Facility. Carnage shall
11 retain a duly licensed contractor who shall construct the
12 Facility on the Property as more fully described in Sections
13 2. 1 and 2 . 2 .
14 (b) Sale of the Facility. Carnage agrees to enter
15 into ( i) an agreement with Redding in accordance with the terms
16 more fully described in Article II (the "Unit One Purchase and
17 Sale Agreement" ) providing for the sale to Redding of Unit One
18 of the Facility ( as defined in Section 2. 1) , and a ground lease
19 to Redding ( the "Ground Lease" ) of a portion of the Property
20 necessary to operate Unit One; and ( ii) an agreement with
21 Redding in accordance with the terms - more fully described in
22 Article II ( the "Unit Two Purchase and Sale Agreement" ) provid-
23 ing for the sale to Redding of Unit Two of the Facility (as
24 defined in Section 2 . 1 ) , together with the Property and all
25 appropriate easements and rights of way. The Unit One Purchase
26 and Sale Agreement and the Unit Two Purchase and Sale Agreement
27
28 2
s
, Ill 410
1 are hereinafter referred to collectively as the "Purchase and
2 Sale Agreements" ) .
3 Section 1. 2 Obligations of Sierra.
4 (a) Operation and Maintenance of the Facility.
5 Sierra agrees to enter into an agreement with Redding in accor-
6 dance with the terms more fully described in Article III (the
7 "Operation and Maintenance Agreement" ) , providing for the
8 operation and maintenance of the Facility by Sierra.
9 (b) Fuel Supply for the Facility. Sierra agrees
10 to enter into an agreement with Redding in accordance with the
11 terms more fully described in Article IV (the "Fuel Supply
12 Agreement" ) providing for the supply of suitable fuel for the
13 Facility.
14 (c) Guarantee. Sierra guarantees the performance
15 of Carnage.
16 Section 1. 3 Obligations of Redding.
17 (a) Purchase of the Facility. Redding agrees to
18 enter into the Purchase and Sale Agreements and the .Ground Lease
19 with Carnage whereby Redding will purchase the Facility in
20 two phases, together with the Property and all appropriate
21 easements and rights of way from Carnage.
22 (b) Operation and Maintenace of the Facility.
23 Redding agrees to enter into the Operation and Maintenance
24 Agreement with Sierra whereby it will contract with Sierra for
25 the operation and maintenance of the Facility.
26
27'
28 3
, t •
1 (c) Fuel Supply for the Facility. Redding
2 agrees to enter into the Fuel Supply Agreement whereby it will
3 contract with Sierra for the fuel supply for the Facility.
4 ARTICLE II
5 THE PURCHASE AND SALE AGREEMENTS
6 Carnage and Redding shall enter into the Purchase and
7 Sale Agreements in accordance with the terms set forth in this
8 Article II . The Purchase and Sale Agreements shall b'e executed
9 and delivered by such parties upon approval of thel Cost Plan
10 by Carnage and Sierra as provided in Section 2 . 4 .
11 Section 2 . 1 Description of the Facility.
12 The Facility shall be a wood-fired co-generation
13 facility witn natural gas over fire capability. Nitural gas
14 shall be capable of operating the boiler to the lesser of ( 1)
15 full capacity, or, ( 2) complete utilization of all natural gas
16 available to the Facility. The Facility shall consist of two
17 separate but interconnected units , each having I boiler,
18 turbine and generator with all associated equipment and improve-
19 ments necessary for generating electric energy. The unit com-
20 pleted first in time shall be referred to as "Unit One" and
21 the unit completed last in time shall be referred to as "Unit
22 Two, " ( together they will be referred to as the "Units" ) . The
23 Units shall be constructed side by side. Sierra is currently
24 constructing, for its own use, a biomass co-generation facility
23 at Burney, California, ( the "Burney facility" ) . Each of the
26' Units shall be the functional equivalent of the Burney facility,
27
23 4
• •
1 except to the extent that the final plans and specifications
2 prescribe different design, engineering, standards, or capacity.
3 Section 2. 2 General Characteristics of thelFacility.
4 The Facility shall have the following general charactreristics:
5 (a) Two spreader stoker type boilers with
6 auxiliary gas burners;
7 (b) Necessary air ducting, fans, dampers , dust
8 collectors, electrostatic precipitators and associate stacks;
9 (c) Steam delivery system with cross-feed capable
10 of delivering steam from Unit One boiler to Unit Two turbine and
11 Unit Two boiler to Unit One turbine;
12 (d) Two extraction steam turbines capable of
13 utilizing full boiler flow with associated condenseand feed
14 water heaters and circulating pumps;
15 (e) Two boiler feed water treatment facilities
16 consisting of demineralizers, chemical injection, sampling
17 points, storage and water supply;
18 (f) Cooling water system with cross-feed capabil-
19 ity consisting of one cooling tower, but duel pumps; separate
20 piping; chemical treatment facilities ; and water storage
21 facilities ; _
22 (g) Electrical generating and control systems
23 consisting of two generators with a minimum rating of 25 mva,
24 hydrogen cooling systems , voltage regulator systems, switch
25 gear, relaying and metering, step-up transformers and other
26 necessary ancillary equipment.
27
28, 5
. ,
. ,
1 (h) Associated station service facilities consis-
2 ting of motor control centers, transformers, wiring and other
3 miscellaneous items ;
4 (i) Two wood fuel supply systems with cross-feed
5 capability and asphalted fuel storage area;
6 ( j ) Buildings, fencing, landscaping, drainage,
7 parking, lighting, and waste water treatment facilities;
8 (k) All other equipment and hardware necessary
9 to create a fully functioning wood-fired co-generation facility
10 capable of producing a minimum of 37 . 5 MW net electrical output
11 and with the ability to be operated at 12 . 5 MW or less net
12 electrical output, and with the ability to increase or reduce
13 the net electrical output at the minimum rate of 8 MW
per hour
14 while maintaining a power factor of within plus 5 percent or
15 minus 10 percent of unity;
16 ( 1) Entry port for additional steam to utilize
17 excess turbine capacity; and
18 (m) All major components included in the con-
19 struction of the Facilities shall be new, except for those major
20 components listed on Exhibit B attached which shall bile rebuilt
21 according to the appropriate remanufacturing industry standards.
22 Section 2 . 3 Materials and Workmanship.
23 (a) Reddinc to Specify. The quality of equip-
24 ment, materials , construction, and testing utilized in the
25 Facility shall be set forth in the plans and specifications
26 prepared by Redding ( "Plans and Specifications" ) . ThelPlans
27 and Specifications shall be in accordance with prevailing
2S 6
1 standards and practice in the industry for indusltrial grade
2 co-generation facilities which interconnect with electric
3 utility systems ( the "Industry" ) .
4 Section 2 . 4 Plans and Specifications.
5 (a) Cost Plan. The initial plans and specifica-
6 tions and feasibility study for the project shall be denominated
7 a Cost Plan and shall be of sufficient detail to enable a cost
8 estimate for the Facility accurate to within ten percent.
9 (b) Final Plans and Specifications. The final
10 plans and specifications shall be denominated Plans and Specif-
11 ications and shall control all construction.
12 (c) Cost of Design and Engineering.
