-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GjLC2qhwSk+MUe+dty0bVWMtFy/P+gaEuohvUoXaJNQONlPO7u1URSbsr+nzgwrc q0BrKZjVarLkgEVnvZWrUA== 0000945979-96-000005.txt : 19960401 0000945979-96-000005.hdr.sgml : 19960401 ACCESSION NUMBER: 0000945979-96-000005 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 27 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOBILE ENERGY SERVICES HOLDINGS INC CENTRAL INDEX KEY: 0000945979 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 582133689 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 033-92776 FILM NUMBER: 96540928 BUSINESS ADDRESS: STREET 1: 900 ASHWOOD PARKWAY STREET 2: SUITE 450 CITY: ATLANTA STATE: GA ZIP: 30338 BUSINESS PHONE: 770-673-7730 MAIL ADDRESS: STREET 1: 900 ASHWOOD PARKWAY STREET 2: SUITE 450 CITY: ATLANTA STATE: GA ZIP: 30338 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOBILE ENERGY SERVICES CO LLC CENTRAL INDEX KEY: 0000948362 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 631148953 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 033-92776-01 FILM NUMBER: 96540877 BUSINESS ADDRESS: STREET 1: 900 ASHWOOD PARKWAY STREET 2: SUITE 300 CITY: ATLANTA STATE: GA ZIP: 30338 BUSINESS PHONE: 770-673-7781 MAIL ADDRESS: STREET 1: 900 ASHWOOD PARKWAY STREET 2: SUITE 300 CITY: ATLANTA STATE: GA ZIP: 30338 10-K405 1 FORM 10-K =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------- Form 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1995 OR ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. - ----------- ----------------------------------- ------------------ 33-92776 Mobile Energy Services Company, L.L.C. 63-1148953 (An Alabama Limited Liability Company) 900 Ashwood Parkway, Suite 300 Atlanta, Georgia 30338 (770) 379-7781 33-92776 Mobile Energy Services Holdings, Inc. 58-2133689 (An Alabama Corporation) 900 Ashwood Parkway, Suite 450 Atlanta, Georgia 30338 (770) 379-7730 =============================================================================== Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( X ) Each of the registrants meets the conditions set forth in General Instruction J(1)(a) and (b) of Form 10-K and is therefore filing this form with reduced disclosure as permitted by such General Instruction J. A description of the registrants' common stock follows:
Description of Shares Outstanding Registrant Common Stock at February 28, 1996 - ---------- -------------- -------------------- Mobile Energy Services Company, L.L.C. Not applicable Not applicable Mobile Energy Services Holdings, Inc. Par Value $1 Per Share 1,000
Table of Contents PART I PAGE Item 1 Business-............................................................................................... I-1 General.............................................................................................. I-1 Power, Steam and Liquor Processing Sales............................................................. I-2 Operations........................................................................................... I-8 Sources and Availability of Raw Materials............................................................ I-9 Permitting and Regulatory Matters.................................................................... I-10 Environmental Considerations......................................................................... I-11 Outages.............................................................................................. I-13 Summary of Principal Project Contracts............................................................... I-15 Item 2 Properties.............................................................................................. I-57 Item 3 Legal Proceedings....................................................................................... I-62 Item 4 Submission of Matters to a Vote of Security Holders..................................................... I-62 PART II Item 5 Common Equity Market.................................................................................... II-1 Item 6 Selected Financial Data................................................................................. II-1 Item 7 Management's Discussion and Analysis of Results of Operations and Financial Condition.............................................................................. II-1 Background........................................................................................... II-1 Results of Operations................................................................................ II-1 Revenues............................................................................................. II-2 Expenses............................................................................................. II-2 Liquidity and Capital Resources...................................................................... II-2 Environmental Matters................................................................................ II-6 Funding of the Maintenance Reserve Account........................................................... II-7 Tax Matters.......................................................................................... II-7 Item 8 Financial Statements and Supplementary Data............................................................. II-9 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................................. II-9 PART III Item 10 Directors and Executive Officers of the Registrants..................................................... III-1 Item 11 Executive Compensation.................................................................................. III-1 Item 12 Security Ownership of Certain Beneficial Owners and Management.......................................... III-1 Item 13 Certain Relationships and Related Transactions.......................................................... III-1 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......................................................................................... IV-1
i SELECTED DEFINITIONS When used in this report, the following terms will have the meanings indicated. "Abandonment" means (i) the announcement by Mobile Energy of its decision to suspend for more than thirty (30) days or abandon the operation of the Energy Complex or (ii) the suspension for more than thirty (30) days (as extended during the continuance of a Force Majeure Event), abandonment or indefinite deferral of the operation of the Energy Complex. "Actual Energy Complex Capacity" means the Actual Liquor Processing Capacity, the Actual Steam Processing Capacity and the Actual Power Processing Capacity. "Actual Liquor Processing Capacity" means the actual capability of the Energy Complex to deliver Liquor Processing Services at any given time. "Actual Power Processing Capacity" means the actual capability of the Energy Complex to deliver Power Processing Services at any given time. "Actual Steam Processing Capacity" means the actual capability of the Energy Complex to provide Steam Processing Services at any given time. "ADEM" means the Alabama Department of Environmental Management. "Adverse Financial Effect" means the extent to which Mobile Energy is adversely financially affected as the direct result of a Change Event, measured as any Change in Net Costs, provided that an "Adverse Financial Effect" shall in no event include or be calculated to include any amount which is intended to provide Mobile Energy with any specified or benchmark rate of return, debt coverage ratio or other similar ratio or amount which is based upon an anticipated or expected economic benefit to be derived from, or the anticipated or expected financial performance of, the operation of the Energy Complex. "Affiliate" of a specified Person means any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the specified Person. As used in this definition, "control", "controlled by" and "under common control with" shall mean possession, directly or indirectly, or power to direct or cause the direction of management or policies of such Person (whether through ownership of securities or other partnership or ownership interests, by contract or otherwise), provided that in any event, any Person which owns directly, indirectly or beneficially ten percent (10%) or more of the securities having voting power for the election of directors or other governing body of a corporation or ten percent (10%) or more of the partnership interests or other ownership interests of any other Person will be deemed to control such Person. Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate of a Person solely by reason of his or her being a director, committee member, officer or employee of such Person. "Aggregate Power Processing Demand" means, collectively, the Pulp Mill Power Processing Demand, the Tissue Mill Power Processing Demand and the Paper Mill Power Processing Demand. ii "Aggregate Power Processing Requirement" means the aggregate requirement of the Mills for Power Processing Services at any given time. "Aggregate Steam Processing Demand" means, collectively, the Pulp Mill Steam Processing Demand, the Tissue Mill Steam Processing Demand and the Paper Mill Steam Processing Demand. "Aggregate Steam Processing Requirement" means the aggregate requirement of the Mills for Steam Processing Services at any given time. "Alabama Power" means Alabama Power Company. "Alabama PSC" means the Alabama Public Service Commission. "Asset Lease Agreements" means the series of lease or sublease and assignment agreements by which Scott conveyed to Mobile Energy (as the assignee of Holdings) those part of the facilities, structures and equipment comprising the Energy Complex to which title is held by the IDB and which are leased by the IDB to Scott/Kimberly-Clark or are currently subject to installment sale agreements between the IDB and Scott/Kimberly-Clark. "Asset Purchase Agreement" means the Asset Purchase Agreement dated as of December 12, 1994 between Scott and Mobile Energy (as the assignee of Holdings). "Back-Up Power" means power purchased by the Mill Owners from Alabama Power that is treated by Alabama Power as back-up power under the 1986 Alabama Power Contract as such contract was applied and administered by Scott and Alabama Power prior to the Acquisition Closing Date. "Bankruptcy Code" means the Federal Bankruptcy Code of 1978, as amended. "Bankruptcy Event" means, with respect to any person, (i) such Person's general inability, or its admission of its inability, to pay its debts as such debts become due, (ii) the application by such Person for or its consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (iii) the commencement by such Person of a voluntary case under the Bankruptcy Code, (iv) the making by such Person of a general assignment for the benefit of its creditors, (v) the filing of a petition by such Person seeking to take advantage as a debtor of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, winding-up or readjustment of debts, (vi) the failure by such Person to controvert in a timely and appropriate manner, or its acquiescence in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, (vii) the taking of any corporate or other action by such Person for the purpose of effecting any of the foregoing, (viii) the commencement of a proceeding or case, without the application or consent of such Person, in any court seeking (A) such Person's reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (B) the appointment of a trustee, receiver, custodian, liquidator, examiner or the like of such Person or all or any substantial part of its property or (C) similar relief in respect of such iii Person under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect for a period of 60 or more days, or (ix) an order for relief against such Person shall be entered in an involuntary case under the Bankruptcy Code. "Bond Transfer Instrument" means the agreement of the Scott Subsidiary selling, assigning and transferring the 1994 Bonds to Mobile Energy. "Change Event" means a Process Model Adjustment Event or a Financial Adjustment Event, individually or collectively, as the context may require. "Change in Net Costs" means, as the direct result of a Change Event, any capital expenditure incurred by Mobile Energy or any change in Mobile Energy's costs required to operate and maintain the Energy Complex (which shall be deemed to include any energy taxes payable due to a Financial Adjustment Event pursuant to clause (A) of the definition thereof), net of any offsetting financial benefit that will be recovered by Mobile Energy through (i) an automatic adjustment (including any change through indices or escalators) applicable to the Process Model, Processing Charges, Demand Charges or any other charges payable by the Mill Owners under their respective Energy Services Agreements, the Master Operating Agreement or any other Project Agreement, (ii) reduced operating costs or other monetary benefit derived by Mobile Energy in connection with such Change Event or (iii) insurance proceeds received in connection with such Change Event. "Clean Air Act" means the Clean Air Act Amendments of 1990. "Collateral Agent" means the collateral agent for the Senior Secured Parties under the Intercreditor Agreement, which is Bankers Trust (Delaware). "Confidentiality Agreement" means the Confidentiality Agreement dated December 12, 1994 among Southern Electric, Mobile Energy, Scott/Kimberly-Clark, and S.D. Warren. "Consent to Assignment" means any one or more (as the context may require) of the consents to assignment executed by certain of the parties to certain of the Project Contracts in connection with the collateral assignment of Mobile Energy's rights under those contracts to the Collateral Agent. "Conversion Demand" means 42.7 million pounds of virgin dry black liquor solids per week, as such amount may be revised from time to time pursuant to the Master Operating Agreement. "Conversion Demand Charge" means the Demand Charges for Liquor Processing Services for a given period of time. "Current Liquor Processing Nomination" means the maximum amount of black liquor to be delivered to Mobile Energy pursuant to the Pulp Mill Energy Services Agreement during any week. iv "Current Paper Mill Power Processing Nomination" means the maximum amount of power processing required of Mobile Energy pursuant to the Paper Mill Energy Services Agreement during any fifteen (15) minute period during any day, which amount taken together with the Current Pulp Mill Power Processing Nomination and the Current Tissue Mill Power Processing Nomination shall not exceed the Aggregate Power Processing Demand, as revised from time to time pursuant to the Master Operating Agreement. "Current Paper Mill Steam Processing Nomination" means the maximum amount of steam to be processed by Mobile Energy pursuant to the Paper Mill Energy Services Agreement during any one (1) hour period during any day, which amount taken together with the Current Pulp Mill Steam Processing Nomination and the Current Tissue Mill Steam Processing Nomination shall not exceed the Aggregate Steam Processing Demand, as such nomination may be revised from time to time pursuant to the Master Operating Agreement. "Current Power Processing Nomination" means, collectively, the Current Pulp Mill Power Processing Nomination, the Current Tissue Mill Power Processing Nomination, and the Current Paper Mill Power Processing Nomination. "Current Pulp Mill Power Processing Nomination" means the maximum amount of power processing required of Mobile Energy pursuant to the Pulp Mill Energy Services Agreement during any fifteen (15) minute period during any day, which amount taken together with the Current Paper Mill Power Processing Nomination and the Current Tissue Mill Power Processing Nomination shall not exceed the Aggregate Power Processing Demand, as revised from time to time pursuant to the Master Operating Agreement. "Current Pulp Mill Steam Processing Nomination" means the maximum amount of steam to be processed by Mobile Energy pursuant to the Pulp Mill Energy Services Agreement during any one (1) hour period during any day, which amount taken together with the Current Paper Mill Steam Processing Nomination and the Current Tissue Mill Steam Processing Nomination shall not exceed the Aggregate Steam Processing Demand, as such nomination may be revised from time to time pursuant to the Master Operating Agreement. "Current Steam Processing Nomination" means, collectively, the Current Pulp Mill Steam Processing Nomination, the Current Tissue Mill Steam Processing Nomination and the Current Paper Mill Steam Processing Nomination. "Current Tissue Mill Power Processing Nomination" means the maximum amount of power processing required of Mobile Energy pursuant to the Tissue Mill Energy Services Agreement during any fifteen (15) minute period during any day, which amount taken together with the Current Paper Mill Power Processing Nomination and the Current Pulp Mill Power Processing Nomination shall not exceed the Aggregate Power Processing Demand, as such nomination may be revised from time to time pursuant to the Master Operating Agreement. v "Current Tissue Mill Steam Processing Nomination" means the maximum amount of steam to be processed by Mobile Energy pursuant to the Tissue Mill Energy Services Agreement during any one (1) hour period during any day, which amount taken together with the Current Pulp Mill Steam Processing Nomination and the Current Paper Mill Steam Processing Nomination shall not exceed the Aggregate Steam Processing Demand, as such nomination may be revised from time to time pursuant to the Master Operating Agreement. "Environmental Guaranty" means a guaranty provided by Southern of certain of Mobile Energy's obligations under the Mill Environmental Indemnity Agreements. "EPA" means the Environmental Protection Agency. "FASB" means the Financial Accounting Standards Board. "FERC" means the Federal Energy Regulatory Commission. "Financing Documents" means all agreements, documents and instruments evidencing and/or securing the Financing Liabilities. "Financing Liabilities" means all indebtedness, liabilities and obligations of Mobile Energy or Holdings (including, but not limited to, principal, interest, fees, reimbursement obligations, penalties, indemnities and legal expenses, whether due to acceleration or otherwise) to the Senior Secured Parties (of whatsoever nature and howsoever evidenced) under or pursuant to the Indenture, the First Mortgage Bonds and all other Indenture Securities, the IDB Lease Agreement, the Tax-Exempt Indenture, the Working Capital Facility and any evidence of indebtedness thereunder entered into, the Security Documents and the Tax-Exempt Security Documents, to the extent arising on or prior to the maturity of the Senior Securities, in each case, direct or indirect, primary or secondary, fixed or contingent, now or hereafter arising out of or relating to any such agreement. "First Mortgage Bonds" means $255,210,000 principal amount of 8.665% First Mortgage Bonds due 2017 issued by Mobile Energy and unconditionally guaranteed by Holdings. "Governmental Approvals" means those authorizations, consents, approvals, waivers, exemptions, variances, registrations, certifications, permissions, permits, and licenses with any Governmental Authority required for the ownership and operation of the Energy Complex and the performance of a person's obligations under the Project Documents. "Governmental Authority" means any federal, state, county, municipal, foreign, international, regional or other governmental or regulatory authority, agency, department, board, body, instrumentality, commission, arbiter or court. vi "Governmental Rule" means any law, rule, regulation, ordinance, order, code, permit, interpretation, judgment, decree, directive, guideline, policy or similar decision of any governmental authority having the effect and force of law. "Holdings" means Mobile Energy Services Holdings, Inc. "Indenture" means the Trust Indenture dated as of August 1, 1995 among Mobile Energy, Holdings, and First Union National Bank of Georgia, as trustee. "Indenture Securities" means the First Mortgage Bonds and any additional Senior Debt issued by Mobile Energy pursuant to the Indenture in the future. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among Bankers Trust (Delaware) as the collateral agent, Mobile Energy, Holdings, First Union National Bank of Georgia as trustee under the Indenture, First Union National Bank of Georgia as trustee under the Tax-Exempt Indenture, the IDB, and Banque Paribas as the Working Capital Facility Provider. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended. "Liquidated Damages" means Liquor Processing Liquidated Damages, Steam Processing Liquidated Damages or Power Processing Liquidated Damages, individually or collectively, as the context may require. "Long Term Maintenance Power" means power purchased by the Mill Owners from Alabama Power that is treated by Alabama Power as long term maintenance power under the 1983 Alabama Power Contract as such contract was applied and administered by Scott and Alabama Power prior to the Acquisition Closing Date. "Maintenance Expenditures" means all costs and expenses of operating and maintaining the Energy Complex and, when Mobile Energy is exercising the Mobile Energy Step-In Rights, the Pulp Mill Step-In Equipment, other than (i) fuel costs and expenses, (ii) labor and employee expenses, including fringe benefits and labor relations expense, (iii) payments for insurance premiums and like insurance-related expenses, (iv) costs and expenses of consumable items such as process or cleaning chemicals and lubricants, (v) equipment rental, small tools and vehicle maintenance expenses, (vi) costs and expenses associated with legal, accounting and other office and administrative functions, (vii) permitting fees, (viii) costs and expenses of safety supplies, office supplies and other office expenses, (ix) property taxes and payments made in lieu of taxes, (x) computer maintenance expenses, (xi) any amounts payable for services rendered under the Common Services Agreement, (xii) ash disposal costs, (xiii) liquidated damages payable to the Mill Owners under the Master Operating Agreement, (xiv) amounts payable to the Mill Owners for reimbursement of costs incurred in connection with the exercise of Mill Owner Step-In Rights, (xv) any amounts required to be rebated to the United States government pursuant to Section 148 of the Internal Revenue Code in connection with any of the Tax-Exempt Indenture Securities and (xvi) payments to the IDB, including vii payments required to be made by Mobile Energy with respect to the 1994 Bonds, in each case to the extent the foregoing costs or expenses are not customarily treated as capital expenditures. "Maintenance Power" means Long Term Maintenance Power and Short Term Maintenance Power, collectively. "Mill Material Adverse Effect" means, with respect to any Mill Owner, a material adverse effect on (i) the operation, maintenance or use of such Mill Owner's Mill or such Mill Owner's portion of the Real Property, (ii) the use by such Mill Owner or its representatives of any easement granted to such Mill Owner by Mobile Energy pursuant to the Easement Deeds or (iii) the ability of Mobile Energy or its Affiliates to observe and perform their respective obligations under any of the Operative Documents. "Mill Owner Consents to Assignment" means the Consents to Assignment executed by the Mill Owners with respect to the principal Project Contracts. "Minimum Demand" means the Minimum Conversion Demand, the Minimum Power Processing Demand and the Minimum Steam Processing Demand, individually or collectively, as the context may require. "Minimum Economic Demand" refers to the definitions of "Minimum Economic Conversion Demand," "Minimum Economic Power Processing Demand" and "Minimum Economic Steam Processing Demand." "Minimum Economic Conversion Demand" means seventy-seven percent (77%) of the Maximum Liquor Processing Capacity in effect at the Acquisition Closing Date. "Minimum Economic Power Processing Demand" means seventy-seven percent (77%) of the Maximum Power Processing Capacity in effect at the Acquisition Closing Date. "Minimum Economic Steam Processing Demand" means seventy-seven percent (77%) of the Maximum Steam Processing Capacity in effect at the Acquisition Closing Date. "Mobile Energy" means Mobile Energy Services Company, L.L.C. "Mobile Energy Material Adverse Effect" means a material adverse effect on (i) the facilities, structure and equipment comprising the Energy Complex; (ii) the operation, maintenance or use of the Energy Complex or the Leased Premises; (iii) the use by Mobile Energy or its representatives of any easement granted for the benefit of Lots 7 and 9 pursuant to the Easement Deeds; or (iv) the ability of Scott/Kimberly-Clark or any Mill Owner to observe and perform its obligations under any of the Operative Documents. "1986 Alabama Power Contract" means the Contract for Electric Power dated as of April 14, 1986 between Scott/Kimberly-Clark and Alabama Power. viii "1983 Alabama Power Contract" means the Agreement dated as of July 20, 1983 between Scott/Kimberly-Clark and Alabama Power. "Nondisturbance Agreement" means the Estoppel and Nondisturbance Agreement dated as of December 12, 1994 between the Scott Subsidiary and Mobile Energy. "NPDES" means the National Pollutant Discharge Elimination System. "Operation and Maintenance Costs" means all costs and expenses of operating and maintaining the Energy Complex and, when Mobile Energy is exercising the Mobile Energy's Step-In Rights, the Pulp Mill Step-In Equipment, including and together with, without limitation, Maintenance Expenditures and any costs and expenses specified in clauses (i) through (xvi) of the definition of Maintenance Expenditures (other than rent payments under the IDB Lease Agreement and payments of principal, premium and interest on the 1994 Bonds). "Operative Documents" means each of the Project Agreements, the Asset Purchase Agreement and the bill of sale and assignment and assumption agreement relating thereto, the Asset Lease Agreements, the Bond Transfer Instrument, the Employee Transition Agreement and the guaranty of Southern of Mobile Energy's obligations under the Lease Assignment and Assumption Agreement. "Outage" means a Scheduled Outage, a Major Maintenance Outage or an Unscheduled Outage, as the context may require. "Paper Mill Energy Services Agreement" means the Paper Mill Energy Services Agreement dated as of December 12, 1994 between S.D. Warren Company, in its capacity as Paper Mill Owner, and Mobile Energy, as amended. "Paper Mill Power Processing Demand" means 22,500 kilowatts, as such amount may be adjusted from time to time pursuant to the Master Operating Agreement. "Paper Mill Steam Processing Demand" means 420 million british thermal units per hour, as such amount may be adjusted from time to time pursuant to the Master Operating Agreement. "Permitted Energy Complex Outage" has the meaning given in the Master Operating Agreement. "Person" means any individual, sole proprietorship, corporation, partnership, limited liability company, joint venture, trust, unincorporated association, Governmental Authority or any other entity. "Power Processing Demand" means the Pulp Mill Power Processing Demand, the Paper Mill Power Processing Demand and the Tissue Mill Power Processing Demand. ix "Process Water Plant" means the plant owned by the Pulp Mill Owner which supplies water to the Energy Complex and the Mills. "Project Agreements" means the Energy Services Agreements, the Master Operating Agreement, the Direct Lease, the Supplementary Lease, the O&M Agreement, the Confidentiality Agreement, the Common Services Agreement, the Water Agreement, the Ash Agreement, the Pulp Supply Agreement, the Scott/Kimberly-Clark Environmental Indemnity Agreement, the Mill Environmental Indemnity Agreements, the Transition Agreement and the Easement Deeds, provided, that each Project Agreement having a stated term (which may include a stated renewal term) that has expired in full at the end of such stated term (or such stated renewal term) and each Project Agreement not having a stated term that has been fully performed in accordance with its terms (including, without limitation, through the final payment of all amounts due or to become due thereunder) shall cease to be a Project Agreement for all purposes with respect to the Energy Services Agreements and the Master Operating Agreement. "Project Contracts" means, collectively, the Energy Services Agreements, the Master Operating Agreement, the Direct Lease, the Supplementary Lease, the O&M Agreement, the Common Services Agreement, the Water Agreement, the Ash Agreement, the Scott/Kimberly-Clark Environmental Indemnity Agreement, the Mill Environmental Indemnity Agreements, the Transition Agreement, the Employee Transition Agreement, the SCS Agreement, the Easement Deeds, the Asset Purchase Agreement, the Coal Supply Agreement dated as of May 1, 1995 between Mobile Energy and E.J. Hodder & Associates, the Lease Assignment and Assumption Agreement, the Facilities Lease and Agreement and the related Sublease and Assignment Agreement, the Installment Sale Agreements and the related Lease and Assignment Agreements, the Recovery Boiler Lease and Agreement and the related 1994 Bond Agreement, the Nondisturbance Agreement, the Recognition Agreements, the Mill Owner Maintenance Reserve Account Agreement, the Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement dated July 14, 1995 between Holdings and Mobile Energy and any other contract entered into by Mobile Energy or Holdings for the provision of fuel to the Energy Complex (in each case, as the same may be amended, supplemented, modified, replaced or assigned in accordance with the Indenture). "Project Documents" means, collectively, the Financing Documents and the Project Contracts. "PUHCA" means the Public Utility Holding Company Act of 1935, as amended. "Pulp Mill Energy Services Agreement" means the Pulp Mill Energy Services Agreement, dated as of December 12, 1994 between Scott/Kimberly-Clark, in its capacity as Pulp Mill Owner, and Mobile Energy. "Pulp Mill Power Processing Demand" means 32,000 kilowatts, as such amount may be adjusted from time to time pursuant to the Master Operating Agreement. "Pulp Mill Steam Processing Demand" means 500 million british thermal units per hour, as such amount may be adjusted from time to time pursuant to the Master Operating Agreement. x "PURPA" means the Public Utility Regulatory Policies Act of 1978, as amended. "Qualifying Facility" means a qualifying facility under PURPA. "Recognition Agreements" means the Mixed-Use Bonds Recognition Agreement and the Tax-Exempt Bonds Recognition Agreement. "Scheduled Outage" means a scheduled Energy Complex Outage or a Scheduled Mill Outage, as the context may require. "Scott" means Scott Paper Company. "SCS" means Southern Company Services, Inc. "S.D. Warren " means S.D. Warren Company. "SEC" means the Securities and Exchange Commission. "Security Documents" means, collectively, (i) the Mortgage, (ii) the Security Agreement, (iii) the Indenture, (iv) the Intercreditor Agreement, (v) the Tax-Exempt Indenture, (vi) the IDB Lease Agreement, (vii) the Consents to Assignment and (viii) each Uniform Commercial Code financing statement in connection with the foregoing. "Senior Debt" means all Senior Securities, together with additional debt under any Working Capital Facility. "Senior Secured Parties" shall mean collectively the trustee under the Indenture (on behalf of holders of Indenture Securities), the trustee under the Tax-Exempt Indenture (on behalf of holders of Tax-Exempt Indenture Securities) and the Working Capital Facility Provider. "Senior Securities" shall mean the Indenture Securities and the Tax-Exempt Indenture Securities collectively. "Services" means any one or more (as the context may require) of Liquor Processing Services and the Shared Services. "Shared Services" means Steam Processing Services, Power Processing Services, process water, and compressed air. "Short Term Maintenance Power" means the power purchased by the Mill Owners from Alabama Power that is treated by Alabama Power as short term maintenance power under the 1983 Alabama Power Contract as such contract was applied and administered by Scott and Alabama Power prior to the Acquisition Closing Date. xi "Shortfall Hour" means, for a Liquor Processing Shortfall Event, a Steam Processing Shortfall Event or a Power Processing Shortfall Event, the duration of such shortfall event rounded up to the next whole hour. "Site" means the Real Property, the Mills, and the Energy Complex. "Southern" means The Southern Company. "Southern Electric" means Southern Electric International, Inc. "Steam Processing Demand" means the Pulp Mill Steam Processing Demand, the Tissue Mill Steam Processing Demand and the Paper Mill Steam Processing Demand. "Step-In Rights" means Mill Owner Step-In Rights or Mobile Energy Step-In Rights, as the context may require. "Supplemental Power" means power purchased by the Mill Owners from Alabama Power that is treated by Alabama Power as supplemental power under the 1986 Alabama Power Contract as such contract was applied and administered by Scott and Alabama Power prior to the Acquisition Closing Date. "Tax-Exempt Bonds" means $85,000,000 principal amount of 6.95% Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project) Series 1995 due 2020 issued by the IDB. "Tax-Exempt Indenture Securities" means the Tax-Exempt Bonds and any additional Senior Debt issued pursuant to the Tax-Exempt Indenture. "Tax-Exempt Security Documents" means, collectively, (i) the Mortgage, (ii) the Security Agreement, (iii) the Tax-Exempt Indenture, (iv) the IDB Lease Agreement, (v) the Intercreditor Agreement, (vi) the Consents to Assignment and (viii) each Uniform Commercial Code financing statement in connection with the foregoing. "Tissue Mill Energy Services Agreement" means the Tissue Mill Energy Services Agreement dated as of December 12, 1994 between Scott/Kimberly-Scott, in its capacity as Tissue Mill Owner, and Mobile Energy. "Tissue Mill Power Processing Demand" means 39,500 kilowatts, as such amount may be adjusted from time to time pursuant to the Master Operating Agreement. "Tissue Mill Steam Processing Demand" means 280 million british thermal units per hour, as such amount may be adjusted from time to time pursuant to the Master Operating Agreement. xii "Unit Trip" means any sudden and immediate removal from service or sudden and immediate interruption of service not caused by the Mills of any boiler, turbine-generator or high voltage distribution component such that (I) in the case of the boiler, either fuel input shuts off, or super heater steam flows stop, (ii) in the case of the turbine generator, either the generator circuit breaker opens, or the main steam stop valve closes, or (iii) in the case of the high voltage distribution system, the 13.8kv power supply to the Mills is interrupted, provided that prior to the interruption of service of any boiler, turbine generator or high voltage distribution component, the applicable unit shall have been in service contributing to the Liquor Processing Services, Steam Processing Services or Power Processing Services provided to the Mills for not less than 12 hours. "Uniform Commercial Code" means the Uniform Commercial Code of the jurisdiction the law of which governs the document in which such term is used. "Unscheduled Mill Outage" means any Outage with respect to a Mill which is not a Scheduled Mill Outage, other than any Outages caused by a Force Majeure Event with respect to such Mill or its respective owner. "Unscheduled Outage" means an Unscheduled Energy Complex Outage or an Unscheduled Mill Outage, as the context may require. "Waste Water Treatment Plant" means the treatment plant owned by the Pulp Mill Owner and used to treat waste water from the Energy Complex and the Mills. xiii PART I Item 1. BUSINESS General Holdings was incorporated in the State of Alabama on August 25, 1994 under the name Mobile Energy Services Company, Inc. Its name was changed to Mobile Energy Services Holdings, Inc. on May 17, 1995. Mobile Energy was formed as a limited liability company in the state of Alabama on July 13, 1995. The mailing address of the principal executive offices of Mobile Energy is 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338-4780, and its phone number is (770)379-7781. The mailing address of the principal executive offices of Holdings is 900 Ashwood Parkway, Suite 450, Atlanta, Georgia 30338-4780, and its phone number is (770)379-7730. Mobile Energy and Holdings were formed to acquire, own and manage the energy and black liquor recovery complex (the "Energy Complex") located at an integrated pulp, paper and tissue manufacturing facility in Mobile, Alabama (the "Mobile Facility"). Holdings acquired the Energy Complex (the "Acquisition") and commenced operations on December 16, 1994 (the "Acquisition Closing Date"). Holdings transferred to Mobile Energy the Energy Complex, the Project Contracts and related assets, permits and agreements on July 14, 1995. Mobile Energy's sole business consists exclusively of the ownership and management of the Energy Complex. Holdings, which owns 99% of the equity interests in Mobile Energy, does not conduct any independent operations. Southern Electric owns the remaining equity interest in Mobile Energy. Both Holdings and Southern Electric are wholly owned subsidiaries of Southern. The Mobile Facility is a physically integrated complex that produces tissue and paper products from timber that is processed into bleached and unbleached pulp. The Mobile Facility is comprised of the Energy Complex, a tissue mill (the "Tissue Mill"), a pulp mill (the "Pulp Mill"), and a paper mill (the "Paper Mill," and together with the Tissue Mill and the Pulp Mill, the "Mills"). The Pulp Mill receives wood primarily in long form, both from truck and barge deliveries. The "longwood" is cut into ten-foot lengths, cleaned, debarked and chipped. Chips are then fed into digesters along with an appropriate amount of white liquor (which is produced from green liquor). Steam is then added and the chips are "cooked" in order to separate wood fiber (pulp) from lignin (the binding agent in wood). Spent liquor (weak black liquor) and small debris is then removed from the resultant pulp stock. The pulp is then bleached and fed to paper machines as needed for the production of paper. The weak black liquor is delivered to the Energy Complex for processing. The Energy Complex processes almost 100% of the Pulp Mill's weak black liquor (which contains, among other things, black liquor solids) into "green liquor" (a chemical solution that is essential to the production of pulp because it is reused in the production of white liquor by the Pulp Mill) (this processing, the "Liquor Processing Services"). Approximately 85% of the fuel requirements of the Energy Complex currently are satisfied with by-products generated by the operations of the Pulp Mill or provided by the Pulp Mill. These by-products include weak black liquor, biomass (waste wood) and sludge, each of which is provided to Mobile Energy by the Pulp Mill. The Energy Complex processes various fuels and water provided by the Mills, together with other fuel obtained by Mobile Energy, into steam (the "Steam Processing Services") and electricity (the "Power Processing Services"). The Mills currently obtain all of their aggregate steam processing needs and 98% of their aggregate power processing needs from the Energy Complex. The Pulp Mill, in turn, disposes of substantially all of the by-products of the Energy Complex's operations, including boiler ash, and provides process water and waste water treatment services to the Energy Complex and each of the other Mills. The Mobile Facility is one of the largest pulp, paper and tissue production complexes in North America. At the time of the Acquisition, Scott owned the Tissue and Pulp Mills. Subsequent to Holdings' acquisition of the Energy Complex, Scott merged with a wholly owned subsidiary of Kimberly-Clark Corporation ("Kimberly-Clark") (the resulting entity "Scott/Kimberly-Clark"). This merger was completed in December 1995. Prior to the merger, the Tissue Mill was Scott's largest tissue mill in North America and produced approximately one-third of all tissue products manufactured by Scott in the United States in 1994. The Tissue Mill consists of five paper machines with a capacity to manufacture approximately 310,000 tons of tissue per year, as well as finishing I-1 operations and distribution operations. Prior to the merger, the Pulp Mill was Scott's largest pulp mill in North America and generated almost 60% of all pulp produced by Scott from virgin fiber in North America in 1994. The Tissue Mill and the Paper Mill currently rely on the Pulp Mill for almost all of their supply of pulp. The Paper Mill is owned by S.D. Warren. At the time of the Acquisition, Scott owned S.D. Warren. On December 21, 1994 Scott sold S.D. Warren to a company indirectly owned by Sappi Limited, DLJ Merchant Banking Partners L.P. and UBS Capital Corporation. S.D. Warren's obligations under the Project Agreements were not affected by this sale. S.D. Warren produces uncoated business, commercial offset printing (including heavyweight board and colored offset products) and coated specialty and technical papers at the Paper Mill. The Paper Mill produces all of S.D. Warren's uncoated free sheet paper and certain coated specialty and technical papers. The Paper Mill consists of three paper machines with a capacity to manufacture approximately 270,000 tons of paper per year, as well as finishing operations and distribution operations. Power, Steam and Liquor Processing Sales Mobile Energy is a party to various long-term contracts, including (A) Energy Services Agreements (including any amendments thereto, the "Energy Services Agreements") with (1) Scott/Kimberly-Clark acting in its capacity as the owner of the Tissue Mill (Scott/Kimberly-Clark in such capacity, together with successors and permitted assigns, the "Tissue Mill Owner"), (2) Scott/Kimberly-Clark acting in its capacity as the owner of the Pulp Mill (Scott/Kimberly-Clark in such capacity, together with successors and permitted assigns, the "Pulp Mill Owner"), and (3) S.D. Warren acting in its capacity as the owner of the Paper Mill (S.D. Warren in such capacity, together with successors and permitted assigns, the "Paper Mill Owner," and together with the Tissue Mill Owner and the Pulp Mill Owner, the "Mill Owners") and (B) a Master Operating Agreement (including any amendments thereto or restatements thereof, the "Master Operating Agreement") with Scott/Kimberly-Clark, the Tissue Mill Owner, the Pulp Mill Owner and the Paper Mill Owner. Pursuant to the Energy Services Agreements, Mobile Energy provides Steam Processing Services and Power Processing Services to the Mills and Liquor Processing Services to the Pulp Mill. The provision of Power Processing Services, Steam Processing Services and Liquor Processing Services (collectively, the "Processing Services") by Mobile Energy under the Energy Services Agreements is governed by the Master Operating Agreement, which, among other things, coordinates operations at the Mobile Facility. Subject to certain limited exceptions described herein, the Energy Services Agreements and the Master Operating Agreement provide that Mobile Energy will be the exclusive supplier of the Mills' requirements for the Processing Services up to the stipulated capacity (such capacity, as further defined in the Master Operating Agreement with respect to particular processing services, the "Maximum Capacity") of the Energy Complex. Pursuant to the Energy Services Agreements and the Master Operating Agreement, Mobile Energy is obligated to dedicate to each Mill an agreed upon portion of the Energy Complex's capacity to provide Processing Services (the quantity of such capacity being referred to as a Mill's "Demand" for the particular Processing Service). Concurrently with the Acquisition, the Mill Owners selected initial Demand levels under the Energy Services Agreements that, in the aggregate, equal the current Maximum Capacity of the Energy Complex to provide such processing services. Mobile Energy's revenues are comprised almost entirely of charges for Processing Services provided to the Mills. To compensate Mobile Energy for dedicating a portion of the Energy Complex's capacity to a Mill, each Mill Owner is obligated to pay fixed capacity charges (the "Demand Charges") based upon formulas set forth in the Master Operating Agreement to Mobile Energy based upon the level of such Mill Owner's Demand for each Processing Service. The aggregate Demand Charges payable by the Mills were designed generally to cover, among other things, Mobile Energy's projected costs that are in the nature of fixed costs (including the payment of debt service) assuming that certain operating performance standards are satisfied. There can be no assurance, however, that such operating performance standards will be satisfied or that the Demand Charges will at all times cover Mobile Energy's costs that are in the nature of fixed costs, including the payment of principal of and interest on its outstanding indebtedness. Under the Energy Services Agreements, Demand Charges are due and payable on a monthly basis regardless of whether a Mill actually utilizes any or all of the processing services corresponding to its dedicated demand. Demand Charges are subject to automatic reduction ("Demand Charge Reductions") due to a shortfall in the provision of Processing Services by I-2 Mobile Energy that is not excused by the Project Agreements. In addition, such an unexcused shortfall would require Mobile Energy to pay the Mill Owners liquidated damages in an amount up to $10,000 per day (subject to escalation from the Acquisition Closing Date) for each day on which there is such an unexcused shortfall. The Master Operating Agreement provides that (except as described below) the sum of the three Mills' Demand Levels (and, therefore, the aggregate Demand Charges payable by the Mills) for any Processing Service (the "Aggregate Demand" for that Processing Service) is subject to reduction (and upon the satisfaction of certain conditions) only in December 1999, and on each second anniversary thereafter (each such date, a "Demand Anniversary Date," and the period from one Demand Anniversary Date until the next succeeding Demand Anniversary Date, a "Demand Period"). If, during any Demand Period, a Mill's peak usage of a particular Processing Service is less than such Mill's then applicable Demand level for such Processing Service (and, in certain circumstances, is less than a specific usage level set forth in the Master Operating Agreement), then, on the Demand Anniversary Date on which such Demand Period concludes, the Mill is permitted to select a lower Demand level (and, hence, incur a lower Demand Charge) for the ensuing Demand Period. Pursuant to the Master Operating Agreement, such lower Demand level cannot be less than such Mill's peak usage (as determined pursuant to the Master Operating Agreement) of the particular Processing Service during the just concluded Demand Period. Mobile Energy believes that since the Acquisition Closing Date, the Mills have, from time to time, required and utilized, in the aggregate, Steam Processing Services, and the Pulp Mill has required and utilized Liquor Processing Services, in amounts such that the Aggregate Demand levels for Steam Processing Services and Liquor Processing Services will not, pursuant to the terms of the Master Operating Agreement, be permitted to be decreased at the conclusion of the first Demand Period in December 1999. Therefore, pursuant to the Master Operating Agreement, unless there is a Mill Closure (as hereinafter defined) or certain casualty or force majeure events occur, Mobile Energy believes that the aggregate Demand Charges payable by the Mill Owners for Steam Processing Services and Liquor Processing Services are not subject to reduction by the Mill Owners until at least the conclusion of the second Demand Period in December 2001. In February 1996 Mobile Energy completed implementation of a new metering system that will allow it to determine whether the Aggregate Demand level with respect to Power Processing Services also will not, pursuant to the terms of the Master Operating Agreement, be permitted to be decreased at the conclusion of the first Demand Period in December 1999. In the period since that metering system became fully operational, the Tissue Mill and the Paper Mill have had peak demands for Power Processing Services that would prevent them from decreasing their Demands for Power Processing Services at the conclusion of the first Demand Period in December 1999, but the Pulp Mill has not. In any event, pursuant to the Master Operating Agreement, unless there is a Mill Closure or certain casualty or force majeure events occur, the aggregate Demand Charges payable by the Mill Owners for Power Processing Services are not subject to reduction by the Mill Owners until at least the end of the first Demand Period in December 1999. However, there can be no assurance that a Mill Closure, casualty or force majeure event will not occur, or that such aggregate Demand Charges will remain in effect after December 1999 or 2001, as applicable. Each Mill Owner has the right to terminate its Energy Services Agreement (i) during the pendency of a Mobile Energy Event of Default (as hereinafter defined) or (ii) if (a) the Mill Owner makes a public announcement that it will close its Mill for a period of at least one year or that it will reduce production of pulp, tissue or paper (as applicable) at its Mill (permanently or for a period of at least two years ) to less than 10% of such Mill's 1994 production levels, or (b) there occurs a two-year period during which production at such Mill is less than 10% of 1994 production levels (for any reason other than a Force Majeure Event (as hereinafter defined)) (clauses (a) and (b) each constituting a "Mill Closure"). If a Mill Owner terminates its Energy Services Agreement due to a Mobile Energy Event of Default, such Mill Owner will stop accruing Demand Charges and Processing Charges (as hereinafter defined) as of the date of the termination. If a Mill Owner terminates its Energy Services Agreement due to a Mill Closure, on the other hand, such Mill Owner is required by the Master Operating Agreement to pay Demand Charges for a period equal to the greater of (i) one year following the date upon which the Mill Owner gives notice of termination to Mobile Energy or (ii) until the end of the then current Demand Period. The first Demand Period ends in December 1999, and each subsequent Demand Period ends on the second anniversary of the end of the preceding Demand Period. I-3 Thus, a Mill Closure or the occurrence of certain casualty or force majeure events at any time during the terms of the Energy Services Agreements would, after the satisfaction of certain conditions and the expiration of the various time periods set forth in the Master Operating Agreement, relieve the affected Mill Owner from its obligations to pay Demand Charges and, therefore, could have a materially adverse impact on Mobile Energy. For example, if a Mill Closure occurs before December 1999, the aggregate Demand Charges payable by the Mill Owners will be subject to reduction commencing as early as December 1999. In addition, if certain casualty or force majeure events occur with respect to any Mill or the Energy Complex before December 1999, the aggregate Demand Charges payable by the Mill Owners may be subject to reduction prior to such date, in accordance with the casualty and force majeure provisions of the Master Operating Agreement and Energy Services Agreements. Subject to certain restrictions set forth in the Master Operating Agreement, the Mill Owners are entitled to reallocate Demand levels and, correspondingly, Demand Charges, among the various Mills once each year. However, such reallocations are not permitted to result in a decrease in the Aggregate Demand levels or the aggregate Demand Charges then in effect. As indicated above, concurrently with the acquisition of the Energy Complex by Holdings, the Mill Owners selected initial Demand levels for each of the Processing Services, which Demand levels currently remain in effect. The following table sets forth the approximate percentage of Aggregate Demand by Mill Owners for each of the Processing Services as of December 31, 1995: Power Steam Liquor Processing Processing Processing Services Services Services Pulp Mill Owner................... 34 42% 100% Tissue Mill Owner................. 42 23 N/A Paper mill Owner.................. 24 35 N/A --- --- ---- 100% 100% 100% The foregoing allocations of Aggregate Demand are subject to reallocation among the Mill Owners as early as December 1996 and at various times thereafter. The Energy Services Agreements also require each Mill Owner to pay usage charges (the "Processing Charges") based upon formulas set forth in the Master Operating Agreement which vary from month to month in accordance with the amount of Processing Services required by, and provided to, such Mill Owner and Mobile Energy's efficiency with respect to fuel usage. The Processing Charges were designed generally to cover the balance of Mobile Energy's costs that are not projected to be covered by Demand Charges, including variable costs such as fuel related expenses. There can be no assurance, however, that the Processing Charges will at all times cover such costs, including variable costs such as fuel related expenses. Mobile Energy and the Mill Owners are currently developing a computer model (the "Process Model") in accordance with certain principles set forth in the Master Operating Agreement. Upon the completion of the development and testing of the Process Model, the Process Model will be used to calculate the fuel cost component of the Processing Charges. The Process Model will be designed to compute, among other things, the quantity of coal that the Energy Complex should be using at any time (given the amount of weak black liquor, biomass, sludge and gas provided, and the amount of condensate returned, by the Mill Owners) in order to satisfy certain efficiency and reliability standards, taking into account applicable fuel mix, boiler availability, the Mills' aggregate requirements for Processing Services and other specified operating parameters. The Process Model also will be designed to determine the amount of gas that the Energy Complex should be using at any time, in accordance with a specified protocol for boiler dispatch. These standards are designed to circumscribe Mobile Energy's efficiency risk within the parameters set forth in the Process Model, so that, within such parameters, Mobile Energy should not be penalized for permitted decreases in efficiency that result from operational modifications necessary to perform scheduled maintenance or to satisfy the Mill Owners' needs for Processing Services at any given time. The Process Model standards also are designed to take into account degradation of equipment efficiencies as a result of aging. Mobile Energy will be permitted to charge the Mill Owners, as a component of the Processing Charges, for only those quantities of coal as are calculated by the Process Model to be efficient quantities and only those quantities of gas as are determined by the Process Model to be in accordance with a specified protocol for boiler dispatch incorporated therein. If the Energy Complex uses more coal or gas than the quantities calculated or determined by the Process Model (because, for example, Mobile Energy has been inefficient in its use of gas, coal, black liquor, biomass or sludge or has inappropriately dispatched its I-4 equipment), the costs attributable to the excess quantities of coal or gas are not permitted to be included in the Processing Charges and, as a result, will be borne by Mobile Energy. By contrast, if the Energy Complex uses less coal or gas than the quantities calculated or determined by the Process Model, Mobile Energy can include in the Processing Charges the costs associated with the Process Model quantities of coal and gas notwithstanding that such calculated or determined quantities may exceed the actual quantities used by the Energy Complex. Thus, Mobile Energy will be rewarded for operating the Energy Complex more efficiently than the standards set forth in the Process Model and will bear the risk of operating the Energy Complex less efficiently than those standards. The Process Model has not yet been developed by Mobile Energy and the Mill Owners. Once the Process Model is developed and implemented, there can be no assurance that the Energy Complex will use fuel in accordance with the standards set forth in the Process Model, or that Mobile Energy will operate the Energy Complex more efficiently than the standards set forth in the Process Model. Moreover, there can be no assurance that the Process Model will perform in accordance with its design or the principles set forth in the Master Operating Agreement. If the Process Model fails to calculate accurately the amount of coal and gas the Energy Complex should be using in accordance with the standards described above, Mobile Energy's ability to recover its costs for coal and gas could be adversely affected. Until the Process Model is developed and certain accuracy and reliability tests are completed (the "Interim Period"), Mobile Energy is permitted to charge the Mills for any and all quantities of coal used by the Energy Complex to provide the Processing Services. In addition, Mobile Energy is, subject to certain conditions described herein, permitted to charge the Mills for any and all quantities of gas used by the Energy Complex to provide the Processing Services during the Interim Period. Certain other modifications to the formulas used to calculate the Processing Charges will also remain in effect during the Interim Period, in order to facilitate the calculation of the processing charges until the development and testing of the Process Model has been completed. Pursuant to the Master Operating Agreement, the unit charge payable by the Mill Owners for coal is contractually fixed and escalated in accordance with an escalator based upon the market price for coal mined east of the Mississippi River and sold to specified utilities across the United States. Thus, Mobile Energy receives the benefit, and bears the burden, of any difference between Mobile Energy's actual coal costs and the contractual coal charges. The unit charge payable by the Mill Owners for gas is Mobile Energy's actual "all in" per unit gas cost. For the twelve-month period ended December 31, 1995, sales to the Pulp Mill, Tissue Mill and Paper Mill (including both Demand Charges and Processing Charges) were $42.6 million, $19.5 million, and $19.8 million respectively, which accounted for 51.6%, 23.7% and 24.0%, respectively, of Mobile Energy's operating revenues. Payments of Demand Charges and Processing Charges by the Mill Owners under the Energy Services Agreements are expected to provide virtually all of Mobile Energy's operating revenues and are therefore the primary source of funds for the payment of debt service. There are no significant alternative sources of funds available to Mobile Energy to make debt service payments (other than certain reserve accounts). Accordingly, a significant decrease in revenues payable under the Energy Services Agreements that is not accompanied by a corresponding decrease in operating costs may have a materially adverse impact on Mobile Energy's financial condition. If Demand Charges and such other charges were at any time to be insufficient to cover Mobile Energy's fixed costs (including payment of debt service), Mobile Energy could be unable to pay principal of and interest on its outstanding indebtedness or could be unable to pay its other fixed costs. Subject to certain limited exceptions, the Energy Services Agreements and the Master Operating Agreement require the Mill Owners to purchase their entire requirements for Processing Services from Mobile Energy up to the Maximum Capacity of the Energy Complex, but do not require that the Mill Owners purchase any minimum level of Processing Services at any time. No assurance can be given that the Mill Owners will continue to operate the Mills at historical operating levels for all or any portion of the term of the Energy Services Agreements. Also, seasonal and cyclical fluctuations in the pulp, tissue and paper industry will affect the Mills' requirements for Processing Services. The markets for certain of the Mills' products historically have been highly cyclical, characterized by periods of supply and demand imbalance. Therefore, revenues from Processing Charges may fluctuate considerably from month to month. I-5 Subject to the limitations discussed above with respect to adjustments of Demand Charges, Mobile Energy's revenues from Demand Charges can be affected by such cyclical fluctuations in the pulp, tissue and paper industry as well. Revenues from Demand Charges with respect to Steam Processing Services and Liquor Processing Services could substantially decline in January 2002, and again on each second anniversary thereof (based on Mobile Energy's belief that such Demand Charges would not be subject to reduction prior to such time, except if there is a Mill Closure or if certain casualty or force majeure events occur). Revenues from Demand Charges with respect to Power Processing Services could substantially decline in January 2000, and again on each second anniversary thereof, or, in each such case, earlier if Mobile Energy fails to provide required levels of Processing Services or if a Mill Closure or certain casualty or force majeure events occur. Sales to each of the three Mills account for substantially all of Mobile Energy's revenues. Accordingly, the loss of revenues from any one Mill, whether due to decreased operations, a Mill Closure or otherwise, could have a material adverse impact on Mobile Energy. Given that sales to the Pulp Mill account for the greatest percentage of Mobile Energy's operating revenues, and because the Pulp Mill supplies certain fuels, water and waste water treatment services and boiler ash disposal services to the Energy Complex, a permanent, substantial curtailment of production at or a closure of the Pulp Mill could have a far more detrimental effect on Mobile Energy's revenues than similar occurrences with respect to the Paper Mill or the Tissue Mill. No assurance can be given that the Mill Owners will timely pay amounts due to Mobile Energy or perform the services required under the Project Agreements or that, regardless of whether or not the Mill Owners timely make such payments and perform such services, Mobile Energy's revenues from Processing Charges and Demand Charges will be sufficient to pay the operating and maintenance expenses of the Energy Complex and the principal of and interest on Mobile Energy's indebtedness. The markets for certain of the Mills' products are highly cyclical, characterized by periods of supply and demand imbalance, and have historically experienced price fluctuations driven by changes in supply, end-user demand and preferences (including as to use of recycled contents in finished goods) and the availability and relative price of imported products. Certain sectors of the paper industry have also been significantly affected by changes in general economic conditions, levels of consumer confidence and income, the availability of financing and interest rate levels. Some of the Mill Owners' competitors have greater financial resources than the Mill Owners, and certain mills operated by competitors may be lower cost producers than the Mills. Accordingly, there can be no assurance that a Mill Closure will not occur, that the Mills will be operated at current levels over the life of the Mobile Facility or that such levels of operation will generate sufficient revenue to Mobile Energy to enable it to pay principal of and interest on its outstanding indebtedness. Since the sale of the Energy Complex by Scott to Holdings, S.D. Warren has transferred some of its grade coated production (in which it is a market leader) from the Paper Mill to another of its mills which is not serviced by the Energy Complex. While S.D. Warren has indicated that the change in operations is designed, in part, to convert capacity at the Paper Mill to the production of coated specialty and technical paper, and while such change in operations has increased the Paper Mill's usage of Steam Processing Services, there can be no assurance that the altered product mix of the Paper Mill will not have a materially adverse impact on the