13 ( 1) Cost of Cost Plan. Redding and Carnage
14 shall each pay one-half of all fees and costs for preparation of
15 the Cost Plan as represented by invoice from Black and Veatch
16 for the completed Cost Plan. If the project is not constructed,
17 fees and costs for preparation of the Cost Plan shall be payable
18 as follows :
19 (i) Exclusively by Redding if Redding
20 fails to obtain bond financing;
21 ( ii) Exclusively by Carnage if Camage
22 declines to construct the Facility pursuant to Article II
23 Section 2 . 4 Paragraphs (d) or (e) below.
24 Total fees and costs for preparation of the Cost Plan shall not
25 exceed Three Hundred Eleven Thousand Three Hundred Dollars
26 ( $311 , 300 . 00 ) for purposes of determining the liability of
27 Carnage under this Agreement.
93; 7
. ,
1 ( 2) Cost of Plans and Specifications . All
2 fees and costs for preparation of the Plans and Specifications
3 shall be paid by Redding. Carnage shall reimburse Redding for
4 costs and fees incurred byReddingfor
preparation of the Plans
5 and Specifications only in the event that Sierra approves the
6 Cost Plan pursuant to Section 2 . 4 Paragraph (d) but thereafter
7 declines to construct the Facility pursuant to Section 2. 4
8 Paragraph (e) . If the plant is not constructed pursuant to
9 Section 2 . 4 Paragraph (e) , the total maximum liability of Carnage
10 for costs and fees for preparation of the Plans and
11 Specifications shall not exceed Two Million Seven Hundred
12 Ninety-One Thousand Dollars ( $2,791, 000 . 00 ) . In the (event that
13 Carnage exercises its right to decline to construct pursuant to
14 Section 2 . 4 Paragraph (e) below, the liability of Carnage to
15 Redding for costs and fees incurred in the preparation of Plans
16 and Specifications shall equal Redding' s actual cast not to
17 exceed the amount set forth in this Paragraph (c) of Section
18 2 . 4 . As utilized herein, "Redding' s actual cost" means the fees
19 and costs payable by Redding to Black and Veatch for services
20 rendered on this project as of the date Redding actually
21 receives notice that Sierra is exercising its rights under
22 paragraph (e) of this Article II Section 2 . 4 .
23 (d) Review and Approval of Cost Plan. At. all
24 times during the preparation of Cost Plan, Carnage and Sierra
25 shall make their representatives available for review and
26 discussion. From time to time during drafting, Redding may, at
27
23
8
•
.0 . •
1
its option, request tentative approval q from Camp ge of any
2 portion of the Cost Plan. The Cost Plan shall be completed by
3 Redding and presented to Carnage on or before September 29 , 1986 .
4 Within 30 days of receipt of the Cost Plan, Carnage shall by
5 written notice either:
6 ( 1) approve the Cost Plan; or
7 ( 2) disapprove the Cost Plan and terminate
8 this and all other Agreements pertaining to this Facility.
9 (e) Review and Approval of Plans and
10 Specifications . At all times during the preparation of the
11 Plans and Specifications , Carnage and Sierra shall (make their
12 representatives available for review and discussion. The Plans
13 and Specifications shall be finalizes:: during .. construction and
14 shall be submitted to Carnage as construction proceeds in accor-
15 dance with standard custom and practice in the industry
16 ( "industry" means electrical utility generation plant construe-
17 tion) ; provided, however, that Plans and Specifications relating
18 to early phases of construction shall be completed prior to com-
19 mencement of construction. Redding shall utilize its best
20 efforts to insure that the Plans and Specificationslare suf-
21 ficiently complete to allow for commencement of construction on
22 or before four ( 4 ) months after Carnage has approved the Cost
23 Plan. Within thirty ( 30 ) days of receipt of the Plans and
24 Specifications for early construction phases, Carnage shall by
25 written notice do one of the following:
20. ( 1 ) approve the Plans and Specifications and
27 commence construction; or
23 9
��, • 411
1 ( 2) disapprove the Plans and Specifications,
2 reimburse Redding for the cost of the Plans and Specifications
3 as set forth in Paragraph (c) of Section 2. 4 above, and termin-
4 ate this and all other Agreements pertaining to this Facility;
5 or
6 ( 3 ) request that work on the Plans and
7 Specifications proceed to a further stage of completion.
8 If alternative ( 3 ) above is chosen, more complete
9 versions of the Plans and Specifications shall be submitted to
10 Carnage until one of the following occurs :
11 ( 1 ) Carnage approves the Plans and
12 Specifications and commences construction; or
13 ( 2) Carnage disapproves tie Plaits and
14 Specifications , reimburses Redding for its cost cf design and
15 engineering, and terminates this and all other Agreements
16 pertaining to the Facility.
17 Section 2 . 5 Warranties. Carnage warrants that at the
18 time of the closing of the sale of the Facility to Redding:
19 (i) The Facility will be fully opera-
20 tional and shall conform in all material respects to the Plans
21 and Specifications agreed to by the parties ;
22 ( ii) The Facility will be free from
23 defects in materials and workmanship, which warranty shall
24 continue for six months subsequent to the closing date;
25 ( iii) The Facility shall comply with
26 all applicable laws and regulations ; and
27
28i� 10
e , • •
, ,
1 ( iv) The Property shall be reasonably
2 free from accumulation of waste materials , rubbish, construction
3 equipment, and surplus materials.
4 OTHER THAN WARR.'-=NTIES AS TO TITLE AND THOSE SET FORTH ABOVE,
5 ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
6 LIMITATION ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
7 FOR A PARTICULAR PURPOSE, ARE EXCLUDED. MANUFACTURERS '
8 WARRANTIES ON EQUIPMENT IN THE FACILITY SHALL BE ASSIGNED TO
II
9 REDDING TO THE EXTENT ALLOWED BY THE MANUFACTURER. TO THE
10 EXTENT THAT ANY MANUFACTURER WILL NOT ALLOW THE ASSIGNMENT,
11 CAMAGE SHALL SUPPLY WARRANTY EQUAL TO THAT OF SUCH MANUFACTURER.
12 Carnage shall be liable for defects in materials or workmanship
13 only to the extent that they become apparent within six months
14 from the date of closing unless the same also constitute a
15 deviation from the Plans and Specifications in which case Carnage
16 shall be liable for twelve ( 12 ) months from closing.
17 Section 2 . 6 Redding' s Right to Review Construction
18 and Testing. Redding reserves the right to attend scheduled
19 tests required by the Plans and Specifications and to observe
20 all construction activities to determine if the construction
21 standards referenced in this Article II are complied with.
22 Carnage shall provide Redding adequate notice of all tests and
23 construction to allow monitoring and observation by Redding.
24 On],y those tests listed in the Plans and Specifications shall be
25 required.
26
27
28 11
`" • 411
. • .
1 Section 2. 7 Date of Delivery of the Units .
2 (a) Unit One. Carnage shall utilize its best
3 efforts to consummate the sale and effect delivery of Unit One
4 on or before September 30, 1987. Sale of Unit One Ian occur
5 through the execution and delivery of the Purchase and Sale
6 Agreement for Unit One. The precise date of the sale closing
7 and delivery for Unit One shall be at such time as Unit One has
8 passed all applicable tests required by the Plans and Ipecifica-
9 tions and has been demonstrated to be capable of continuous
10 uninterrupted operation at full power capacity for a period of
11 ten days . The Ground Lease shall be executed simultaneously
12 with the close of the sale of Unit One.
13 (b) Unit Two. Carnage will utilize ;.ts best
14 efforts to consummate the sale and delivery of Unit Two on or
15 before January 30 , 1988 . Sale of Unit Two shall occur through
16 the execution and livery of the Purchase and Sale Agreement for
17 Unit Two and Certain Real Property. The precise dale of the
18 sale closing and delivery for Unit Two shall be at such time as :
19 ( 1 ) Unit Two has passed all applicable tests
20 required by the Plans and Specifications and has been demon-
21 strated to be capable of continuous uninterrupted operation
22 at full power capacity for ten days ; and
23 ( 2 ) The Facility has passed all applicable
24 tests required by the Plans and Specifications , conform' to the
25 Plans and Specifications , and has been adequately tested with
26 both Unit One and Unit Two in operation and demonstrated to
27 be capable cf daily cycling frcm 12 , 500 kilowatts net to 37 , 500
2S1 12
• 111
1 kilowatts net at the maximum design ramp rates, fer ten con-
2 tinuous days while maintaining a power factor within plus five
3 percent and minus ten percent of unity; and
4 ( 3 ) Cross-over facilities have passed all
5 applicable tests required by the Plans and Specifications for
6 the Facilities .
7 The close of sale for the Property shall be simultaneous with
8 the close of the sale for Unit Two.
9 Section 2 . 8 Price. The sales price for Unit One and
10 Unit Two shall be Sixty Million Dollars ( $60, 000, 0010 . 00 ) less
11 "x" where "x" equals one-half ( 1/2) the engineering cost payable
12 to Black and Veatch for the Cost Plan plus the entire engineer-
131 ing cost payable r.o Black and Veatch for the Plans and
14 Specifications . The fees and costs for preparation of the Cost
15 Plan and the Plans and Specifications shall not exceed the
16 amounts set forth in Article II Section 2 . 4(c) for purposes of
17 calculating the sales price pursuant to this Section 2 . 8 .
18 Section 2. 9 Terms of Payment.
19 (a) Payment Schedule. The purchase price
20 specified in Section 2 . 8 above shall be payable as follows :
21 ( 1) A sum equal to the differenje between
22 Thirty Million Dollars ( $30 , 000 , 000 ) and "x" (as "x" is defined
23 in Section 2 . 8 above) shall be payable in installments triggered
24 by completion of various construction phases all in accordance
25 with the Purchase and Sale Agreements;
26
27
28 13
. .
4 •
1 ( 2 ) Thirty Million Dollars ( $30 , 000 , 000 . 00 )
2 shall be payable to an interest bearing trust account upon close
3 of sale;
4 ( 3 ) Moneys placed in the trust account,
5 including accrued interest, shall be payable to Carnage and
6 shall be disbursed to Carnage over a 30-year term in equal
7 monthly installments of principal and interest.
8 Section 2 . 10 The Property. Carnage shall furnish to
9 Redding, as promptly as possible, a preliminary title report for
10 the Property, which title report shall be prepared by Superior
11 Title Company. In the event the preliminary title report
12 contains any exceptions to title to the Property other than the
13 permitted encumbrances described in this Section „2 . 10 ( the
14 "Permitted Encumbrances" ) , Redding may notify Carnage within ten
15 days after receipt of the preliminary title report of its
16 objections , and Carnage shall have 60 days from receipt of such
17 notice within which to cure such objections to title. In the
18 event Redding does not so notify Carnage within ten days after
19 the receipt of the preliminary title report, Redding shall be
20 deemed to have waived all objections to title disclosed by said
21 preliminary title report. If , at the end of said 60 days,
22 Carnage has not cured the defects described in Redding' s notice,
23 then Redding shall elect, by written notice to Carnage within ten
24 days, either to accept title with such encumbrances revealed in
25 the preliminary title report that Carnage has not been able to
26 clear and with the Permitted Encumbrances , or to terminate this
27
I
2S 14
. . .
•
1 Agreement and any other agreements relating to the Facility.
2 Permitted Encumbrances shall include the following:
3 (a) Applicable state laws and zoning ordinances ;
4 (b) Oil, gas and other mineral rights .previously
5 granted or reserved;
6 (c) Taxes and other assessments for the current
7 year which may be a lien but which are not yet due and payable;
8 (d) Pending proceedings, if any, for vacating,
9 opening or changing streets or highways;
10 (e) Questions of location, boundary and area;
11 ( f) Overlaps and encroachments by improvements
12 belonging to these or adjoining premises ;
13 (g) Riparian and flowage ; rights previously
14 granted or reserved;
15 (h) Rights of railroad- to operate upon and over
16 tracks situated on the Property;
17 ( i) Easements, rights of way and licenses that
18 are visible and apparent on or across the Property, the exis-
19 tence of which does not appear of record;
20 ( j ) Rights and claims as may arise from the
21 existence of utility lines which ma be in place beneath the
22 surface of the ground;
23 (k) Easements , rights of way, licenses, restric-
2.1 tions , covenants and agreements that appear on the public
25
26
27
28 , 5
1 records of the applicable jurisdiction within which the Property
2 lies; and
3 ( 1) Such other encumbrances as do not interfere
4 in any material respect with the manner in which the Property
5 has been historically utilized or otherwise materially affect
6 title thereto.
7 Section 2 . 11 Risk of Loss . In the event that the
8 Facility shall be partially or fully destroyed or damaged
9 without fault of Redding prior to transfer of legal title of the
10 Facility and of the Property to Redding, Carnage shall be
11 responsible for repair or replacement of damaged or destroyed
12 structures or equipment in full compliance with the final plans
13 and specifications . After repair or replacement, sale closure .
14 shall be resumed in accordance with the terms of this Igreement.
15 In the event that the premises are destroyed or damaged to such
16 an extent that construction cannot take place upon the Property
17 without a substantial increase in cost of construction, then
18 this Agreement and all other agreements relating to the
19 Facility, including, without limitation, the Purchase and Sale
20 Agreements , the Ground Lease, the Operation and Maintenance
21 Agreement, and the Fuel Supply Agreement, may be terminated at
22 the option of Camage and Camage shall be entitled to any
23 insurance proceeds or other compensation to which it may
24 lawfully be entitled as owner of the Property less installments
25 received from Redding under the Purchase and Sale Agreements.
26 In the event that the Property shall be taken by eminent domain
27
28 1 16
• •
1 prior to close of escrow on Unit One, Carnage shall be entitled
2 to all compensation resulting therefrom less any installments
3 paid by Redding under the Purchase and Sale Agreements. In the
4 event that the Property shall be taken by eminent domain prier
5 to the close of escrow on Unit Two and the Property, but after
6 the close of escrow on Unit One, the parties shall negotiate in
7 good faith to distribute among themselves any compensation
8 resulting therefrom.
9 ARTICLE III
10 OPERATION AND MAINTENANCE AGREEMENT
11 Sierra and Redding shall enter into a long-term
12 Operation and Maintenance Agreement in accordance with the terms
13 set forth in this Article III . The Operation and Maintenance
14 Agreement shall be executed and delivered by such parties
15 simultaneously with the execution and delivery of the Purchase
16 and Sale Agreements .
17 Section 3 . 1 Operation of Facility by Sierra. Sierra
18 will operate and maintain the Facility as hereinafter set forth.
10 (a) Redding to Provide Operation and Maintenance
20 Guidelines . Redding agrees to provide Sierra with an operations
21 and maintenance statement (hereinafter "O&M Statement" ) which
22 describes the operation and maintenance methods , schedules and
23 procedures for the Facility. Redding shall make its consulting
24 .naineer available to Sierra for the purpose of explaining the
25
26
27
28; 17
• • III
1 O&M Statement. Sierra agrees to respond within ten days of
2 receipt of the O&M Statement by either:
3 • ( 1) approving the O&M Statement; or
4 ( 2 ) disapproving the O&M Statement and
5 terminating this and all other Agreements pertaining to this
6 Facility.
Notwithstanding the foregoing, Sierra shall at all
8 times maintain and operate the Facility in accordance with
9 normal standards and practice in the Industry regarding matters
10 not covered in the O&M Statement. There shall at all times be a
11 rebuttable presumption that the standards and practice in the
12 Industry are the standards and practices normally employed by
13. Sierra at its own mills as to matters not covered in the O&M
14 - Statement. Redding shall have the right to observe all opera-
15 tion and maintenance activities and schedules to insure that the
16 ag:eed upon standards are being complied with. The O&M
17 Statement shall be attached to and made a part of the Operation
18 and Maintenance Agreement.
19 Section 3 . 2 Consumable Supplies . Sierra shall supply
20consumable supplies , janitorial supplies , and all small tools
21 utilized in operation of the Facility:
22 Section 3 . 3 Routine Maintenance. Sierra shall be
23 responsible for all routine maintenance and the cost incurred in
24 performing same. As utaized herein, the term "routine mainten-
25 ance" means all ordinarily scheduled maintenance, minor repair,
26and janitorial services. "Minor repair" is any repair which is
27
23; 18
• i
1 not necessitated by a "major equipment failure" as defined in
2 Section 3 . 4 .
3 Section 3 . 4 Major Eauiment Failure. Sierra shall
4 not be liable for the cost of repair for a major equipment
5 failure unless such failure results from willful action evidenc-
6 ing a conscious disregard for good engineering and Lmaintenance
7 practices . "Willful action" means action taken or nit taken by
8 directors, officers, agents or employees of Sierra relating to
9 its performance of operation and maintenance services under this
10 Agreement and the Operation and Maintenance Agreement, which
11 action is knowingly or intentionally directed by such directors,
12 officers , agents or employees with conscious indifference to the
13 injurious consequences thereof, or with intent that injury or
14 damage would result therefrom. Willful action does not include
15 any act or failure to act which is involuntary, accidental or
16 : negligent. "Major. equipment failure" means any equipment
17 failure, malfunction- or destruction of any equipment or build-
18 ings located at the Facility involving a cost to repair in
19 excess of Twenty-Five Thousand Dollars ( $25, 000 . 00 ) , provided
20 that the $25 , 000 . 00 limit shall be adjusted upward oar downward
21 annually by the percentage adjustment relied upon in Section 3 . 7
22 to adjustthe fee received by Sierra for operation and mainten-
23 ance.