Paper Mill's requirement for Processing Services, or that the Paper Mill will continue to be operated on an economic basis. Also, the Mill Owners have broad discretion to merge with or otherwise combine with other companies and to otherwise transfer their interests in the Mills, and there can be no assurance that the current Mill Owners will retain their respective interests in the Mills. The consummation of any merger, combination or other transfer, including the Scott merger with a subsidiary of Kimberly-Clark, could result in a change in the mix or level of processing services demanded by such Mill and/or a decrease in the creditworthiness of the Mill Owner, any of which could have a material adverse effect on Mobile Energy. Prior to the announcement in July 1995 of its intent to merge with Kimberly-Clark, Scott had announced its intention to sell the Pulp Mill as part of a general corporate initiative to focus on its tissue operations. Payments from the Pulp Mill Owner accounted for approximately 51.6% of Mobile Energy's operating revenues in 1995. There can be no assurance that Scott/Kimberly-Clark will not seek to sell the Pulp Mill or that any successor to Scott/Kimberly-Clark as the Pulp Mill Owner would be of equivalent credit quality or industry expertise, would require the same level of Processing Services as are currently or have been historically required by Scott/Kimberly-Clark for its operation of the Pulp Mill or would continue to I-6 provide the services and products currently provided by Scott/Kimberly-Clark (as the Pulp Mill Owner) pursuant to certain of the Project Contracts to the other Mills or the Energy Complex. The Tissue Mill and the Paper Mill currently rely upon the Pulp Mill for almost all of their supply of pulp. Because both the Tissue Mill and the Pulp Mill currently are owned by Scott/Kimberly-Clark, there is no contractual arrangement between the Tissue Mill and the Pulp Mill for the supply of pulp. By contrast, in connection with the sale of S.D. Warren in December 1994, Scott entered into a long-term agreement (the "Pulp Supply Agreement") for the Pulp Mill to supply the Paper Mill with its pulp requirements (subject to minimum and maximum amounts) at prices that are generally based upon, though somewhat discounted from, market prices. There can be no assurance that future owners of the Pulp Mill and/or the Tissue Mill would enter into similar long-term pulp supply arrangements or that any such pulp supply arrangements would be economically beneficial to such parties. Prior to the announcement of its intent to merge with Kimberly-Clark, Scott had also announced its intention to sell in 1995 its Southeast timberland operations (the "Southeast Timberland"), which controls over 500,000 acres of woodlands in Alabama and Mississippi. The Pulp Mill currently relies upon the Southeast Timberland for the supply of a significant portion of the Pulp Mill's timber requirements and a significant portion of the biomass that the Pulp Mill supplies to the Energy Complex. If the Southeast Timberland were to be sold, a significant source of timber and biomass for the Pulp Mill may no longer be available to the Pulp Mill on terms as advantageous to the Pulp Mill as at the present time. Accordingly, the sale of the Southeast Timberland could have a materially adverse impact on the Pulp Mill's (and therefore the Tissue Mill's and Paper Mill's) business, in the level of Processing Services demanded by such Mills and on the supply of biomass to the Energy Complex. In connection with its proposed merger with Kimberly-Clark, Scott announced that it had suspended its previously stated plans to sell its global pulp operations (including the Pulp Mill) and its timberlands in the United States and Canada (including the Southeast Timberland). However, subsequent to the merger Kimberly-Clark has indicated that the combined entity will endeavor to eliminate redundant overhead costs, reduce its workforce and sell certain assets including some manufacturing facilities. Therefore, although any sale of the Pulp Mill or the Southeast Timberland may be delayed or abandoned as a result of the merger, there can be no assurances that the Pulp Mill or the Southeast Timberland (or any other assets (including the Tissue Mill)) would not eventually be sold by the combined entity. The revenues received by Mobile Energy from the sale of Processing Services to the Mills could also be adversely affected if one or more Mill Owners were to go into bankruptcy. The Energy Services Agreements, the Master Operating Agreement and certain of the other Project Contracts to which one or more Mill Owners are party are "executory contracts" under the Bankruptcy Code because performance is still due, to some extent, by both Mobile Energy and the Mill Owners. Therefore, if a voluntary or involuntary petition with respect to a Mill Owner were filed in a bankruptcy court, the Mill Owner (as debtor) could, with the approval of the bankruptcy court, assume, assume and assign, or reject its Energy Services Agreement, the Master Operating Agreement or any other of the Project Contracts to which it is a party. No assurance can be given that a Mill Owner in bankruptcy would be willing or able to assume any or all of the Project Contracts to which it is a party, including its Energy Services Agreement. Furthermore, no assurance can be given that Mobile Energy would be able to replace any such Mill Owner with another customer willing to purchase power, steam or liquor processing services on terms similar to those in an Energy Services Agreement that is rejected by a Mill Owner in bankruptcy or on other terms that are beneficial to Mobile Energy. If, after the filing of a bankruptcy petition, a Mill Owner in bankruptcy does not immediately assume or reject the Project Contracts to which it is a party and Mobile Energy provides Processing Services to such Mill Owner pursuant to the Project Contracts, Mobile Energy would be compensated for such post-petition services at a rate equal to the "actual and necessary" value of the benefit of those services to the bankruptcy estate. In addition, a bankruptcy court could compel Mobile Energy to continue to provide Processing Services to the Mill Owner in bankruptcy, provided that the Mill Owner pays Mobile Energy an amount equal to the "actual and necessary" value of the benefit I-7 of the Processing Services to the bankruptcy estate. Furthermore, if Mobile Energy were deemed to be a "utility" under Section 366 of the Bankruptcy Code, Mobile Energy could be compelled by the bankruptcy court to provide Processing Services to the Mill Owner for the remainder of the bankruptcy case even following the Mill Owner's rejection of its Energy Services Agreement, in return for payment based on the "actual and necessary" value of the benefit to the Mill Owner in bankruptcy of such Processing Services. There can be no assurance that a bankruptcy court would determine that the "actual and necessary" value of the benefit of the Processing Services to a Mill Owner in bankruptcy (i.e., the amount payable by the bankrupt Mill Owner) is equal to the sum of the Processing Charges and Demand Charges otherwise payable under the Project Contracts. If a bankruptcy court were to determine that the "actual and necessary" value of the benefit of the Processing Services to the bankrupt Mill Owner is in fact less than the sum of the Processing Charges and Demand Charges otherwise payable by such Mill Owner, the financial condition of Mobile Energy could be adversely affected. Operations The Energy Complex is operated by Southern Electric pursuant to an agreement with Mobile Energy (the "O&M Agreement"). Southern Electric provides operation, maintenance and administrative services to Mobile Energy and currently employs all of the personnel who work at the Energy Complex. At December 31, 1995, there were 24 salaried and 110 union employees working at the Energy Complex. Southern Electric is compensated by Mobile Energy pursuant to the O&M Agreement on a cost pass-through basis for the labor and other costs incurred by Southern Electric in operating and maintaining the Energy Complex. Mobile Energy, Scott/Kimberly-Clark and each of the Mill Owners are parties to a common services agreement (including any amendments thereto, the "Common Services Agreement") which, among other things, (i) provides for Mobile Energy and the Mill Owners to share certain facilities owned by Scott/Kimberly-Clark at the Mobile Facility (such as a cafeteria, an infirmary, a maintenance training facility and certain roads) and (ii) requires the Tissue Mill Owner to provide certain services (such as cafeteria services, medical services, maintenance training services and parking lot maintenance) to Mobile Energy and each of the other Mill Owners. In addition, each of the Mill Owners has granted Mobile Energy non-exclusive easements over the portions of the Mobile Facility owned by such Mill Owner (other than Lots 7 and 9 of the Real Property (as hereinafter defined), which Mobile Energy leases from Scott/Kimberly-Clark), and Mobile Energy has granted non-exclusive easements over Lots 7 and 9 to each of the Mill Owners, in each case, among other things, for access to the common facilities described above, for access to the portions of the Mobile Facility owned or leased by the person to whom the easement was granted and for other purposes required for or incidental to the performance of the grantee's obligations and the exercise of its rights under the Project Agreements. These agreements, together with the Master Operating Agreement, which, among other things, provides for the coordination of operations at the Mobile Facility and the management of the common services, establish the contractual framework that enables the Mobile Facility to continue to operate as an integrated manufacturing complex. Mobile Energy, Scott/Kimberly-Clark and the Mill Owners are party to the Master Operating Agreement which, among other things, provides for the continuation after the Acquisition of a committee (the "Site Operating Committee") previously utilized by Scott to coordinate and integrate the operations of the Mills and the Energy Complex. The Site Operating Committee is comprised of one representative from each of the Mills and the Energy Complex. The Site Operating Committee meets once a week (or, if necessary, more frequently) to address scheduled and unscheduled events that affect the Processing Services and other flows among the Energy Complex and the Mills, the operating systems, the common facilities and the safety and integrity of the Mobile Facility. The Master Operating Agreement provides for the members of the Site Operating Committee to work on a cooperative basis to promote the operation and maintenance of the Energy Complex and each of the Mills in a manner that will optimize, in accordance with the Project Agreements, the performance of the Energy Complex and the Mills as an integrated facility. Pursuant to the Master Operating Agreement, the Site Operating Committee, among other things, (i) coordinates the delivery of Processing Services and other flows among the Energy Complex and the Mills pursuant to the Project Agreements, (ii) coordinates Scheduled Energy Complex Outages (as hereinafter defined), scheduled outages at the Mills ("Scheduled Mill Outages") and Major Maintenance Outages (as hereinafter defined), (iii) develops and modifies emergency operating and shutdown procedures, (iv) endeavors to resolve disputes among the parties (in accordance with the dispute resolution procedures set forth in the Master I-8 Operating Agreement) and (v) supervises and/or directs the performance of the Essential Common Services (as hereinafter defined) in accordance with the Common Services Agreement. Except for certain categories of decisions set forth in the Master Operating Agreement, all resolutions of the Site Operating Committee are required to be by unanimous decision of all members present in person or by telephone at a Site Operating Committee meeting. The effective functioning of the Site Operating Committee is important to the effective operation of the Mobile Facility and to the rapid resolution of disagreements between Mobile Energy and the Mill Owners. No assurance can be given that the Site Operating Committee will effectively coordinate and integrate the operations of the Mills and the Energy Complex, resolve disagreements between Mobile Energy and the Mill Owners or otherwise function as designed or that the failure to do so would not have a materially adverse impact on Mobile Energy. Sources and Availability of Raw Materials Approximately 85% of the fuel requirements of the Energy Complex are currently satisfied with by-products generated by the operations of the Pulp Mill or provided by the Pulp Mill. These by-products include black liquor, biomass (waste wood), and sludge, each of which is provided to Mobile Energy by the Pulp Mill Owner under the Pulp Mill Energy Services Agreement. Although a failure by the Pulp Mill Owner to deliver solid waste or weak black liquor to the Energy Complex by itself should not cause Mobile Energy to default upon its obligations to the Mill Owners under the Project Agreements, such failure could decrease operating cash flow to Mobile Energy to the extent that (i) processing charges decline due to diminished Energy Complex output and (ii) operations and maintenance costs fail to decline correspondingly. In addition, such a reduction could lead to a downward adjustment of Demand Charges in subsequent Demand Periods. No assurance can be given that the Pulp Mill will continue to operate at historical levels (or at all) and continue to provide the Energy Complex with historical levels of black liquor to process. If the Pulp Mill does reduce or suspend its operations, it will have a reduced (or no) need for any of the Processing Services and, in particular, will reduce its requirements for (or cease to require) Liquor Processing Services because it will be producing limited (or no) amounts of weak black liquor. Since there is no other long-term customer for Liquor Processing Services currently available to the Energy Complex and, therefore, no alternative source of supply for weak black liquor, the failure by the Pulp Mill Owner to deliver weak black liquor for processing could have a materially adverse impact on Mobile Energy's ability to generate revenues due to a resulting decrease in Demand Charges in future Demand Periods or to the extent that Processing Charges decline and operations and maintenance costs fail to decline correspondingly. Also, because the Energy Complex has no reliable long-term source of supply of weak black liquor other than the Pulp Mill, and because the Pulp Mill has the most readily available supply of biomass for the Energy Complex, the closure of the Pulp Mill could deprive the Energy Complex of two significant fuels, and could thereby impede, physically and economically, the Energy Complex's ability to provide the Power Processing Services and Steam Processing Services to the Tissue Mill, the Paper Mill or third parties. The supplemental fuel needs of the Energy Complex are satisfied with coal, presently procured by Mobile Energy pursuant to a short-term contract which will expire on April 30, 1996 and which is subject to extension for successive one-year terms, and natural gas, currently procured by the Tissue Mill Owner from third parties. Both products are readily available on the open market from a variety of suppliers. Accordingly, Mobile Energy anticipates no significant problems in satisfying its future needs for coal and natural gas. Pursuant to the Master Operating Agreement, the unit charge payable by the Mill Owners for coal is contractually fixed and escalated in accordance with an escalator based upon the market price for coal mined east of the Mississippi River and sold to specified utilities across the United States. Thus, Mobile Energy receives the benefit, and bears the burden, of any difference between Mobile Energy's actual coal costs and the contractual coal charges. There can be no assurance that Mobile Energy will be able to procure coal at prices equal to or less than the contractual coal charges. Additionally, the Energy Complex and each of the Mills are dependent upon the Pulp Mill to provide, pursuant to a Water Procurement and Effluent Services Agreement (including any amendments thereto, the "Water Agreement"), process water and waste water treatment services, and the Energy Complex currently relies on the Pulp Mill Owner to provide, pursuant to a Boiler Ash Disposal I-9 Agreement (including any amendments thereto, the "Ash Agreement"), ash disposal services. If Mobile Energy does not receive any such products or services, Mobile Energy is entitled by the Master Operating Agreement to reduce the amount of Processing Services provided to the Mill Owners (without incurring any reduction in the Demand Charges payable to Mobile Energy during the then current Demand Period as a result). However, such a reduction could decrease Mobile Energy's operating cash flow to the extent that (i) Processing Charges decline due to diminished Energy Complex output and (ii) operations and maintenance costs fail to decline correspondingly. In addition, such a reduction could lead to a downward adjustment of Demand Charges in subsequent Demand Periods. No assurance can be given that the Pulp Mill Owner can or will perform its obligations under the Water Agreement, the Ash Agreement or any other Project Contract. If the Pulp Mill Owner fails to perform any of its obligations under the Water Agreement (and if certain other conditions are satisfied), Mobile Energy is granted the right under the Master Operating Agreement to assume operational responsibility for the Pulp Mill's process water plant and waste water treatment plant (the "Mobile Energy Step-In Rights"). In addition, Mobile Energy has a license from the Pulp Mill Owner to utilize, at Mobile Energy's expense, certain Pulp Mill equipment (including the two water plants) if the Pulp Mill Owner terminates its Energy Services Agreement in connection with a Mill Closure with respect to the Pulp Mill. However, no assurance can be given that the Mobile Energy Step-In Rights are legally enforceable, that Mobile Energy would be able successfully to exercise the Mobile Energy Step-In-Rights or that Mobile Energy's use of the license would be economically beneficial to Mobile Energy. Additionally, no assurance can be given that Mobile Energy has or could obtain the Governmental Approvals necessary to exercise the Mobile Energy Step-In-Rights. Finally, because both the Tissue Mill and the Paper Mill currently rely upon the Pulp Mill for almost all of their supply of pulp, and for all of their supply of process water and waste water treatment services, the failure by the Pulp Mill to provide any of these products or services could have a material adverse effect on the operation of the Tissue Mill or the Paper Mill, thereby reducing their requirements for processing services. Therefore, even if Mobile Energy were able to obtain from other sources any products or services that the Pulp Mill failed to supply to Mobile Energy, Mobile Energy's revenues could be materially adversely affected to the extent that a reduction of operations at, or the closure of, the Pulp Mill adversely affects operations at the other Mills. Because both the Tissue Mill and the Pulp Mill currently are owned by Scott/Kimberly-Clark, there is no contractual agreement between the Pulp Mill and the Tissue Mill for the supply of pulp and no assurance can be given that future owners of the Pulp Mill and/or the Tissue Mill would enter into pulp supply agreements. Furthermore, no assurance can be given that the Pulp Mill will continue to supply pulp, process water or waste water treatment services to the other Mills, or that any such supply failure would not have a material adverse effect on the Tissue Mill, the Paper Mill or Mobile Energy. Permitting and Regulatory Matters Both Holdings and Mobile Energy are subject to regulation as subsidiary companies of a registered public utility holding company (Southern) by the SEC under PUHCA. Under PUHCA, the SEC regulates certain activities undertaken by Mobile Energy and Holdings, including securities sales, certain asset sales and acquisitions, and sales, service, and construction contracts with affiliates, among other matters. Mobile Energy believes that it is not subject to regulation, including rate regulation, by the FERC because Mobile Energy does not currently sell electricity at wholesale or transmit electricity in interstate commerce. In addition, Mobile Energy believes that it is not subject to regulation, including rate regulation, as a public utility by the Alabama PSC because it does not offer Power Processing Services or Steam Processing Services to the public generally. The Alabama PSC has not provided notice to Mobile Energy of any intent to exercise regulatory authority over Mobile Energy. As with any project comparable in size and nature to the Energy Complex, Mobile Energy is required to comply with the provisions of numerous statutes and regulations relating to the safety and health of employees and the public during the operation of the Energy Complex, including: emergency response and remediation or cleanup in connection with hazardous and toxic materials or other substances associated with the Energy Complex; limits on noise emissions from the Energy Complex; safety and health standards; practices and procedures applicable to the operation of the Energy Complex; environmental protection requirements (such as