11 Major equipment failure" may involve one or more
24 equipment items . Where more than one egaipment item fails , the
25 cumulative total cost of repairing all of the failed equipment
26 items shall be considered in determining the total cost to
27
28 19
,
1 repair if there is a causal connection between the failure of
2 one item of equipment and the subsequent failure of the others.
3 Where two or more equipment items fail approximately simul-
4 taneously, but there is no causal connection whatsoever between
5 the equipment item which is first to fail and those which fail
6 subsequently, then the failure of each particular equipment item
7 shall be considered a separate and discrete "equipment failure"
8 for purposes of determining whether the cost of repair or
9 replacement is sufficient to constitute a "major equipment
10 failure. " The cost to repair a particular equipment item shall
11 be equal to the sum of the cost of all parts, !equipment,
12 supplies , and outside labor reasonably necessary tl effect a
13 repair. As utilized heein, the term "outside labor" Ilhall mean
14 individuals not ordinarily employed by Sierra at the Facility.
15 Where the failure of one item of equipment causes the subsequent
16 failure of another item or items of equipment but the failure of
n
17 the other item or items is "remote in time, " cost of repair
18 shall be separately calculated for each item for purposes of
19 determining if there is a major equipment failure, just as
20 though there were no causal connection between the failures .
21 "?emote in time" means more than seven days .
22 Section 3 . 5 Personnel . Sierra shall supply trained
23 personnel in sufficient quantity to operate and maintain the
24 Facility in accordance with the O&M Statement. There shall at
all times be a rebuttable presumption that the standards and
26 practice in the Industry are the standards and Iractices
271 normally employed by Sierra at its own mills as to matters not
28
70
• 111
•
1 covered in the O&M Statement. Redding shall have the right to
2 observe all operation and maintenance activities and schedules
3 to insure that the agreed upon standards are being complied
4 with. All personnel operating and maintaining the Facility
5 shall be responsible only to Sierra and Sierra shall make all
6 deductions required of employers by state, federal, and local
7 laws, including deductions for social security and withholding
8 taxes, and contributions for unemployment compensaJion funds ,
9 and shall maintain workers ' compensation and liability insurance
10 for each of them.
11 Section 3 . 6 Term of Agreement. The Operation and
12 Maintenance Agreement shall be for a term of five ( 5 ) years and
13 shall be automatically renewable at Reddi_ng' s option for five
14 ( 5) additional successive terms of five ( 5 ) years each. The
15 Operation and Maintenance Agreement shall be cancelable upon two
16 ( 2 ) years ' prior written notice by Redding to Sierra.
17 Section 3 . 7 Payment to Sierra. Sierra shall perform
18 all obligations pursuant to its duties under the Operation and
19 Maintenance Agreement for an annual fee of $1, 537, 500 payable in
20 equal monthly installments on the twentieth ( 20th) day of each
21 month, with the first installment due on the twentieth ( 20th)
22 day of the month immediately following the close ol sale for
23 Unit One . Such annual maintenance fee shall increase to
24 Three Million Seventy-Five Thousand Dollars ( $3 , 075 , 000 . 00 ) upon
251 the close of sale of Unit Two. The annual fee for maintenance
26 specified in this Section 3 . 7 shall be further modified annually
27
28 21
411 111
,
1 commencing January 1 , 1989 , and on each anniversary of that
2 date. The annual percentage adjustment shall be equal to
3 one-half of the percentage change, if any, in the Consumer Price
4 Index, plus one-half of the percentage change, if any, in the
5 Redding mean average wholesale power cost. As utilized herein,
6 the term "Consumer Price Index" means the Consumer Price Index
7 for western cities with a population of over 50 , 000people, as
8 published by the Bureau of Labor Statistics, the Debartment of
9 Labor, United States Government. As utilized herein, the term
10 "Redding average wholesale power cost" shall equal the mean
11 average price per kilowatt hour paid by the City of Redding for
12 power during the annual adjustment period. Percentage change
13: for the initial modification on January 1 , 1989 ; shall be .
14 calculated upon the percentage change between January 1, 1988 ,
15 and January 1, 1989 . Actual changes in monthly payment of
16 operation and maintenance shall be effective on April 1, 1989 ,
17 by virtue of current publishing schedules which make the
IS Consumer Price Index data available in March of the year.
19 Payments for the period of April 1 , 1989 , through March 30 ,
20 1990 , shall be adjusted to reflect the percentage changes, if
21 any, in the annual operation and maintenance fee for the period
22 January 1 , 1988 , through January 1, 1989 . The percentage change
23for each succeeding year shall be calculated in like manner.
24 Section 3 . 8 Fee Reduction. Sierra shall use its
20 best efforts to ensure that the Facility produces a) least the
26
amount of power scheduled by Redding. Redding shall specify by
27recorded telephone statement to Sierra on a daily basis at least
i
"3�
7')
411 111
1 one day in advance the amount of power capacity and energy
2 Redding requires hourly ( "Scheduled Power Production" ) ; pro-
3 vided, however, that if the Scheduled Power Production requested
4 by Redding exceeds the amount of power provided for in Section
5 4 . 1 , the parties shall enter into a separate agreement in
6 accordance with Section 3 . 9 . The operation and maintenance
7 fee to be received by Sierra pursuant to Section 3 . 7 will be
8 reduced for each month in which the power output of the Facility
9 is at least five percent below the Scheduled Power Production.
10 The reduction in the operation and maintenance fee shall be
11 determined by multiplying the "Reduction Formula" times the
12 scheduled monthly payment. The "Reduction Formula" shall equal:
13 x_y _
. 05
x
14
15 where "x" equals the Scheduled Power Production; and "y" equals
16 the amount of capacity and energy actually produced each hour.
17 At least 15 days prior to the beginning of each month, Redding
18 shall provide Sierra with a reasonable estimate of the Scheduled
19 Power Production for the month. No fee reduction shall be
20 effective pursuant to this paragraph if failure to meet the
21 Scheduled Power Production is the result of any act or omission
22 by Redding.
23 Section 3 . 9 Additional Power Output. If Redding
24 requests an amount of fuel in excess of the fuel sufficient to
25 provide the power requirements listed in Section 4 . 1 of this
26 Agreement, the parties shall negotiate to reach agreement on
27 the increase in the amount of power and consequent 'increase in
28; -)3
. ,
410 •
1 fuel. The price of additional fuel to be agreed upon by the
2 parties shall include the increase in the cost of operation and
3 maintenance and any other applicable costs attributable to
4 such increased power production and fuel consumption.
5
Additional amounts of fuel necessary for increased power output
6 above the levels specified in Section 4 . 1 will be provided only
7 subsequent to the parties ' reaching a mutual agreement.
8 Sierra' s failure to supply an increased amount of fuel necessary
9 to exceed Section 4 . 1 power requirements will not affect the
10 operation and maintenance fee received by Sierra under the
11 terms of this Agreement, but may reduce fees to be received by
12 Sierra pursuant to any separate agreement for increased fuel
1? and consequent increased power output. The amount of any such
14 fee reduction shall be specified in a separate agreement.
15 Section 3 . 10 Limitation of Liability. IN NO EVENT
•
16 SHALL CARTAGE OR SIERRA BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
17 SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHICH MAY BE
18 CAUSED BY OR IN ANY MANNER RESULT FROM SIERRA' S PERF1RMANCE OF,
19 OR FAILURE TO PERFORM, ANY SERVICES UNDER THE OPERATION AND
20 MAINTENANCE AGREEMENT INCLUDING, WITHOUT LIMITATION, DAMAGES
21 FOR LOSS OF PROFITS OR REVENUES OR LOSS BY REASON OF FACILITY
22 SHUTDOWN OR INABILITY TO OPERATE THE FACILITY AT THE DESIRED
23 LEVEL OF POWER PRODUCTION OR DUE TO ANY WILFUL ACTION OR ANY
24 THEORY OF STRICT LIABILITY.
25 Section 3 . 11 Emergencies . In any emergency affecting
26 the safety of persons or property, Sierra shall have the right,
27
28,
24
.
1 at its discretion, to disrupt or diminish electrical power
2 generation of the Facility in order to prevent the threatened
3 damage, injury or loss .
4 Section 3 . 12 Scheduled Outages . Sierra may schedule
5 outages for maintenance in the months of February, March, April
6 and/or November for up to 30 consecutive days per calendar year
7 provided, however, that Sierra must submit to Redding a notice
8 of intent to perform maintenance at least 90 days prior to the
9 proposed maintenance date. Redding, at its sole option, may
10 defer Sierra ' s scheduled maintenance. Notice of any deferral of
11 maintenance by Redding shall be given to Sierra not less than
12 60 days prior to the scheduled outage, except in the event of an
13 emergen:y. In addition to any other scheduled outage, Sierra
14 shall be allowed partial outages for maintenance of one unit for
15 up to 72 hours during any of the months specified in this
161 Section 3 . 12 . There shall be no more than one scheduled outage
17 per year wherein Unit One and Unit Two are simultaneously
18 off-line and such scheduled outage shall not exceed three ( 3 )
19 days in duration. Provided, however, that the Operationland
20 Maintenance Agreement may make additional provisions covering
21 major overhaul consistent with standards and practice in the
22 Industry.
23 ARTICLE IV
24 FUEL SUPPLY AGREEMENT
25 Sierra and Redding shall enter into the Fuel Supply
26 Agreement in accordance with the terms set forth in this
27' Article IV. The Fuel Supply Agreement shall be executed and
28' 25
111
1 delivered by such parties simultaneously with the execution
2 and delivery of the Purchase and Sale Agreements.
3 Section 4 . 1 Amount of Fuel. Sierra shall make avail-
4 able to Redding at the Facility, at a minimum, on I continu-
5 ous uninterrupted basis that amount of fuel sufficient to
6 provide the designated gigawatt hourserV
p year deliveredlto
7 Redding' s transmission system as set forth below. Redding shall
8 purchase from Sierra, at a minimum, that amount of fuel suf-
9 ficient to provide the designated gigawatt hours per year as set
II
10 forth below and to provide sufficient power to properly operate
11 the Facility on a take or pay basis subject to a reduction in
12 take as specified in Section 4 . 2 . All electrical energy
13 produced by the Facility net of station service shall be
14 delivered to Redding. In no event shall Redding be required to
15 purchase more fuel than is necessary to operate the Facilty and
16 to produce the following annual power quotas delivered to
17 Redding' s transmission system.
18 (a) First partial year of operation of Unit
19 One: 50 gigawatt hours times number of months remaining in the
20 calendar year after the close of sale of Unit One divided by
21 12 and, thereafter, 50 gigawatt hours annually until the close
22 of sale of Unit Two.
23 (b) First partial year of operation of Unit
21 Two: 100 gigawatt hours times number of months remaining in the
2J calendar year after sale of Unit Two divided by 12 .
26
(c) First full calendar year of operation of
27 both Units : 100 gigawatt hours.
2s1
.#
111
1 (d) Second full calendar year of operation
2 of both Units: 150 gigawatt hours.
3 (e) Third full calendar year of operation of
4 both Units: 200 gigawatt hours .
5 (f) Fourth full calendar year of operation
6 of both Units and each succeeding calendar year: 205 gigawatt
7 hours thereafter.
8 Section 4 . 2 Reduction in Fuel Purchase b,Ily Redding.
9 The quantity of fuel that Redding is required to purchase from
10 Sierra in accordance with Section 4 . 1 shall be reduced if the
11 Facility fails to produce the Scheduled Power Production for
12 any hour; provided, however, that failure to produce any
13 additional power agreed upon in accordance with Section 3 . 9 .
14 shall not result in a reduction of Redding' s fuel purchase
15 requirements under this Agreement. The reduction in annual
16 fuel purchase requirement shall be calculated as follows : ,
17 ( a) For each calendar month of the year subtract
18 the scheduled gigawatt hours actually produced from the
19 scheduled gigawatt hours to arrive at the monthly deviation; and
20 (b) Calculate the cumulative total of the
21 monthly deviation, if any, for each and every month to derive
22 the reduction, in gigawatt hours , in the minimum annual fuel
23 purchase requirement.
24 There shall be no reduction in the miniumum fuel purchase
25 requirement if the failure to meet the scheduled output is a
26 result of any act or omission on the part of Redding. There
27
281 27
411, •
1 shall be a reduction in the minimum fuel purchase requirements
2 if the failure to meet the scheduled outputs is a result of
3 major overhaul as allowed under Section 3 . 12 . Power produced in
4 excess of the amount scheduled by Redding shall not be con-
5 sidered when calculating the monthly deviation.
6 Section 4 . 3 Payments to Sierra. Reddinglshall
7 initially pay Sierra for fuel on a monthly basis at the rate of
8 0 . 789 cents per 1, 000 btu' s of energy available from the fuel
9 delivered by Sierra. In order to account for the amount of
10 btu' s available from the fuel delivered by Sierra which is not
11 converted to electrical energy and delivered to Redding' s trans-
12 mission system due to station service and Facility inefficiency
13 Redding and Sierra agree that the amount of kilowatt hours
14 delivered by the Facility to Redding' s transmission system when
15 multiplied by the Efficiency Factor of 4, 436 will equal the
16 amount of btu' s of energy available from the fuel delivered by
17 Sierra. The Efficienty Factor shall be appropriately adjusted
18 every ten years . Additionally, Redding shall supply to Sierra
19 as additional compensation for fuel low pressure steam at the
20Sawmill sufficient to operate the Sawmill' s dry kilns . Botha
21 parties agree that Sierra shall operate the Facility so that
22
enough fuel is burned to
g produce steam sufficient for Redding' s
23
Scheduled Power Production and Sierra ' s steam needs. In the
24 event that the Operation and Maintenance Agreement is termin-
25 ated, Redding agrees to operate and maintain the Facility so
26
27
281
28
. .
. " , , • •
• 1 that Sierra' s steam needs continue to be met for as Tong as the
2 Facility shall continue to operate, with steam from the Facility
3 at a rate equal to the rate of steam received at the Sawmill at
4 the time of termination of the Operation and Maintenance
5 Agreement. Sierra' s steam needs shall not be guaranteed in the
6 event that Sierra fails to deliver fuel in accordance with the
7 requirements of this Agreement and the Fuel Supply Agreement.
8 Section 4 . 4 Price of Fuel. The price for fuel speci-
9 fied hereunder shall be increased annually, commencing
:10 January 1 , 1989 , at a rate equal to one-half of the percentage
11 change in the Consumer Price Index plus one-half of the percen-
12 tage change in Redding' s average wholesale power cost. The
13 "Consumer Price Index" means the Consumer Price Index for
14 western cities with a population of over 50 , 000 people, as
15 published by the Bureau of Labor Statistics, the Department of
16 Labor, United States government. The fuel price for each
17 succeeding year shall be changed each January 1 for the follow-
18 ing year in accordance with the foregoing. If there is a net
19 decrease in the sum of the percentage change in the Consumer
20 Price Index and Redding' s average wholesale power cost, the rate
21 shall be adjusted downward. As utilized herein, the term
22. "Redding average wholesale power cost" shall equal the mean
23 average price per kilowatt hour paid by Redding for power
24 during the annual adjustment period. Percentage change for the
25 initial modification of January 1 , 1989 , shall be calculated
26
1
271
28 29
. •
1 upon the percentage change between January 1 , 1988 , and January
2 1, 1989 . Actual changes in monthly price of fuel shall be
3 effective on April 1 , 1989 , by virtue of current publishing
4 schedules which make the cost of living index data available in
5 March of the year. Payments for the period of April_ 1 , 1989 ,
6 through March 30 , 1989, shall be adjusted to reflect the
7 percentage changes, if any, in the annual price for fuel. The
8 annual percentage change for each succeeding year shall be
9 calculated in like manner.