standards relating to the discharge of pollutants into the air, water and land); and employment, hiring and anti-discrimination requirements. Compliance with such requirements may impose significant additional costs on Mobile Energy. Failure to comply with any such statutes or I-10 regulations could have material adverse effects on Mobile Energy, including civil or criminal liability, imposition of clean-up liens and fines and expenditures of funds to bring the Energy Complex into compliance. There can be no assurance that Mobile Energy will at all times be in compliance with all applicable statutes and regulations or that the steps to bring Mobile Energy into compliance would not materially adversely affect Mobile Energy's financial condition. Additionally, there can be no assurance that the Mills or the Mill Owners at all times will be in compliance with applicable statutes and regulations. Due to the integrated nature of the Mills and the Energy Complex, such failure by the Mills or the Mill Owners to comply with applicable statutes and regulations could have a materially adverse impact on Mobile Energy. Mobile Energy also is obligated to comply with the provisions of the numerous federal, state and local statutory and regulatory regimes specifically applicable to its operations and to obtain and/or maintain numerous governmental approvals pursuant to applicable laws. Mobile Energy, Holdings, Southern Electric and Southern have obtained all material discretionary governmental approvals required as of the date hereof in order to acquire and operate the Energy Complex. Although not currently required, additional governmental approvals, including without limitation, renewals, extensions, transfers, assignments, reissuances or similar actions regarding governmental approvals, may be required in the future due to a change in law or a change in Mobile Energy's customers or for other reasons. For example, if Mobile Energy were to sell electricity to a purchaser which intended to resell the electricity, such as Alabama Power, Mobile Energy would need the approval of the FERC, and there can be no assurance that Mobile Energy could obtain such approval on acceptable terms, or at all. In addition, if Mobile Energy were to sell electricity or steam to more than a limited number of end users, Mobile Energy (and such sales) could be subject to rate and other regulation by the Alabama PSC, which could materially adversely affect Mobile Energy's revenues. No assurance can be given that Mobile Energy will be able to obtain and/or maintain all required governmental approvals that it does not yet have or that it may in the future require, or that Mobile Energy will be able to obtain any necessary modifications to existing governmental approvals. Delay in obtaining or failure to obtain and maintain in full force and effect any such governmental approvals, or amendments thereto, or delay or failure to satisfy any such conditions or other applicable requirements, could prevent operation of the Energy Complex, sales to persons other than the Mill Owners or delivery of fuel or ash disposal, or could result in additional costs to Mobile Energy. Mobile Energy's business also could be materially adversely affected as a result of statutory or regulatory changes or judicial or administrative interpretations of existing laws that impose more comprehensive or stringent requirements on the Energy Complex, the use or transportation of fuel or the transportation or disposal of ash. For example, a statutory or regulatory change, or a new judicial or administrative interpretation of existing laws, could subject Mobile Energy and its sales of Power Processing Services and Steam Processing Services to regulation by the Alabama PSC even if Mobile Energy's business does not change significantly. Any such changes could substantially increase the cost of Mobile Energy's operations or decrease Mobile Energy's revenues and have a material adverse effect on the financial condition of Mobile Energy. Under Chapter 14 of Title 37 of the Code of Alabama (the "Alabama Territorial Law"), which regulates service territories for electric suppliers, Alabama Power is the primary electric supplier in the City of Mobile. Secondary electric suppliers are prohibited from extending facilities to serve existing or new premises within the city limits. The Mobile Facility lies within the city limits. Mobile Energy believes that its acquisition of the Energy Complex and provision of electric power to the existing Mobile Facility would not cause it to be in violation of the Alabama Territorial Law. However, there can be no assurance that the Alabama PSC would reach the same conclusion if presented with the issue. If the Alabama Territorial Law were found to prohibit Mobile Energy from providing Power Processing Services to the Mills, Mobile Energy's revenues and its ability to pay the principal of and interest on its indebtedness could be materially adversely affected. Environmental Considerations Pursuant to three separate environmental indemnity agreements between each of the Mill Owners and Mobile Energy (collectively, including any amendments thereto, the "Mill Environmental Indemnity Agreements"), each of the Mill owners has agreed to indemnify Mobile Energy and Mobile Energy has agreed to indemnify I-11 each of the Mill Owners, and, in each such case, their respective affiliates, directors, officers, agents, attorneys and employees from and against various enumerated environmental-related claims ("Environmental Claims") brought against, and various enumerated environmental-related expenses ("Environmental Expenses") imposed upon, such indemnified parties in connection with (1) breaches by the indemnifying party of any of its representations and warranties, covenants or other obligations in the applicable Energy Service Agreement or the Master Operating Agreement, or (2) any environmental-related conditions ("Environmental Conditions") that give rise to, or could give rise to, Environmental Claims or other liabilities, or any violation of any environmental law ("Environmental Noncompliance") located at or otherwise relating to the Mills or the Energy Complex (as applicable) or associated facilities of the indemnifying party, to the extent arising out of facts or circumstances that occur or come into existence after December 12, 1994. Also, Scott/Kimberly-Clark has agreed to indemnify, defend and hold harmless Mobile Energy, its affiliates, and its and their respective officers, directors, agents, attorneys and employees (the "Mobile Energy Indemnified Parties"), from and against any and all Environmental Claims brought against, and any and all Environmental Expenses imposed upon or incurred by any Mobile Energy Indemnified Party, in connection with (1) breaches of any Scott/Kimberly-Clark representations and warranties, or other provisions of the Asset Purchase Agreement, relating to or otherwise concerning Environmental Conditions or Environmental Noncompliance with respect to the Mills or Energy Complex, or (2) any (a) Environmental Conditions that give rise to, or could give rise to, Environmental Claims or other liabilities or (b) Environmental Noncompliance located at or otherwise relating to the Mills or Energy Complex, or associated facilities, in each case, to the extent arising out of any facts or circumstances existing as of or prior to December 12, 1994. Either (i) Mobile Energy's performance of its obligations that may in the future arise under the Mill Environmental Indemnity Agreements or (ii) the failure of Scott/Kimberly-Clark or any Mill Owner to perform its obligations that may in the future arise under its respective agreement could have a material adverse effect on Mobile Energy's financial condition. Mobile Energy is subject to comprehensive and dynamic federal, state and local environmental laws and regulations, including those governing air emissions, waste water discharges and hazardous and non-hazardous waste disposal. For example, the EPA has proposed (1) certain effluent limitation guidelines and standards for the control of waste water pollutants from pulp and paper industry facilities and (2) a national emission standard for hazardous air pollutants emitted from mills that chemically pulp wood fiber using kraft, sulfite, soda, or semi-chemical methods (the "Cluster Rule"). The currently proposed water effluent guidelines apply only to non-combustion sources within mills, and the proposed emission standards are limited to the emission points in the pulping and bleaching processes and in the associated process waste water collection and treatment systems. The EPA, however, has indicated that it expects to propose a revised version of the water effluent guidelines and emissions standards in the spring of 1996. The EPA also has indicated that it expects to propose an additional regulation applicable to pulp and paper industry facilities, consisting of effluent guidelines and emission standards for combustion sources, in the late summer of 1996 (the "Combustion Rule"). If promulgated as proposed, the Cluster Rule (which would principally apply to the Mills) probably will require significant capital expenditures by, and significant modifications to, the Mills. None of the Mills is contractually obligated to Mobile Energy to comply with the Cluster Rule or any other environmental regulation. Thus, the Mills could choose to close entirely rather than incur the costs imposed by the Cluster Rule. If a Mill Closure occurs (whether as a result of the costs imposed on the Mill Owners by the Cluster Rule or otherwise), and the applicable Mill Owner decides to terminate its Energy Services Agreement, such Mill Owner is required by the Master Operating Agreement to pay Demand Charges for a period equal to the greater of (i) one year following the date on which the Mill Owner gives notice of termination to Mobile Energy or (ii) until the end of the then current Demand Period. The first Demand Period ends in December 1999 and each subsequent Demand Period ends on the second anniversary of the end of the preceding Demand Period. The failure by the Mills to spend the monies necessary to comply with the Cluster Rule therefore could, indirectly, have a material adverse impact on Mobile Energy's results of operations, to the extent that it were to reduce the amount of processing services the Mills purchase from the Energy Complex and the amount of charges (including Demand Charges) the Mills pay to Mobile Energy. Because the Energy Complex is a combustion source, it is unlikely that the currently proposed Cluster Rule will have a direct impact on the Energy Complex. I-12 If promulgated in some form, the Combustion Rule, which has not yet been officially proposed but which the EPA has indicated may be proposed in 1996, and which would principally apply to the Energy Complex, could require significant capital expenditures by Mobile Energy and equipment and operational modifications to the Energy Complex. Because the Combustion Rule has not yet been proposed, Mobile Energy cannot estimate the expense required to comply with such a rule. Accordingly, the Cluster Rule could have a materially adverse impact on the economic status of the Mills and the amount of processing services they require, and the Combustion Rule could have a materially adverse impact on Mobile Energy directly, by requiring Mobile Energy to modify its equipment or operations in order to comply with the Combustion Rule's provisions. Under the Master Operating Agreement, Mobile Energy generally is permitted to charge the Mills the reasonable cost of capital expenditures and operation and maintenance expenses incurred by Mobile Energy as a result of the Cluster Rule or the Combustion Rule. Nevertheless, there can be no assurance that a Mill Owner would not abandon its Mill rather than incur the costs imposed by the Cluster Rule (or any other environmental or non-environmental law or regulation) or would have the ability to comply with its obligations under the Master Operating Agreement associated with the Combustion Rule. Either such result could have a materially adverse impact on Mobile Energy's financial condition. As regulatory agencies have not yet promulgated final standards for some existing programs, and as some proposed requirements (such as the Cluster Rule) and suggested requirements (such as the Combustion Rule) have not yet been enacted or adopted, Mobile Energy cannot at this time reasonably estimate its costs of compliance with these additional programs and requirements (some of which will not take effect for several years or may not be promulgated at all) or the timing of any such costs. Pursuant to the Ash Agreement, Scott/Kimberly-Clark has agreed to transport and dispose of boiler ash that results from operation of the Energy Complex, and Scott/Kimberly-Clark has elected to dispose of such boiler ash at the Lott Road Landfill (as hereinafter defined). The ADEM permit for the landfill expired on January 3, 1993. ADEM has authorized continued operation of the landfill under the terms of the expired permit until a final decision has been made on permit renewal. Permit renewal is under review, the required information has been submitted, and the landfill can continue to operate until the review is complete. No assurance can be given that the landfill will obtain the necessary permits from ADEM to continue operations. Scott/Kimberly-Clark's obligation to take and dispose of Energy Complex boiler ash, however, is not dependent upon the continued availability of the Lott Road Landfill. The landfill owner estimates that the Lott Road Landfill has a remaining lifetime of approximately seven years. As noted above, however, Scott/Kimberly-Clark's obligation to take and dispose of Energy Complex boiler ash is not dependent upon the continued availability of the Lott Road Landfill. Because the landfill is constructed in a sand pit without an engineered liner, there is a risk that landfill leachate and storm water from the facility may have percolated to groundwater. According to the landfill's operational plan, however, most of the materials disposed of in the landfill are inert. Nevertheless, the disposal of Energy Complex boiler ash in the landfill creates a risk of participation in future remediation at the landfill, if any such remediation is ever needed or required. At present, Mobile Energy cannot estimate the amount by which its costs would increase as a result of any of these events. However, any of these events could have a material adverse impact on Mobile Energy. Outages In each contract year, Mobile Energy is entitled to (i) a specified number of days of downtime for regularly recurring annual maintenance of each boiler and turbine ("Scheduled Energy Complex Outages") and (ii) a specified amount of shortfalls in the provision of Processing Services for unanticipated events that affect the operation of the Energy Complex equipment ("Unscheduled Energy Complex Outages") (each number of days and amount of shortfall, an "Outage Allowance"). In addition, Mobile Energy is entitled to a specified number of days of downtime for major maintenance activities with respect to each power boiler and recovery boiler during the term of the Master Operating Agreement ("Major Maintenance Outages") (such number of days also an "Outage Allowance"). Major Maintenance Outages are designed to accommodate life cycle replacement and refurbishment of equipment, and can generally be anticipated with sufficient lead time to be added to the Outage Allowance for a particular contract year. I-13 However, Major Maintenance Outages were not allocated to particular contract years as of the Acquisition Closing Date in order to give Mobile Energy the flexibility to schedule such outages on an as-needed basis. As such, Major Maintenance Outages will be scheduled by the Site Operating Committee for particular contract years over the course of the term of the Master Operating Agreement. If the outages experienced by the Energy Complex in a contract year do not exceed the Outage Allowances applicable to that contract year (including the allowances for Scheduled Energy Complex Outages, Unscheduled Energy Complex Outages and, if scheduled for that contract year, Major Maintenance Outages), Mobile Energy will not be deemed to be in default under the Energy Services Agreements or the Master Operating Agreement, will not be liable for Liquidated Damages (as hereinafter defined), and will not incur Demand Charge Reductions (as hereinafter defined). By contrast, if the outages experienced by the Energy Complex for a particular contract year do exceed the Outage Allowances applicable to that contract year, Mobile Energy could, subject to the applicable provisions of the Master Operating Agreement and Energy Services Agreements, be deemed to be in default under such agreements, be liable for Liquidated Damages and incur Demand Charge Reductions. The Outage Allowance to which Mobile Energy is entitled for Liquor Processing Services can be reduced under certain circumstances as a result of unscheduled interruptions of electrical power to the Pulp Mill if (i) Mobile Energy causes an unscheduled interruption of electrical power to the Pulp Mill that curtails the Pulp Mill from delivering weak black liquor to the Energy Complex in accordance with the Pulp Mill's current request for Liquor Processing Services, (ii) Mobile Energy's Outage Allowance for Liquor Processing Services is greater than zero at the time of the interruption of electrical power, and (iii) the amount of Liquor Processing Services provided by Mobile Energy in the week in which the interruption of electrical power occurs does not exceed the lessor of (A) the average daily amount of Liquor Processing Services provided by Mobile Energy during the 365 days immediately preceding that week multiplied by seven, (B) the amount of Liquor Processing Services requested by the Pulp Mill for that week, and (C) the Pulp Mill Owner's then current Demand for Liquor Processing Services. The amount of the reduction will be equal to (a) the average daily amount of Liquor Processing Services provided by Mobile Energy during the 365 days immediately preceding that week divided by (b) 24 and then multiplied by (c) the duration of the interruption of electrical power (expressed in hours and rounded up to the nearest hour); provided that the Outage Allowance for Liquor Processing Services shall not be reduced below zero. The Mill Owners have the right to take an unlimited number of outages for any duration, provided that the Mill Owners continue to pay Demand Charges and any other amounts due under the Project Agreements during a Mill outage. Each year, the Site Operating Committee is required to prepare a timetable (the "Yearly Outages Schedule") for Scheduled Outages and, if applicable, Major Maintenance Outages for the following contract year based upon schedules proposed by Mobile Energy and each of the Mill Owners. To the maximum extent practicable, the Site Operating Committee is required to coordinate the timing of Scheduled Outages among the Energy Complex and the Mills so as to maximize the availability of Services. At the request of Mobile Energy or any Mill Owner, the Yearly Outages Schedule may be revised by the Site Operating Committee. If Mobile Energy or any Mill Owner anticipates that its facility may experience an Unscheduled Outage, or (if an outage is unanticipated) following the occurrence of an Unscheduled Outage, the applicable party is obligated to notify the other parties of the expected effect that the Unscheduled Outage will have on its ability to provide Processing Services or Mill Products (as applicable). In addition, any Mill Owner whose Mill experiences an Unscheduled Outage is obligated to inform Mobile Energy and the other Mill Owners of the expected effects that such Unscheduled Outage will have on the affected Mill's Current Nomination (as hereinafter defined) and short-term future requirements for any Processing Service, process water or compressed air. If a Mill suffers an Unscheduled Outage, Mobile Energy may shut down any item of equipment or machinery at the Energy Complex for maintenance or inspection as long as (i) Mobile Energy's ability to satisfy the Mills' requirements for Processing Services during the Mill's Unscheduled Outage is not thereby diminished and (ii) such shutdown will not last longer than the duration of the Unscheduled Mill Outage as communicated by the affected Mill. Such a shutdown by Mobile Energy is not deemed an Outage for purposes of the Master Operating Agreement and, therefore, does not affect Mobile Energy's usage of any Outage Allowance. I-14 Mobile Energy's actual utilization of Outage Allowances for 1995 was as follows: 1995 Maximum Category Allowance Utilization Unused Carryover ------- --------- ---------- ------ --------- Steam (MMBTU's) 25,000 9,752 15,248 10,776 Liquor (MMLBs) 49 3 46 25 Electricity (MWHs) 10,900 1,422 9,478 5,221 The Outage Allowances available to Mobile Energy in 1996 are as follows: 1996 ------------------------ Category Carryover Total - -------- --------- ----- Steam (MMBTU's) 10,776 24,818 Liquor (MMLBs) 25 50 Electricity (MWHs) 5,221 14,732 SUMMARY OF PRINCIPAL CONTRACTS The following summaries of selected provisions of the principal Project Contracts are qualified in their entirety by reference to the full text of the actual agreements, copies of which are filed as exhibits to this Form 10-K.. Energy Services Agreements and Master Operating Agreement Mobile Energy is party to a Pulp Mill Energy Services Agreement with the Pulp Mill Owner, a Tissue Mill Energy Services Agreement with the