10 Section 4 . 5 Failure to Sur,.oly Fuel. In the event
11 that Serra fails to make fuel available at the Facility for .
12 use by the Units , Sierra shall pay Redding for the diminished
13 electrical output directly attributable to the failure to
14 provide fuel. Sierra shall pay the difference between Redding' s
15 cost of replacement capacity and energy and the cost of the
16 capacity and energy if the fuel had been produced by Sierra as
17 scheduled. Redding shall make every attempt to purchase
18 replacement power at the best available rate. No payment will
10 be made if Redding' s cost for replacement capacity and energy
20 are less than Redding' s cost of capacity and energy if the fuel
21 had been produced by Sierra as scheduled; provided, however,
22 that Sierra shall be liable for no more than the difference
23 between the rate Redding pays for supplemental power from the
24 Western Area Power Administration ( "WAPA" ) and thelcost to
25 Redding for power had it had been produced by the �Facility.
26 Provided, however, that under no circumstances shall Sierra be
271
2S� =0
110
1 obligated to pay in excess of ten times the normal WAPA rate for
2 replacement power. "Normal WAPA rate" means the rate charged
3 by WAPA for Redding' s regularly scheduled power needs. Failure
4 of the fuel delivery system, when fuel is available at the
5 Facility, shall not constitute a failure to supply fuel under
6 the terms of this Section 4 . 5
7 EXCEPT AS SPECIFICALLY SET FORTH ABOVE, hN NO EVENT
8 SHALL SIERRA BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
9 CONSEQUENTIAL DAMAGES OF ANY KIND WHICH MAY BE CAUSED BY, OR IN
10 ANY MANNER RESULT FROM SIERRA' S PERFORMANCE OF, OR FAILURE TO
11 PERFORM, SERVICES UNDER THE FUEL SUPPLY AGREEMENT WHETHER FOR
12 BREACH OF CONTRACT, NEGLIGENCE OR STRICT LIABILITY.
1.,0
Section 4 . 6 Quality of • Fuel. The quality of fuel
14 provided by Sierra shall be commensurate with the quality of the
15 fuel provided by. Sierra at Sierra's similar facilities and
16 shall be fit for the purpose intended. Sierra makes no other
11 warranties , express or implied, regarding fuel character or
18 quality. There shall be a rebuttable presumption that fuel of
19 the general character and quality of that which is consumed at
20 Sierra' s similar facilities is sufficient for the intended
21 purpose.
22 Section 4 . 7 Alternate Fuels . Sierra shall have the
23 right to utilize a commercially reasonable substitute for wood
24 fuel if the following four conditions are satisfied:
25
(a) Wood fuel is not a commercially reasonable
26 fuel source;
27
2S
31
. ,
• •
1 (b) A commerically reasonable substitute fuel
2 may be obtained by Sierra;
3 (c) The price of substitute fuel delivered to
4 the Facility when expressed in cents per kilowatt hour is
5 commercially reasonable. Therice for the substitute fuel
p II
6 shall be the fair market value of the fuel delivered to the
7 Facility expressed in cents per kilowatt hour;
8 (d) Alternate fuel may lawfully be utilized in
9 the Facility; and
10 (e) If use of substitute fuel requires modifica-
11 tion of the Facility, Sierra shall pay for all modifications
12 necessary for use of the substitute fuel.
13 Section 4 . 8 Term of Fuel Sunnly Aaree:.ient. The Fuel
14 Supply Agreement shall be for a period of thirty ( 30 ) years.
15 The fuel price shall be renegotiated twice: once al ten ( 10 )
16 years and once at twenty ( 20 ) years from the date of execution.
17 The renegotiated price shall be the fair market value of the
18 fuel. As used herein, the term "fair market value" means
19 the fair market value of the fuel, including the cost of
20 delivery of the fuel to the Facility. If the fair market value
21 of fuel makes. operation of the Facility commercially unreason-
22 able, Redding shall have the right to terminate this Fuel
23 Agreement at either of the two times designated for price
24 renegotiation. Notice of such termination must be given by
25 Redding to Sierra within 90 days of the renegotiation date. The
26
27i
28 32
4 •
1 renegotiated price shall be adjusted annually pursuant to
2 Section 4 . 4 .
3 Section 4 . 9 Additional Available Fuel. In the event
4 that excess fuel becomes available to Sierra and Sierra wishes
5 to sell, and Redding wishes to buy, additional fuel, the same
6 shall be sold in accordance with any future agreement of the
7 parties . Price for such sale shall be established at the time
8 of sale.
9 Section 4 . 10 Ccst of Natural Gas . All naturallgas
10 utilized in the Facility shall be paid for by Sierra so long as
I1 Sierra continues to operate and maintain the Facility. In the
12 event that Sierra ceases to operate and maintain the Facility,
13' all cost of natural gas fuel utilized at the Facility shall be
14 paid by Redding.
15 Section 4 . 11 Obligation to Maintain Fuel Storage Area.
16 Fuel becomes the property of Redding when delivered to and
17 placed upon the fuel conveyor. So long as Sierra continues to
18 maintain and oeprate the Facility, Sierra shall be responsible
19 for maintaining the fuel storage area. In the event that
20 Sierra ceases to operate and maintain the Facility:
21 (a) Redding warrants that it will exerciselits
22 best efforts to maintain the fuel storage area in accordance
23 with good engineering practice in order to maintain the quality
24 of the fuel;
25. (b) Fuel shall become the
property of Redding
26 when delivered to Redding ' s fuel storage area.
27
28 33
• •
1 Section 4 . 12 Fuel Utilized in Testing. Redding shall
2 not be obligated to make payment for fuel utilized by Carnage for
3 testing purposes . Provided, however, that Redding shall be
4 obligated to purchase all power produced by Camage during
5 testing at the rate which Redding is able to obtain on resale .
6 Redding will excercise its best efforts to obtain the highest
7 rate on any such resale.
8 ARTICLE V
9 INTERCONNECTION FACILITIES
10 Carnage shall construct and Redding shall own the
11 interconnection facilities to protect Redding' s system, employ-
12 ees and customers from damage or injury arising out of or in
13 connection with the operation of the Facility. "Interconnection
14 facilities" means all the required apparatus installed to
15 interconnect and deliver power from the Facility to the City of
16 Redding system including, but not limited to, connection,
17 transformation, switching, metering, and safety equipment, such
18 as equipment required to protect ( 1) the Redding system and its
19 customers from faults occurring at the Facility, and ( 2 ) the
20 Facility from faults occurring on the Redding system or on the
21 systems of others to which the Redding system is directly or
22 indirectly connected. Sierra shall pay for that portion of the
2312 KV facilities constructed to serve the Sawmill, consistent
24 with Redding' s existing policy regarding line extension for
25 commercial customers of Redding ' s electric system.
2G
27
28
•
1 ARTICLE VI
2 DAMAGES FOR FORCED OUTAGE
3 Section 6 . 1 Camaae and Sierra Not Liable. Except as
4 expressly provided for in Section 4 . 5 , 'neither Carnage nor Sierra
5 shall be liable for any suits, actions, legal or administrative
6 proceedings , claims , demands, consequential or punitive damages,
7 damages , liabilities, interest, attorney' s fees, costs and
8 expenses of any nature, in any manner proximately caused or
9 claimed to be proximately caused by reason of any forced outage.
10 "Forced outage" means any full or partial curtailment of the
11 electric output of the Facility resulting from any design
12 defect, inadequate construction, operation or maintenance error,
13 or any breakdown of the mechanical or electrical ea ipment or
14 any insufficiency in the fuel supply.