Tissue Mill Owner, a Paper Mill Energy Services Agreement with the Paper Mill Owner and a Master Operating Agreement with each of Scott/Kimberly-Clark, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. These agreements set forth the obligations of Mobile Energy, Scott/Kimberly-Clark and the Mill Owners to sell and purchase Liquor Processing Services, Steam Processing Services and Power Processing Services, to deliver or dispose of certain waste products or by-products produced by the Energy Complex and the Pulp Mill, and to manage the operations of the Energy Complex and the Mills. Mobile Energy entered into these agreements with Scott/Kimberly-Clark and S.D. Warren acting in their capacities as the various Mill Owners so as to facilitate the sale by Scott/Kimberly-Clark of one or more of its Mills during the terms of the agreements by clearly designating the rights and obligations associated with each of the Mills. See "-Transfer and Assignment." Term The Energy Services Agreements and the Master Operating Agreement each have an initial term of 25 years, which began on the Acquisition Closing Date. Mobile Energy has the right to extend the terms of all of these agreements by five years, but cannot exercise such right to extend with respect to less than all of these agreements, unless any agreement not extended was earlier terminated in accordance with its terms. In addition, the Mill Owners, acting collectively, have an option to extend the terms of all of these agreements by five years. The Mill Owners may not extend these agreements, except with the concurrence of Mobile Energy, if less than all of the agreements are in effect at the end of the initial 25-year term. If these agreements are so extended by either Mobile Energy or the Mill Owners, the terms of certain other Project Contracts (including the Water Agreement, the Common Services Agreement, the Ash Agreement and the Mill Environmental Indemnity Agreements) will also be extended for five years. Processing Services General Purchase and Supply Obligations During the term of each of the Energy Services Agreements, Mobile Energy is required to provide Steam Processing Services and Power Processing Services to each of the Mill Owners, and Liquor Processing Services to the Pulp Mill Owner. With regard to each Mill, Mobile Energy is obligated to dedicate the portion of the Energy Complex's capacity to provide each Processing Service to that Mill equal to that Mill's Demand for that Processing Service. Each Mill Owner is obligated to purchase its entire requirements for Processing Services, up to the Maximum Capacities, from Mobile Energy unless Mobile Energy fails to satisfy such requirements due to capacity constraints or for any other reason. Mobile Energy is obligated to supply the Mills' requirements for the Processing Services, up to the Aggregate Demand for each Processing Service. The Aggregate Demand levels are fixed by the Master Operating Agreement until December 1999 and, thereafter, are reset periodically in accordance with the Master Operating Agreement to reflect the Mills' actual aggregate usage of Processing Services. Regardless of usage, the Aggregate Demand levels cannot exceed the Maximum Capacity associated with each Processing Service. The Maximum Capacities are stipulated, technological capacity constraints associated with I-15 the provision of Processing Services by the Energy Complex, and can be modified to reflect the results of certain metering and testing activity, additions to or modifications of the Energy Complex or the Mills, and Demand that has been relinquished or forfeited by the Mill Owners in accordance with the Master Operating Agreement. Generally, although a Mill's Demand can be decreased only on specific dates set forth in the Master Operating Agreement, a Mill's Demand can be increased at any time (either voluntarily by the Mill Owner upon notice to Mobile Energy and the other Mill Owners, or automatically due to a peak in usage by a Mill that exceeds its then current Demand) if Aggregate Demand for a Processing Service is less than the Energy Complex's Maximum Capacity for that Processing Service. On the last day of the first five-contract year period (the "Initial Demand Period") and on the last day of each subsequent Demand Period, any Mill Owner whose peak usage of a particular Processing Service was below the low end of a range established for such Mill under the Master Operating Agreement with respect to such Processing Service (each such range a "Demand Band") has the option to reset its Demand for such Processing Service to a level not less than its peak usage during the Demand Period then ended. If a Mill's peak usage of a Processing Service was within the applicable Demand Band, the Mill's Demand cannot be reset to a lower level on the Demand Anniversary Date. Mobile Energy believes that since the Acquisition Closing Date, the Mills have, from time to time, required and utilized, in the aggregate, Steam Processing Services, and the Pulp Mill has required and utilized Liquor Processing Services, in amounts such that the Aggregate Demand levels for Steam Processing Services and Liquor Processing Services will not, pursuant to the terms of the Master Operating Agreement, be permitted to be decreased at the conclusion of the first Demand Period in December 1999. Therefore, pursuant to the Master Operating Agreement, unless there is a Mill Closure or certain casualty or force majeure events occur, Mobile Energy believes that the aggregate Demand Charges payable by the Mill Owners for Steam Processing Services and Liquor Processing Services are not subject to reduction by the Mill Owners until at least the conclusion of the second Demand Period in December 2001. In February 1996 Mobile Energy completed implementation of a new metering system that will allow it to determine whether the Aggregate Demand level with respect to Power Processing Services also will not, pursuant to the terms of the Master Operating Agreement, be permitted to be decreased at the conclusion of the first Demand Period in December 1999. In the period since that metering system became fully operational, the Tissue Mill and the Paper Mill have had peak demands for Power Processing Services that would prevent them from decreasing their Demands for Power Processing Services at the conclusion of the first Demand Period in December 1999, but the Pulp Mill has not. In any event, pursuant to the Master Operating Agreement, unless there is a Mill Closure or certain casualty or force majeure events occur, the aggregate Demand Charges payable by the Mill Owners for Power Processing Services are not subject to reduction by the Mill Owners until at least the end of the first Demand Period in December 1999. However, there can be no assurance that a Mill Closure, casualty or force majeure event will not occur, or that such aggregate Demand Charges will remain in effect after December 1999 or 2001, as applicable. By contrast, a Mill's Demand level will automatically be increased at any time (whether or not on a Demand Anniversary Date) if the Mill's usage of a Processing Service peaks above its Demand level for that Processing Service, as long as the increase would not cause the Aggregate Demand for the Processing Service to exceed the Maximum Capacity for the Processing Service. Because the Aggregate Demands were set at their respective Maximum Capacities on the Acquisition Closing Date, there will be no increases in the Aggregate Demand for any Processing Service due to increased usage until there occurs a reduction in Aggregate Demand or an increase in Maximum Capacity. A Mill desiring to increase its Demand level for any Processing Service before the first reduction in Aggregate Demand can do so only by agreeing to take a portion of another Mill's Demand for that Processing Service in accordance with the Demand reallocation provisions set forth in the Master Operating Agreement. The Master Operating Agreement allows the Mills to reallocate the Aggregate Demand for Steam Processing Services or Power Processing Services on the first day of each contract year. Any such reallocation must reflect actual peak usage by the reallocating Mills during the preceding contract year or sufficiently demonstrated anticipated usage by the reallocating Mills during the upcoming contract year. Furthermore, any such reallocation cannot cause the relevant Aggregate Demand to exceed its respective Maximum Capacity and cannot decrease I-16 the relevant Aggregate Demand then in effect. The Mill Owners do not have the right to compel Mobile Energy to increase the capacity of the Energy Complex if the Mills' aggregate requirements increase above the capacity of the Energy Complex; however, if the Mill Owners were to request, Mobile Energy would be required in such circumstance to negotiate in good faith with the Mill Owners to determine whether an expansion of the Energy Complex would be mutually advantageous. If Mobile Energy does increase the capacity of the Energy Complex, the Maximum Capacities for the Processing Services would increase only upon the mutual agreement of Mobile Energy and the Mill Owners. In addition to the automatic increases in Demand described above, each Mill Owner may at any time, upon notice to Mobile Energy and the other Mill Owners, voluntarily increase its Demand for a Processing Service up to the difference between the Aggregate Demand then in effect for the relevant Processing Service and the applicable Maximum Capacity. If such increase is not on a Demand Anniversary Date (or, if on a Demand Anniversary Date, is in excess of the Mill's peak Demand during the then just ended Demand Period), then Mobile Energy shall have a reasonable amount of time (consistent with specified prudent plant operating standards) in which to prepare the Energy Complex to provide the higher level of Processing Services and the resetting Mill Owner will be required to reimburse Mobile Energy for all costs incurred by Mobile Energy in connection with such preparations. Daily Supply Obligations The Master Operating Agreement provides an operating structure for informing Mobile Energy of each Mill's maximum requirements for the Processing Services during specified intervals and determining Mobile Energy's supply obligations during such specified intervals. Each morning, each of the Mill Owners is required to inform Mobile Energy of the maximum amount of Steam Processing Services it will require in any given hour during that day and the maximum amount of Power Processing Services it will require in any given 15-minute period during that day (each such amount, a "Current Nomination"). Taken together, the sum of the Current Nominations of the three Mills for Steam Processing Services and Power Processing Services cannot exceed the applicable Aggregate Demand for such Processing Service. In addition, each Friday morning, the Pulp Mill Owner is required to inform Mobile Energy of the amount of weak black liquor that Mobile Energy will be required to accept the following week (such amount also a "Current Nomination"). During any given 15-minute, hourly or weekly interval, as applicable, Mobile Energy is obligated to provide the applicable Processing Services to each Mill Owner in an amount not to exceed the Mill Owner's Current Nomination of the applicable Processing Service. If a Mill Owner's requirement for a Processing Service exceeds its Current Nomination for that Processing Service during the course of a day, the Mill Owner may request that Mobile Energy provide the Mill Owner with an increased amount of the Processing Service (a "Requested Change"). Mobile Energy is obligated to implement the Requested Change only if, and to the extent that, (i) the Requested Change would not cause the Mill Owner's Current Nomination for that Processing Service to exceed its Demand for that Processing Service and (ii) the Requested Change would not cause the amount of that Processing Service provided by Mobile Energy to exceed the applicable Aggregate Demand. If any or all of a Requested Change is not implemented by Mobile Energy due to capacity constraints, the Mill Owner seeking a Requested Change may obtain the right to receive a portion of another Mill Owner's Current Nomination of such Processing Service on such terms as such Mill Owners may mutually agree to. Upon joint notification in writing to Mobile Energy by such Mill Owners, Mobile Energy is required to implement the service change, unless it is not technologically feasible to do so in light of prudent operating standards. The Master Operating Agreement prohibits any Mill from using more than its Current Nomination with respect to any Processing Service (unless it has increased its Current Nomination in accordance with the procedures described in the preceding paragraph). If Mobile Energy has provided the aggregate Current Nomination for a Processing Service and a Mill takes more than its Current Nomination of the Processing Service (such excess usage being the "Overuse Amount"), Mobile Energy will not be liable to the other Mill Owners for failing to provide their Current Nominations of that Processing Service to the extent of the Overuse Amount. If the Mills' aggregate requirement for any Processing Service is less than the aggregate Current Nomination for that Processing Service during the course of any day, Mobile Energy is obligated to follow (in accordance with prudent I-17 operating standards) all changes in the Mills' aggregate requirement for that Processing Service as it increases or decreases from time to time (to the extent that such changes in aggregate requirements are consistent with prudent operating standards). As such, the Master Operating Agreement prevents Mobile Energy from receiving Processing Charges for Processing Services provided to the Mill Owners in excess of the Mill Owners' requirements. Sales to Third Parties The Energy Services Agreements permit Mobile Energy to sell to any person, on an as-available, fully interruptible basis, any of the services or products that the Energy Complex is capable of producing in excess of the Mills' requirements for such services or products at any given time. Mobile Energy is required to satisfy its obligations to provide Processing Services under the Energy Services Agreements before making any Processing Services available to any other person. Air Compressors The air compressors and related facilities that service the compressed air needs of the Mills and the Energy Complex are owned by Scott/Kimberly-Clark and located on the property leased by Scott/Kimberly-Clark to Mobile Energy (the "Air Compressors"). Pursuant to the Master Operating Agreement, Mobile Energy is required to operate and maintain Scott/Kimberly-Clark's Air Compressors in good working order in accordance with prudent operating standards; however, Mobile Energy is not responsible for the replacement or refurbishment of the Air Compressors unless the need for such replacement or refurbishment is a direct result of Mobile Energy's failure to operate the Air Compressors in accordance with prudent operating standards. The Mill Owners are obligated to reimburse Mobile Energy for all costs Mobile Energy reasonably incurs in connection with such operation and maintenance services. Fuel and Other Mill Products Of the five fuels used to operate the Energy Complex (weak black liquor, biomass, sludge, gas and coal), three (weak black liquor, biomass and sludge) are provided by the Pulp Mill Owner pursuant to the Pulp Mill Energy Services Agreement, one (gas) is procured from third parties by the Tissue Mill Owner pursuant to the Master Operating Agreement, and one (coal) is procured by Mobile Energy pursuant to short-term coal contracts. Weak black liquor is provided to Mobile Energy by the Pulp Mill Owner in quantities consistent with the Current Liquor Processing Nomination in effect from time to time. The processing of weak black liquor by the Energy Complex requires certain other items (such as weak wash) that the Pulp Mill Owner is obligated to provide, and produces certain by-products (such as soap) that the Pulp Mill Owner is obligated to accept. Each such item provided or accepted by the Pulp Mill Owner is provided or accepted at no charge to Mobile Energy. The Pulp Mill Owner is obligated to provide solid waste (as such term is defined in the Internal Revenue Code and the regulations promulgated thereunder, generally consisting of biomass and sludge having certain characteristics, and as more particularly defined in the Pulp Mill Energy Services Agreement, "Solid Waste") to Mobile Energy in quantities not less than the an amount equal to the minimum amount of Solid Waste required to be disposed of in the Number 7 Power Boiler (as hereinafter defined) on an annual basis to maintain the tax-exempt status of the Tax-Exempt Bonds ("Required Solid Waste Amount") and not greater than approximately 132 short tons of Solid Waste per hour (as further defined in the Master Operating Agreement, the "Maximum Solid Waste Capacity"). However, the Pulp Mill Owner's failure to provide Mobile Energy the Required Solid Waste Amount does not constitute an event of default under the Pulp Mill Energy Services Agreement, and Mobile Energy's remedies against the Pulp Mill Owner in such event are limited to those described in "-Mobile Energy's Supply Obligations in the Event of a Mill Product Shortfall" below. Mobile Energy is obligated to accept from the Pulp Mill Owner all Solid Waste that is derived from the Pulp Mill's debarking operations. In addition, Mobile Energy is required to accept from the Pulp Mill Owner all Solid Waste that is derived from sources other than the debarking operations and that is delivered in accordance with a delivery schedule periodically agreed upon by Mobile Energy and the Pulp Mill Owner. Finally, Mobile Energy may request that the Pulp Mill Owner obtain (as agent for Mobile Energy) additional quantities of biomass ("Agency Biomass"). Mobile Energy reimburses the Pulp Mill Owner for its cost of procuring Agency Biomass from third parties and these costs are then incorporated into the three Mill Owners' Processing Charges. I-18 Mobile Energy has no obligation to obtain biomass from sources other than the Pulp Mill Owner. However, if Mobile Energy chooses to obtain biomass from sources other than the Pulp Mill Owner, Mobile Energy may charge the Mill Owners an amount not to exceed the lower of (i) Mobile Energy's actual cost or (ii) the lowest price of coal or gas then available to the Energy Complex, based upon the "energy equivalent value" of such fuels. Mobile Energy is dependent upon the Pulp Mill for the Energy Complex's supply of weak black liquor and relies upon the Pulp Mill to provide almost all of the Energy Complex's supply of Solid Waste fuel (consisting of biomass and sludge). Although a failure by the Pulp Mill Owner to deliver Solid Waste or weak black liquor to the Energy Complex should not cause Mobile Energy to default upon its obligations to the Mill Owners under the Project Agreements, such failure could decrease operating cash flow to Mobile Energy to the extent that (i) Processing Charges decline due to diminished Energy Complex output and (ii) operations and maintenance costs fail to decline correspondingly. In addition, such a reduction could lead to a downward adjustment of Demand Charges in subsequent Demand Periods. No assurance can be given that the Pulp Mill will continue to operate at historical levels (or at all), that it will continue to provide the Energy Complex with historical levels of black liquor to process, or that the Pulp Mill Owner can or will perform its obligations under the Pulp Mill Energy Services Agreement with respect to the delivery of the Required Solid Waste Amount. Gas is procured by the Tissue Mill Owner on behalf of Mobile Energy and each of the Mill Owners. The Tissue Mill Owner is responsible for negotiating, executing and administering all gas supply and transportation contracts, and has final authority with respect to such matters, and Mobile Energy and the Mill Owners are required to indemnify the Tissue Mill Owner against all claims arising out of or related to the Tissue Mill Owners' negotiation, execution and administration of gas supply and transportation contracts. Mobile Energy and the other Mill Owners have the right to review all amendments, modifications or extensions of any gas supply and transportation contracts in effect on the Acquisition Closing Date, and any new gas supply and transportation contracts entered into thereafter, prior to the Tissue Mill Owner's execution thereof. The Tissue Mill Owner is obligated to use its best efforts to maintain gas deliveries, based upon anticipated usage information provided by Mobile Energy and the other Mill Owners. Mobile Energy is obligated to pay the Tissue Mill Owner for Mobile Energy's pro rata share of gas at a rate equal to the weighted average cost of all gas supply and transportation charges incurred by the Tissue Mill Owner in any given month. As described below, these costs are then incorporated into the Mill Owners' Processing Charges, taking into account the applicable efficiency standards imposed by the Process Model upon the operation of the Energy Complex. Mobile Energy is required by the Master Operating Agreement to secure a reliable source of delivered coal in such quantities as may be required to provide the Processing Services given the availability of other fuel sources, prudent operating standards, technical constraints and the fuel limitations imposed upon the Number 7 Power Boiler by the solid waste disposal requirements of the Internal Revenue