15 Section 6 . 2 Indemnification of Camaae and Sierra by
11
16 Redding. Redding will indemnify, defend and hold harmless
17 Carnage and Sierra and their legal representatives, successors, •
18 assigns , officers, directors, agents, and employee from and
19 against any and all claims , actions and suits, whether ground-
20 less or otherwise, and from and against any and all liibilities ,
21 loss , damages , costs , charges , attorneys ' fees and other
22expenses of every kind and character which are incurred or
23
sustained in connection with litigation or arbitrltion pro-
24 ceedings by reason of or resulting from or in any way connected
25 with a forced outage , except as expressly provided for in
26 Section 4 . 5 .
27
2S
-z5
411 •
1 ARTICLE VII
2 TERMINATION
3 Section 7 . 1 Termination Under Other Sections . This
4 Agreement may be terminated in accordance with the following
5 provisions :
6 ( a) Carnage may terminate this Agreement in
7 accordance with Sections 2 . 4 and 2. 11 .
8 (b) Sierra may terminate this Agreement in
9 accordance with Section 3 . 1 (a) .
10 Section 7 . 2 Termination for Cause. Any party may
11 terminate this Agreement for cause upon written notice to the
12 other parties where another party breaches any material term or
13 condition of this Agreement and such party fails til cure any
14 such breach within thirty ( 30) calendar days of receiving notice
15 of occurrence of such breach or if the breach cannot lecause of
16 its nature be cured within such thirty ( 30 ) calendar dlly period,
17 to commence proceeding in good faith to remedy such breach
18 within such thirty ( 30 ) calendar day period and to therafter
19 diligently proceed in good faith until the breach is remedied;
20 provided, however, that neither Camage nor Sierra shall have the
21 right to terminate this Agreement for cause if Carnage or Sierra
22� is in breach of this Agreement.
23 In the event this Agreement is terminated in accordance
2r, with the above provisions , Redding shall be required ro
return
25 to Sierra all specifications , technical standards , blueprints
26
27
?8 . j5
411
•
1 and other information provided to Redding by Sierra, whether
2 written or recorded, pertaining to Sierra' s other co-generation
3 facilities and to the Facility.
4 ARTICLE VIII
5 SAWMILL POWER PURCHASE
6 Sierra shall purchase power for the Sawmill from
7 Redding at the price set forth in Redding' s applicable inter-
8 ruptable rate schedule but in no event shall such cost exceed
9 the cost of power available from other commercial suppliers .
10 ARTICLE IX
11 SATISFACTION OF JUDGMENT
12 Any judgment arising out of this Agreement against
13 either Carnage or Sierra in favor of Reddinj may be satisfied out
14 of trust account funds in the event that, within 20 days from
15 entry, judyment debtor is unable to satisfy the judgment.
16 "Trust account funds" means those purchase moneys deposited to a
17 trust account pursuant to Article II Section 2 . 9 ( a) ( 2 ) . Nothing
18 herein shall preclude Sierra or Carnage from posting an appeals
19 bond during any appeals period. Redding shall not have recourse
20 against trust funds during the effective period of any appeals
21 bond.
22 ARTICLE X
23 MISCELLANEOUS
24 Section 10 . 1 Governing Law. The validity, interpre-
23, tation, enforceability and performance of this Agreement shall
26 be governed by and construed in accordance with the law of the
1
2 ' State of California.
28, 37
411 •
1 Section 10 . 2 Additional Terms and Uncertainty. Any
2 additional terms required to resolve any uncertainty arising in
3 connection with the interpretation or enforcementlof this
4 Agreement shall be commercially reasonable terms derived from
5 the normal standards and practices in thalt portion of the
6 electrical co-generation Industry which interconnects with
7 electric utility systems.
8 Section 10 . 3 Notices . All notices , demands and other
9 communications required or permitted hereunder shall be made in
10 writing and shall be deemed to have been duly Ilgiven if deliverd
11 by hand ( against receipt) or mailed, postage prepaid, certified
12 or registered mail, return receipt requested, and addressed to
13 Carnage at: Carnage Corporation
P.O. Box 479
14 Redding, California 96099
ATTN: Mark Emmerson
15
and to Sierra at: Sierra Pacific Industries
16 P.O. Box 4728
Redding, California 96099
17 ATTN: A. A. Emmerson
18 and to Redding at: City of Redding
760 Park View Avenue
19 Redding, California 96001
ATTN: Director, Electric Department
20
21 Notice of change of address shall be effective only
22 when done in accordance with this Section 10 .13 . All notices
23 complying with this Section 10 . 3 shall be deemed to have been
24 received on the date of delivery or on the third business day
25 after mailing.
26 Section 10 . 4 Entire Agreement. Except. as provided in
27 Section 10. 2 , the parties intend that the terms of this Agree-
sc, ;
• • • ,
1 ment, including the attached exhibits , shall be the final
2 expression of their agreement with respect to the subject matter
3 hereof and may not be contradicted by evidence of any prior or
4 contemporaneous agreement. The parties further intend that this
5 Agreement shall constitute the complete and exclusive statement
6 of its terms and that no extrinsic evidence whatsoever may be
7 introduced in any judicial, administrative or other legal
8 proceeding involving this Agreement.
9 Section 10. 5 Amendments and Waivers. This Agreement
10 may not be amended except upon the written consent of all
11 parties . By an instrument in writing, either party may waive
12 compliance by the other party with any term or provision of this
13 Agreement that such other party was or is obligated to comply
14 with or perform, provided, however, that such waiver shall not
15 operate as a waiver of , or estoppel with respect to, any other
16 or subsequent failure. No failure to exercise and no delay in
11exercising any right, remedy or power hereunder shall operate as
18a waiver thereof , nor shall any single or partial exercise of
19 any right, remedy or power hereunder preclude any other or
20 further exercise thereof or the exercise of any other right,
21 remedy or power provided herein or by law or in equity. The
22 waiver by any party of the time for performance of any act or
23 condition hereunder does not constitute a waiver of the act or
2� condition itself.
2� Section 10 . 6 Assignment, Successors and Assigns. Each
26 party agrees that it will not assign, sell, trllnsfer, delegate
27 1 or otherwise dispose
1 p� of , whether voluntarily or involuntarily,
231 Q
•
i i
1 or by operation of law, any right or obligation under this
2 Agreement. Any purported assignment, transfer or delegation in
3 violation of this Section shall be null and void. Nothing in
4 this Agreement, including the foregoing, shall prevent the
5 merger of any party with or into any other corporation, or the
6 sale by any party of all or substantially all of its property or
- 7 assets; or the assignment by any any party of this Agreement
8 and the performance of its obligations hereunder to any succes-
9 sor in interest or any affiliated company. Subjlect to the
10 foregoing limits on assignment and delegation, this Agreement
11 shall be binding upon and shall inure to the benefitlof the
12 parties and their respective successors and assigns . Except for
13 those enumerated above, this Agreement does not �eate, and
14 shall not be construed as creating, any rights enforceablecby
15 any person or entity not a party to this Agreement.
16 Section 10 . 7 Severability. If any provision of this
17 Agreement, or the application thereof to any person, place or
18 circumstance, shall be held by a court of competent jurisdiction
19 to be invalid, unenforceable or void, the remainder of this
20 Agreement and such provisions as applied to other persons ,
21 places and circumstances shall remain- in full force and effect.
22 Section 10 . 8 Counterparts . This Agreement may be
23 executed in counterparts , each of which shall be deemed an
24 original, but all of which taken together shall constitute one
25 and the same instrument.
26
271
281 40
•
`
• • • ,
1 Section 10 . 9 Interpretation of Aareement. The section
2 and other headings used in this Agreement are for reference
3 purposes only and shall not constitute a part hereof or affect
4 the meaning or interpretation of this Agreement. The term
5 "person" shall include any individual, partnership, joint
6 venture, corporation, trust, unincorporated Organization, any
7 other business entity and any government or anyldepartment or
8 agency thereof, whether acting in an individual, fiduciary or
9 other capacity. Whenever ' the context so regdlires, the use of
10 the singular shall be deemed to include the plural and vice
11 versa.
12 Section 10 . 10 Further Assurances . Subject to the
13 terms and conditions hE;reof, each party agrees to use its best
14 efforts to do, or cause to be done, all things necessary, proper
15 or advisable under applicable laws and regulations to consummate
16 the transactions contemplated by this Agreement as expeditiously
17 as practicable, including, without limitation, the performance
18 of such further acts or the execution and delivery of any
19 additional instruments or documents as any party may reasonably
20 request in order to carry out the purposes of this Agreement
21 and the transactions contemplated hereby.
22 Section 10 . 11 Failure or Delay in Performance.
23 Neither party shall be liable for failure or delay in performing
24 its obligations hereunder if such failure or delay is due to
25 circumstances beyond the party' s reasonable control, including,
26
9-
98 41
•
. I
I. p
111 110
1 without limitation, acts of any governmental body, war, insur-
2 rection, sabotage, embargo, fire, flood, strike or 'other labor
3 disturbance, interruption of or delay in transportation, or
4 inability to obtain raw materials, supplies or power used in
5 or equipment needed for the construction of the Facility.
6 Subsequent to successful bond financing by Redding, lack of
7 credit, funds or financing shall not be considered a matter
8 beyond the reasonable control of theu
parry. Redding' s perform-
9 ance is contingent upon its ability to obtain bond financing.
10 Each party (a) shall promptly notify the others in writing of
11 any such delay or failure in performance, the expected duration
12 thereof, and its anticipated effect on the party expected to
13 perform, and (b) shall use its best efforts to remedy such
14 delay, except that no party shall be under any obligation to
15 settle a labor dispute.
16 Section 10 . 12 Recovery of Costs and Attorneys ' Fees .
H -
17 In any legal action, arbitration or other proceeding brought to
18 enforce or interpret the terms of this Agreemeent, the prevail-
19 ing party, or parties, shall be entitled to reasonable attor-
20 neys ' fees and any other costs incurred in that proceeding in
21 addition to any other relief to which it is entitled. Each
22 party acknowledges that it was represented by counsel in the
23 negotiation and execution of this Agreement.
24
25
26
27
2S
42...
•
Ii
f
•
4 t
411
1 Section 10 . 13 Authorization. The execution of this
2 Agreement and the performance hereunder of each signatory has
3 been duly and validly authorized.
4 The parties have duly executed this Agreement as of
5 the date first written above.
6 CAMAGE CORPORATION
7 i, c
By: /4
8 M. D. EMERSON, Vice°President
9
SIERRA PACIFIC INDUSTRIES
10
11 BY: ao
A. A. EMMERSON, President
12
13 CITY OF REDDING
14 •
ATTEST: By:
15 p
(Name and Title")
16
17
18
19
20
21
22
23
21
25i
26
27
28; 43
' • •
EXHIBIT A
A' parcel of land lying in Section 39, of the P. B. Redding Grant in the
unincorporated territory of Shasta County, California more particularly des-
cribed as follows:
Beginning at the northwest section corner of said Section 39 and running
thence N41° 56' 00" E, 427.00 feet to the northeasterly right-gIlIof-way line of.
the Southern Pacific Railroad, thence S48° 04' 00" E along said right-of-way
line 307.32 feet, thence N41° 56' 00" E, 2211.00 feet to a 1/2" iron pipe
marked "LS 5317 PCA" and being the true point of beginning of the parcel of
land herein described and running thence N44° 47 ' 16" E, 550.00 feet to a 1/2"
iron pipe marked "LS 5317 PCB", thence S45° 12 ' 44" E, 1188.00 feet to a 1/2"
iron pine marked "LS 5317 PCC", thence S44° 47' 16" W, 550.00 feet to a 1/2"
iron pipe marked "LS 5317 PCD", thence N45° 12' 44" W, 1188.00 feet to the
true point of beginning.
Said Parcel containing 15.00 acres.
•
\ sl
a 4 ,,,, •
A., J
r s
4 .
. .r!) • •
6\
1 /• t\
/ I(071
--z. — ..,r-b•i '',,,., :
4
i
n i
.•
•
(3
C
/ •
r
....
--t-. \
\ 0 ' --t--- •
t ...,
i s /
(....
DI'
r:
\ D
.e
I. \'.
0‘., ,/ \
-,,°, ',.
0
‘
(.,
-,...
)1 i S, i .
.
•
i
N \ ..../r ' \
''
///1.
(4
t,
1 \ ) ' ' c
It...:,,...„, •, i •
. .
/
..,
Ir.
,-,
_:1.
i. ",',4 ). '4 7-- • -.:---. 1-7:- ---.--- -•
n C.:117—,1-7 -7
7—--.'.it
0 N ('•.- iN) ',' \ ''. -. i t '''...,.,
•D IN,
\ ' I -
\ j.,k:Ii
p q \
t'1 cc
(\
(s)
s'tC:
1- 1, \ 6
,., , 3> , !
,,,', J
c)•.1. , - • , ts •, —
k 1 .
„,..,
'
. a qh
0 il
-
-- ;:?,,
Li cll.,
/.._\ -
r ID , -...
4) ,
. _
)
.. :
C(
r . I
'
--' -1 / \ 0 k ,
/0///7
&I • • I
',...
14 t.;' II . . ,
t '1 i
, ..,. s: '. I i
N,, j'I
1,' '''
I ,
‘,/
7/ -)-- • ---.1 jj
t„ FJ
•,
x ____:. ...,
- ..
If” '•: == : ... , -. - i../// '• •
'•..:".,... i i'''Z..''' I, ,.•
• I.,' -.-'--..--- i 1 Vi LI 1
.,, .....
'4\ '
(4\.,• ,
.-.___,._ ..-._......, .-. ..--..-C...,, .-...-..-. .....-
,-
I ----, . ----,-->.-- — ----____
. 4
'.6
II
..1,..,/c;/;.„,_ „ ,—,0 ‘,..r.,..• .3
I) (1 .,, k 1-•-•\
Z.../, (•., ,,q, -% 0..„
,.-------in-----•------.
\ •
(1,1
1 NI
.A> 0 \ i-}41'. \\ •
..•
h
,r..
Li
,-, 2-,
I--
-- ---------------- t.: ..:', \
-4
(J) -----
r: :-. :'--- 1 r•_, i-4
/
..,
17)
4-. .
\..... , /
-.
I
I
i 5
# • • . . 1 4
EXHIBIT B
USED MACHINERY
DESCRIPTION UNIT 1 UNIT 2
1 . G-E MVA Turbine 1 1
Generator 1 1
Exciter 1 1
2. T-Neck And Expansion Joint 1 1
3. Surface Condensors 2 2
4. "Level Troll " And Miscellaneous
Gate And Globe Valves 1 Set 1 Set
5. Condensate Pumps 'W/Drives 2 2
6. Air Ejectors 2 2
7. Hogging Jet 1 1
8, Miscellaneous Piping Condensor
To D.A. Tank 1 Set 1 Set
9. DeAerator Tank 1 1
10. Feedwater Pumps 2 1
1
11 . Lo-Pressure Feedwater Heater 1 1
12. High Pressure Feedwater Heater 2 2
13. Extraction Piping to D.A. And
Heaters 3 Sets 3 Sets
14. Extraction Non-Return Valves 3 3
15. Turbine-Generator Peripherals:
Oil Lube System 1 1
Hydrogen Cooling System,
Purifier And Controls 1 1 1
Main Stop Va l 7e 11
Grounding (Neutral ) Reactor 1 1
Miscellaneous Bushings 1 Set 1 Set
Turning Gear 1 I 1
16. Circulating Water Pumps 2 2
Alternative: 3 For Both Units
17 . Miscellaneous Butterfly And Gate Valves ,
Reducers And Flanges i Set 1 Set
1
_ f0 4
USED MACHINERY - Cont'd
DESCRIPTION UNIT 1 UNIT 2
18. Bridge Crane ( If Available) 1 0
19. Demineralized Storage
Tanks 2 2
20. Waste Water Storage
Tanks 2 2
21 . Miscellaneous Pumps Less Than
50 HP. 12 12
22. Extraction Isolation Valves - 3 3
23. Feedwater Heater Bypass
Loops And Valves 3 Sets 3 Sets
24. Turbine Oil Purifier 1 1
25. Crane Rail And Beam 1 0
26. Miscellaneous Gear Reducers W/Drives 12 12
27 . Miscellaneous Pipe Hangers 1 Set 1 Set
2