Code. As described below, Mobile Energy's delivered coal costs are incorporated into the Mill Owners' Processing Charges, taking into account the applicable efficiency standards imposed by the Process Model upon the operation of the Energy Complex. In incorporating Mobile Energy's coal costs into the Processing Charges, the Master Operating Agreement assumes that Mobile Energy acquires all coal at a specified fixed price that escalates in accordance with an escalator based upon the market price for coal mined east of the Mississippi River and sold to specified utilities across the United States. Therefore, all delivered coal costs incurred by Mobile Energy in excess of this "assumed" price will not be incorporated into the Processing Charges and will be for Mobile Energy's account. As such, Mobile Energy bears price risk with respect to coal purchases. Conversely, if Mobile Energy's coal costs are less than the "assumed" amount, Mobile Energy is still permitted to charge the Mill Owners for the "assumed" amount. Mobile Energy's Supply Obligations in the Event of a Mill Product Shortfall Under the Master Operating Agreement, Mobile Energy is entitled to reduce the amount of Processing Services provided to the Mill Owners (in accordance with the appropriate load shedding plan set forth in the Master Operating Agreement) if (1) the Pulp Mill fails to provide Mobile Energy with enough black liquor to run the Number 7 and Number 8 Recovery Boilers in accordance with prudent operating standards, and Mobile Energy is using coal, gas and biomass in accordance with prudent operating standards and the Process Model, (2) the Pulp Mill fails to provide Mobile Energy with (a) enough Solid Waste to run the I-19 Number 6 and Number 7 Power Boilers in accordance with prudent operating standards or (b) the Required Solid Waste Amount and, in each such case, Mobile Energy is using coal and gas in accordance with prudent operating standards and the Process Model or (3) Mobile Energy determines that the Pulp Mill Owner will be unable to provide Mobile Energy with the Required Solid Waste Amount in any calendar year, and Mobile Energy is using coal and gas in accordance with the Process Model. Furthermore, if a Mill fails to supply Mobile Energy with certain products produced or procured by a Mill and provided to Mobile Energy under the Project Agreements (including process water, waste water treatment service, boiler ash service but excluding black liquor and biomass) (the "Mill Products") or fails to take any of the stripped condensate, evaporator clean condensate, soap, hot process water, stripper off gases or noncondensible gases (each a "Mobile Energy Processing By-Product") that it is required to take, then (i) Mobile Energy is permitted to reduce the level of Processing Services that it supplies to the Mill Owners to a level consistent with the amount of Processing Services Mobile Energy is able to provide given the reduced amounts supplied by or taken by that Mill and (ii) Mobile Energy may (but is not obligated to) find another source to supply the Mill Product in question, in which case the Mill Owner responsible for the supply failure will be obligated to reimburse Mobile Energy for (x) the difference between the replacement Mill Product and the cost of the Mill Product (if any) otherwise due and payable by Mobile Energy and (y) all reasonable costs and expenses incurred by Mobile Energy in obtaining the replacement Mill Product. Charges The Energy Services Agreements and the Master Operating Agreement obligate each Mill Owner to pay Mobile Energy a Demand Charge for each of the Processing Services that such Mill Owner is entitled to receive under its Energy Services Agreement and a Processing Charge for the Processing Services the Mill Owner actually receives. All such charges are invoiced, and are required to be paid, on a monthly basis. The Demand Charges are based upon the Demand levels in effect from time to time as determined pursuant to the procedures described above. See "-Processing Services-General Purchase and Supply Obligations." For each monthly billing period, a Mill Owner's then current Demand for a particular Processing Service is multiplied by a fixed rate for that Processing Service (that escalates over the term of the Energy Services Agreements according to a composite escalator reflecting inflation-based indices for capital equipment, labor and intermediate materials) (such fixed rate, the "Demand Rate"). The Pulp Mill's Demand Charges are then adjusted to credit the Pulp Mill for certain Mill Products that the Pulp Mill Owner provides to the Energy Complex. The Demand Charges may be reduced in the event there is a shortfall in the provision of Processing Services by Mobile Energy that is not excused by the Project Agreements. See "-Liquidated Damages and Demand Charge Reductions." The Processing Charges are based upon each Mill's actual monthly usage of Processing Services. The Processing Charges were designed generally to cover the balance of Mobile Energy's costs that are not projected to be covered by Demand Charges, including variable costs such as fuel related expenses, and to credit the appropriate Mills for certain energy value attributable to condensate flow that is provided by the Mills to the Energy Complex. There can be no assurance, however, that the Processing Charges will at all times cover such costs, including variable costs such as fuel related expenses. The Pulp Mill's Processing Charges are also adjusted to credit the Pulp Mill for certain biomass and weak black liquor that the Pulp Mill Owner provides to the Energy Complex. Costs incurred by the Pulp Mill in providing biomass and weak black liquor to Mobile Energy are allocated among all the Mills through the Processing Charges. After the expiration of the Interim Period, which lasts from the Acquisition Closing Date until such time as the Process Model is developed and tested in accordance with the Master Operating Agreement, the fuel cost component of the Processing Charges will be based, in part, upon calculations generated by the Process Model. The Process Model will be designed to, among other things, (i) predict the amount of power that the Mill Owners should be obtaining from Alabama Power, rather than from Mobile Energy, during Scheduled Energy Complex Outages and Major Maintenance Outages and (ii) compute the quantity of coal that the Energy Complex should be using at any time (given the amount of weak black liquor, biomass, sludge and gas provided, and the amount of condensate returned, by the Mill Owners) in order to satisfy certain efficiency and reliability standards, taking into account applicable fuel mix, boiler availability, the Mills' aggregate requirements for Processing Services and other specified I-20 operating parameters. The Process Model also will be designed to determine the amount of gas that the Energy Complex should be using at any time, in accordance with a specified protocol for boiler dispatch. These standards are designed to circumscribe Mobile Energy's efficiency risk within the parameters set forth in the Process Model, so that, within such parameters, Mobile Energy should not be penalized for permitted decreases in efficiency that result from operational modifications necessary to perform scheduled maintenance or to satisfy the Mill Owners' needs for Processing Services at any given time. The Process Model standards also are designed to take into account degradation of equipment efficiencies as a result of aging. Mobile Energy will be permitted to charge the Mill Owners, as a component of the Processing Charges, for only those quantities of coal as are calculated by the Process Model to be efficient quantities and only those quantities of gas as are determined by the Process Model to be in accordance with a specified protocol for boiler dispatch incorporated therein. If the Energy Complex uses more coal or gas than the quantities calculated or determined by the Process Model (because, for example, Mobile Energy has been inefficient in its use of gas, coal, black liquor, biomass or sludge or has inappropriately dispatched its equipment), the costs attributable to the excess quantities of coal or gas are not permitted to be included in the Processing Charges and, as a result, will be borne by Mobile Energy. By contrast, if the Energy Complex uses less coal or gas than the quantities calculated or determined by the Process Model, Mobile Energy can include in the Processing Charges the costs associated with the Process Model quantities of coal and gas notwithstanding that such calculated or determined quantities may exceed the actual quantities used by the Energy Complex. Thus, Mobile Energy will be rewarded for operating the Energy Complex more efficiently than the standards set forth in the Process Model and will bear the risk of operating the Energy Complex less efficiently than those standards. The Process Model may be adjusted under certain circumstances. See "-Process Model Adjustments." During the Interim Period, Mobile Energy is allowed to charge the Mills for any and all quantities of coal used by the Energy Complex to provide the Processing Services. In addition, Mobile Energy is allowed to charge the Mills for any and all quantities of gas used by the Energy Complex to provide the Processing Services, unless (i) Mobile Energy uses (in any given month) more than 110% of the amount of gas used during the same month in 1993 and (ii) such excess use was not in accordance with prudent operating standards. Other modifications to the formulas used to calculate the Processing Charges will also remain in effect until the end of the Interim Period, in order to facilitate the calculation of the Processing Charges until new meters are installed by Mobile Energy. In addition, for the first twelve monthly billing periods following the adoption of the Process Model, the Master Operating Agreement provides a range of allowable charges for coal and gas, which range places upper and lower limits on the Mill Owners' payment obligations with respect to coal and gas charges in the event of a dispute between the parties during such time period. Both during the Interim Period and thereafter, the unit charge payable by the Mill Owners for coal used by the Energy Complex to provide the Processing Services is contractually fixed and escalated in accordance with an escalator based upon the market price for coal mined east of the Mississippi River and sold to specified utilities across the United States. Thus, Mobile Energy receives the benefit of, and bears the burden of, any difference between Mobile Energy's actual coal costs and the contractual coal prices. The charge payable by the Mill Owners for gas used by the Energy Complex to provide the Processing Services is Mobile Energy's actual "all in" per unit gas cost, both during the Interim Period and thereafter. Process Model Adjustments The Master Operating Agreement provides that Mobile Energy and the Mill Owners may adjust the Process Model (a "Process Model Adjustment") if (i) for any reason there occurs a modification of any Mill or a change in the method of operation of any Mill and, in either such case, as a result thereof, the Process Model no longer accurately predicts the fuel and/or supplemental power requirements that would have been required using the operational dispatch logic, operational concepts and unit efficiencies used prior to the Acquisition Closing Date or (ii) the accuracy or operational reliability of the Process Model is capable of being improved (clauses (i) and (ii) each a "Process Model Adjustment Event"). No Process Model Adjustment is permitted to be made to benefit any party whose breach of a material provision of any Project Contract caused the Process Model Adjustment Event. In addition, no Demand Charge may be increased as the result of a Process Model Adjustment and, generally, a Process Model Adjustment is not permitted to have a retroactive effect. I-21 The Master Operating Agreement does not entitle Mobile Energy to adjust the Process Model to take into account the declining efficiency of aging equipment. Therefore, Mobile Energy bears the risk of maintaining the Energy Complex equipment so that it performs in accordance with the efficiency standards set forth in the Process Model. Financial Adjustments The Master Operating Agreement entitles Mobile Energy to request an increase in the amounts payable to Mobile Energy (a "Financial Adjustment") if, subject to certain conditions set forth in the Master Operating Agreement, (A) a federal energy tax on fuels used in the generation of electricity or steam (and not based upon the income of Mobile Energy) is imposed on Mobile Energy or the Energy Complex at any time during the first seven years following the Acquisition Closing Date in connection with the transactions contemplated by the Master Operating Agreement or the Energy Services Agreements or (B) Mobile Energy must incur capital or operational expenditures at the Energy Complex because (i) of a modification of or change in operations at a Mill (which modification or change occurred for any reason other than due to a breach by Mobile Energy of its obligations under the Master Operating Agreement or any of the Energy Services Agreements), (ii) any Mill Product becomes characterized as a hazardous material for any reason other than a change in any law applicable or permit applicable to the Energy Complex or the Mills (a "Change of Law") or an action or omission by Mobile Energy or (iii) the Cluster Rule or Combustion Rule (and certain related regulations) become effective (clauses (A) and (B)(i) through (B)(iii) each a "Financial Adjustment Event"). The designation of a Mill Product as a hazardous material due to a change of law will not excuse Mobile Energy from its obligations under the Project Agreements to accept such Mill Product. Therefore, if a Mill Product is so designated due to a change of law, Mobile Energy will bear the costs associated with the proper handling and disposal of the hazardous Mill Product. Mobile Energy will not be entitled to a Financial Adjustment unless (a) the capital expenditures incurred by Mobile Energy as a result of all Adverse Financial Effects of Financial Adjustment Events exceeds $500,000, as escalated from the Acquisition Closing Date (the "Capital Change Threshold"), which amount shall take into account only individual capital expenditures in excess of $200,000, as escalated from the Acquisition Closing Date or (b) the operational expenditures incurred by Mobile Energy as a result of all Adverse Financial Effects of Financial Adjustment Events exceeds $100,000, as escalated from the Acquisition Closing Date(the "Operational Change Threshold"), which amount shall take into account only individual operational expenditures in excess of $25,000, as escalated from the Acquisition Closing Date. Once these thresholds have been met and a Financial Adjustment is made with respect to a Financial Adjustment Event or group of Financial Adjustment Events, no additional Financial Adjustments can be made until the aggregate dollar amount of Adverse Financial Effects exceeds the applicable threshold. The Mill Owner (or Mill Owners) responsible for a Financial Adjustment have the right to satisfy such obligation by paying Mobile Energy, in each monthly billing period, Mobile Energy's actual costs with respect to the Adverse Financial Effects of the Financial Adjustment Event during such billing period. In addition, such Mill Owner(s) have the right to satisfy their obligations by paying Mobile Energy in accordance with any of the following payment options which may be proposed by Mobile Energy: (i) within 30 days of the resolution of any dispute regarding the Financial Adjustment, the present value of the full amount of the Financial Adjustment; (ii) at the earlier of the end of the Demand Period or the time at which all costs of the Adverse Financial Effect have ceased to accrue, the full amount of the Adverse Financial Effect over such period of time; (iii) in each monthly billing period, through an adjustment of the Demand Charges due to Mobile Energy by such Mill Owner(s); or (iv) in accordance with any combination of the payment options in this paragraph. Site Operating Committee As required by the Master Operating Agreement, Mobile Energy and the Mill Owners have established the Site Operating Committee to coordinate and integrate the operations of the Mills and the Energy Complex in a manner similar to that in which Scott coordinated and integrated these operations prior to the Acquisition. The Site Operating Committee is comprised of one representative from each of the Mills and the Energy Complex. Each member of the Site Operating Committee is required to have substantial practical experience in the day-to-day operations of the facility that he or she represents and is required to have the I-22 authority to make binding decisions (with respect to matters delegated to the Site Operating Committee pursuant to the Project Agreements) on behalf of the party that he or she represents. The Site Operating Committee meets once a week (or, if necessary, more frequently) to address scheduled and unscheduled events that affect the Services, Mill Products and Mobile Energy Processing By-Products, the operating systems, the Common Facilities (as hereinafter defined) or the safety and integrity of the Site. The Master Operating Agreement charges the Site Operating Committee to work on a cooperative basis to ensure that the Energy Complex and each of the Mills are operated and maintained in a manner that will optimize, in accordance with the Project Agreements, the performance of the Energy Complex and the Mills as integrated facilities. The Site Operating Committee, among other things, (i) coordinates the delivery of Services, Mill Products and Mobile Energy Processing By-Products pursuant to the Project Agreements, (ii) coordinates Scheduled Outages and Major Maintenance Outages, (iii) develops and modifies emergency operating and shutdown procedures, (iv) endeavors to resolve disputes among the parties (in accordance with the dispute resolution procedures discussed below) and (v) supervises and/or directs the performance of the Essential Common Services (as hereinafter defined) in accordance with the Common Services Agreement. Except as described below, all decisions of the Site Operating Committee are required to be made by the unanimous agreement of all members present (in person or by telephone), and are binding on each of the Mill Owners and Mobile Energy. The senior management of the Mill Owners and Mobile Energy may, by unanimous agreement, overrule any decision of the Site Operating Committee. Any such determination to overrule a Site Operating Committee decision applies prospectively only, and no party will be in breach or default of any of its obligations or duties under the Project Agreements as a result of having taken or omitted to take an action in compliance with, or in reliance on, such decision prior to the date such decision is overruled. Mobile Energy is not entitled to participate in any decision by the Site Operating Committee concerning (i) the allocation among the Mill Owners of the Current Steam Processing Nominations or the Current Power Processing Nominations, (ii) the determination of any Mill Owner to elect (in accordance with the procedures set forth in the Master Operating Agreement) a revised Steam Processing Demand, Power Processing Demand or Conversion Demand, (iii) the granting of (or refusal to grant to Mobile Energy) any additional hours of Scheduled Energy Complex Outages or Major Maintenance Outages, (iv) any decision or dispute with respect to the payment of any charge or other amount due from one Mill Owner to another Mill Owner pursuant to any Project Contract, (v) the allocation of pulp between the Tissue Mill and the Paper Mill or the existence of any breaches and enforcement of remedies under the Pulp Supply Agreement between Pulp Mill Owner and Paper Mill Owner, (vi) the allocation of charges payable by the Mill Owners to Alabama Power for Back-Up Power, Maintenance Power and Supplemental Power pursuant to the 1983 Alabama Power Contract and the 1986 Alabama Power Contract (except that Mobile Energy will have the right to participate in all such decisions if Mobile Energy is required to bear any of such charges) and (vii) the allocation of Liquidated Damages among the Mill Owners. In addition, no party to the Master Operating Agreement is entitled to participate in any decision by the Site Operating Committee (or any committee appointed by it) that (x) could not reasonably be expected to adversely affect in any material respect such party's condition (financial or otherwise), properties, assets, liabilities, permits or licenses, operations or prospects with respect to the business or businesses conducted by such party at the Site, (y) would not increase the amount of payments to be made by such party under any of the Project Agreements and (z) would not impose or create obligations that would make such party's performance under any of the Project Agreements more burdensome. However, the applicable representatives of any non-voting party are entitled to be present at all meetings at which such decisions are made. Force Majeure Each party is excused from failure to perform its obligations under the Project Agreements if, and to the extent that, such failure is due to a Force Majeure Event (as defined below), whether such Force Majeure Event is suffered directly by such party's Mill or Energy Complex or otherwise causes an interruption of operations at the Site. The affected party is obligated to provide prompt notice to the other parties upon becoming aware of the Force Majeure Event, and is obligated to make all reasonable efforts to remedy the Force Majeure Event, if practicable, and to mitigate the adverse effects of the Force Majeure Event. The suspension of any obligation due to a Force Majeure Event does not affect any rights or obligations under the Project Agreements that accrued prior to such suspension. I-23 "Force Majeure Events" include acts of God, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, volcanoes, fires, storms, floods, disasters, civil disturbances, sabotage, the binding order of any Governmental Authority that has been resisted in good faith by all reasonable legal means, Changes of Law (except as provided in the Financial Adjustment Events with respect to the Cluster Rule the Combustion Rule and federal energy taxes or in the Mill Environmental Indemnity Agreements), labor disputes (excluding strikes by and other labor disputes with respect to (i) in the case of Mobile Energy, employees of Mobile Energy or Southern Electric or (ii) in the case of a Mill Owner, employees of such Mill Owner) or any other event or circumstance not within the control of such party that prevents such party from performing its obligations under any Project Contract (but not including governmental actions (including but not limited to any binding order of any Governmental Authority) that such party could have prevented by compliance with appropriate laws, regulations and standards). Force Majeure Events expressly exclude (A) a party's financial inability to perform and (B) any failure to perform, and the effects of such failure, that could have been prevented, overcome or remedied by the exercise, by the party claiming force majeure, of prudent plant operating standards. For purposes of the definition of "Force Majeure Event," (x) if a Change of Law requires the permanent closure of the Energy Complex or any Mill, such Change of Law shall constitute a Force Majeure Event and (y) if a Change of Law does not require such a permanent closure, only the period of time reasonably required to comply with such Change of Law shall constitute a Force Majeure Event. As such, unless a Change of Law requires the permanent closure of the Energy Complex, Mobile Energy will not be excused of its performance obligations if Mobile Energy fails to comply with the Change of Law within a reasonable amount of time. If a Force Majeure Event were to cause the Actual Energy Complex Capacity to fall below the Aggregate Demand (whether or not such Force Majeure Event has also affected any of the Mills), then the provisions in the Master Operating Agreement with respect to the payment by Mobile Energy of Liquidated Damages and the incurrence by Mobile Energy of Demand Charge Reductions (as described below) would not apply. Instead, each Mill Owner's obligation to pay Demand Charges would be reduced to a level consistent with such Mill Owner's capability, if any, to use all or a portion of the Actual Energy Complex Capacity available to it following such Force Majeure Event. As a result, although Mobile Energy would not be subject to the Liquidated Damages and Demand Charge Reduction provisions of the Master Operating Agreement if a Force Majeure Event caused the Actual Energy Complex Capacity to fall below the Aggregate Demand, the Demand Charges payable by the Mill Owners would be reduced if the Mill Owners were unable to use any portion of the available Energy Complex capacity. Thus, if a Mill were unable to operate a paper machine because a Force Majeure Event rendered the Energy Complex unable to provide the full amount of Steam Processing Services required to operate the paper machine, the Mill Owner would not be required to pay Demand Charges on that portion of Energy Complex capacity that the Energy Complex was able to provide to that paper machine, but that the paper machine was unable to use. Therefore, although the existence of a Force Majeure Event would excuse Mobile Energy from performance, it could also diminish the Demand Charges received by Mobile Energy. In addition, if a Force Majeure Event were to affect only the Mills or the Mill Owners, each affected Mill Owner would be required to continue to pay Demand Charges (at a level consistent with its Demand for each applicable Processing Service immediately prior to such Force Majeure Event) for six months after the occurrence of the Force Majeure Event; thereafter, each affected Mill Owner would be required to pay Demand Charges at a level consistent with such Mill Owner's capability, if any, to use all or a portion of the Actual Energy Complex Capacity available. Thus, if a Force Majeure Event were to render a paper machine inoperable for more than six months, the affected Mill Owner would not be required to pay Demand Charges with respect to the capacity that the inoperable paper machine were unable to utilize after the six months had expired. As such, Mobile Energy bears risk with respect to Force Majeure Events that affect only the Mills or the Mill Owners. If a Force Majeure Event, other than a Force Majeure Event resulting in a Casualty (as hereinafter defined), renders the Energy Complex unable to produce more than 20% of the then current maximum liquor processing capacity of the Energy Complex (the "Maximum Liquor Processing Capacity") and seven percent of the then current maximum steam processing capacity of the Energy Complex (the "Maximum Steam Processing Capacity") and is not cured within three years of its occurrence, then the Mill Owners will be permitted to terminate the Master I-24 Operating Agreement and the Energy Services Agreements pursuant to the provisions of the Master Operating Agreement with respect to termination of these agreements upon a Mill Closure. If (i) a Force Majeure Event causes physical loss of or damage to the Mills so as to result in any Aggregate Demand being set at a level which is less than the minimum Demand associated with a Processing Service and (ii) such physical loss or damage is not capable of being repaired or restored within four years of the occurrence of the Force Majeure Event, then Mobile Energy will be permitted to terminate the Energy Services Agreements following the first six months after such Force Majeure Event unless the Mill Owners pay Mobile Energy in each monthly billing period the sum of $834,000 (multiplied by a specified escalator) plus $3,333,400. "Minimum Conversion Demand" is 20% of the then current Maximum Liquor Processing Capacity; "Minimum Steam Processing Demand" is seven percent of the then current Maximum Steam Processing Capacity; and "Minimum Power Processing Demand" is 30% of the then current specified maximum power processing capacity of the Energy Complex (the "Maximum Power Processing Capacity"). Outages In each contract year, Mobile Energy is entitled to (i) a specified number of days of Scheduled Energy Complex Outages and (ii) a specified amount of Unscheduled Energy Complex Outages. In addition, Mobile Energy is entitled to a specified number of days of Major Maintenance Outages. Major Maintenance Outages are designed to accommodate life cycle replacement and refurbishment of equipment, and can generally be anticipated with sufficient lead time to be added to the Outage Allowance for a particular contract year. However, Major Maintenance Outages were not allocated to particular contract years as of the Acquisition Closing Date in order to give Mobile Energy the flexibility to schedule such outages on an as-needed basis. As such, Major Maintenance Outages will be scheduled by the Site Operating Committee for particular contract years over the course of the term of the Master Operating Agreement. If the outages experienced by the Energy Complex in a contract year do not exceed the Outage Allowances applicable to that contract year (including the allowances for Scheduled Outages, Unscheduled Outages and, if scheduled for that contract year, Major Maintenance Outages), Mobile Energy will not be deemed to be in default under the Energy Services Agreements or the Master Operating Agreement, will not be liable for Liquidated Damages, and will not incur Demand Charge Reductions. By contrast, if the outages experienced by the Energy Complex for a particular contract year do exceed the Outage Allowances applicable to that contract year, Mobile Energy could, subject to the applicable provisions of the Master Operating Agreement and Energy Services Agreements, be deemed to be in default under such agreements, be liable for Liquidated Damages and incur Demand Charge Reductions. See "-Events of Default" and "-Liquidated Damages and Demand Charge Reductions." The Outage Allowance to which Mobile Energy is entitled for Liquor Processing Services can be reduced under certain circumstances as a result of unscheduled interruptions of electrical power to the Pulp Mill if (i) Mobile Energy causes an unscheduled interruption of electrical power to the Pulp Mill that curtails the Pulp Mill from delivering weak black liquor to the Energy Complex in accordance with the Pulp Mill's current request for Liquor Processing Services, (ii) Mobile Energy's Outage Allowance for Liquor Processing Services is greater than zero at the time of the interruption of electrical power, and (iii) the amount of Liquor Processing Services provided by MESC in the week in which the interruption of electrical power occurs does not exceed the lessor of (A) the average daily amount of Liquor Processing Services provided by Mobile Energy during the 365 days immediately preceding that week multiplied by seven, (B) the amount of Liquor Processing Services requested by the Pulp Mill for that week, and (C) the Pulp Mill Owner's then current Demand for Liquor Processing Services, then the Outage Allowance for Liquor Processing Services will be reduced. The amount of the reduction will be equal to (a) the average daily amount of Liquor Processing Services provided by Mobile Energy during the 365 days immediately preceding that week divided by (b) 24 and then multiplied by (c) the duration of the interruption of electrical power (expressed in hours and rounded up to the nearest hour); provided that the Outage Allowance for Liquor Processing Services shall not be reduced below zero. The Mill Owners have the right to take an unlimited number of outages for any duration, provided that the Mill Owners continue to pay Demand Charges and any other amounts due under the Project Agreements during a Mill outage. Each year, the Site Operating Committee is required to prepare a timetable (the Yearly Outages Schedule) for Scheduled Outages and, if applicable, Major I-25 Maintenance Outages for the following contract year based upon schedules proposed by Mobile Energy and each of the Mill Owners. To the maximum extent practicable, the Site Operating Committee is required to coordinate the timing of Scheduled Outages among the Energy Complex and the Mills so as to maximize the availability of Services. At the request of Mobile Energy or any Mill Owner, the Yearly Outages Schedule may be revised by the Site Operating Committee. If any part of the Outage Allowance for Scheduled Outages is not used by Mobile Energy in the year to which the allowance is allotted by the Master Operating Agreement, such unused portion is carried forward into subsequent contract years until used by Mobile Energy (unless such carry forward would cause the number of outage days being carried forward to exceed the maximum amounts set forth in the Master Operating Agreement). Similarly, with respect to equipment to which more than one Major Maintenance Outage is allotted by the Master Operating Agreement, if Mobile Energy completes the inspection, repair or maintenance it is to perform during a Major Maintenance Outage in less time than allotted by the Master Operating Agreement, the unused time is carried forward and may be used by Mobile Energy during a subsequent Major Maintenance Outage for the applicable piece of equipment (provided that no such carry forward can increase the maximum number of Major Maintenance Outages allowed for a particular piece of equipment, as opposed to the duration of such outages). Finally, unused portions of the Outage Allowances for Unscheduled Energy Complex Outages for each contract year are carried forward to the next contract year, subject to specified minimum and maximum quantities of permitted unscheduled shortfalls of each Processing Service (measured in MMlb virgin dry black liquor solids/year, MMBTU/year or MWh/year, as applicable) for each contract year. Mobile Energy may (i) adjust the Outage Allowances for Scheduled Outages and Major Maintenance Outages to reflect the annual or life cycle maintenance required by any additional Energy Complex equipment acquired by Mobile Energy after the Acquisition Closing Date due to a Change of Law or a Financial Adjustment Event and (ii) with the approval of the Site Operating Committee (which approval may not be unreasonably withheld), adjust the Outage Allowances for Scheduled Outages and Major Maintenance Outages to reflect the annual or life cycle maintenance required by any additional Energy Complex equipment acquired by Mobile Energy after such date for any reason other than those specified in clause (i). If Mobile Energy or any Mill Owner anticipates that its facility may experience an Unscheduled Outage, or (if an outage is unanticipated) following the occurrence of an Unscheduled Outage, the applicable party is obligated to notify the other parties of the expected effect that the Unscheduled Outage will have on its ability to provide Processing Services or Mill Products (as applicable). In addition, any Mill Owner whose Mill experiences an Unscheduled Outage is obligated to inform Mobile Energy and the other Mill Owners of the expected effects that such Unscheduled Outage will have on the affected Mill's Current Nomination and short-term future requirements for any Processing Service, process water or compressed air. If a Mill suffers an Unscheduled Outage, Mobile Energy may shut down any item of equipment or machinery at the Energy Complex for maintenance or inspection as long as (i) Mobile Energy's ability to satisfy the Mills' requirements for Processing Services during the Mill's Unscheduled Outage is not thereby diminished and (ii) such shutdown will not last longer than the duration of the Unscheduled Mill Outage as communicated by the affected Mill. Such a shutdown by Mobile Energy is not deemed an Outage for purposes of the Master Operating Agreement and, therefore, does not affect Mobile Energy's usage of any Outage Allowance. Liquidated Damages and Demand Charge Reductions Subject to the following sentence, if Mobile Energy fails to provide any Processing Service as specified in the Energy Services Agreements and the Master Operating Agreement and any Mill Owner suffers damages as a result of such failure, Mobile Energy will be liable to such Mill Owner for the Liquidated Damages and Demand Charge Reductions set forth in the following paragraphs. However, if the actual capacity of the Energy Complex to provide the Processing Services is less than the Aggregate Demand at any time due to (i) an Energy Complex Outage that does not exceed the applicable Outage Allowances, (ii) a Force Majeure Event or (iii) a breach by Scott/Kimberly-Clark or any of the Mill Owners of a material obligation under any Project Contract, then Mobile Energy will not be liable to the Mill Owners for Liquidated Damages or any other form of damages and will not incur any Demand Charge Reductions ("Excused Performance"). If at any time (and unless there is Excused Performance) (1) Actual Liquor Processing Capacity is less than Conversion Demand, (2) the Pulp Mill's I-26 requirement for Liquor Processing Services is at or below the Current Liquor Processing Nomination and Mobile Energy cannot satisfy such requirement and (3) Mobile Energy requests that the flow of weak black liquor to the Energy Complex be curtailed by the Pulp Mill or the Pulp Mill is unable to deliver weak black liquor to Mobile Energy due to an operational circumstance caused by Mobile Energy (upon the satisfaction of the conditions set forth in clauses (1), (2) and (3), a "Liquor Processing Shortfall Event"), then (x) Mobile Energy will be obligated to pay the Pulp Mill Owner an amount equal to $10,000 (as escalated from the Acquisition Closing Date in accordance with a formula based upon a composite escalator comprised of inflation-based indices for capital equipment, labor and intermediate materials) per Liquor Processing Shortfall Event (the "Liquor Processing Liquidated Damages") and (y) the Conversion Demand Charge will be reduced by an amount equal to (i) the Conversion Demand Charge for the week in which the Liquor Processing Shortfall Event occurred multiplied by (ii) the sum of the aggregate amount of all such curtailments for the week divided by the then Current Liquor Processing Nomination (such amount the "Conversion Demand Charge Reduction"). If at any time (and unless there is Excused Performance) (1) the Aggregate Steam Processing Requirement does not exceed the Aggregate Demand for Steam Processing Services, (2) the Actual Steam Processing Capacity is less than the Aggregate Demand for Steam Processing Services, (3) the Actual Steam Processing Capacity is less than the aggregate Current Steam Processing Nomination, (4) the steam energy flow to a particular Mill is less than that Mill's requirement for Steam Processing Services (the "Steam Processing Deficiency Amount") (and such deficiency is not due to another Mill using Steam Processing Services in excess of its Current Steam Processing Nomination) and (5) Mobile Energy has implemented its steam load-shedding plan, causing a reduction in Steam Processing Services provided to a Mill (upon the satisfaction of the conditions set forth in clauses (1) through (5), a "Steam Processing Shortfall Event"), then Mobile Energy will be obligated to pay the affected Mill Owner an amount equal to $5,000 (as escalated from the Acquisition Closing Date in accordance with a formula based upon a composite escalator comprised of inflation-based indices for capital equipment, labor and intermediate materials) per Shortfall Hour (the "Steam Processing Liquidated Damages") and (y) the affected Mill's Demand Charges for Steam Processing Services will be reduced, for each Shortfall Hour, by an amount equal to (i) the affected Mill's charges for Steam Processing Demand for such Shortfall Hour multiplied by (ii) the applicable Steam Processing Deficiency Amount divided by the then Current Steam Processing Nomination for the affected Mill (the "Steam Processing Demand Charge Reduction"). If at any time (and unless there is Excused Performance) (1) the Aggregate Power Processing Requirement does not exceed the Aggregate Demand for Power Processing Services, (2) the Actual Power Processing Capacity is less than the Aggregate Demand for Power Processing Services, (3) the Actual Power Processing Capacity (together with all power being supplied by Alabama Power) is less than the Aggregate Power Processing Requirement, (4) Alabama Power is not providing the Mills power pursuant to the terms and conditions of the 1983 Alabama Power Contract and the 1986 Alabama Power Contract and (5) Mobile Energy has exceeded its usage allowance of Back-Up Power (the "Back-Up Power Usage Allowance") (upon the satisfaction of the conditions set forth in clauses (1) through (5), a "Power Processing Shortfall Event"), then (x) Mobile Energy will be obligated to pay the Mill Owners an amount equal to $5,000 (as escalated from the Acquisition Closing Date in accordance with a formula based upon a composite escalator comprised of inflation-based indices for capital equipment, labor and intermediate materials) for each Shortfall Hour (the "Power Processing Liquidated Damages") and (y) the charges for Power Processing Demand will, for each Shortfall Hour, be reduced by an amount equal to (i) the charges for Power Processing Demand for the Shortfall Hour multiplied by (ii) the difference between the power flow to the Mills and the Mills' requirements for power divided by the then Current Power Processing Nomination for the three Mills (the "Power Processing Demand Charge Reduction"). If the total megawatt hours of Back-Up Power purchased by the Mill Owners from Alabama Power in a contract year exceed the Back-Up Power Usage Allowance for that contract year, then Mobile Energy will be obligated to pay each Mill Owner such Mill Owner's proportionate share of the incremental cost of the megawatt hours and megawatt demand for Back-Up Power purchased from Alabama Power in excess of the megawatt hours in the Back-Up Power Usage Allowance (the "Back-Up Power Liquidated Damages"). Furthermore, any monthly difference between the allowance of Long Term Maintenance Power calculated by the Process Model and I-27 the actual amount of Long Term Maintenance Power purchased by the Mill Owners from Alabama Power will be charged or credited, as appropriate, to Mobile Energy on a monthly basis. Finally, any monthly difference between the amount that the Process Model indicates should have been purchased from Alabama Power as Supplemental Power and the actual amount of Supplemental Power purchased by the Mill Owners also will be charged or credited, as appropriate, to Mobile Energy on a monthly basis. Notwithstanding that Liquidated Damages may accrue with respect to more than one Processing Service or Mill Owner, in no event can the Liquidated Damages for all of the Processing Services and all of the Mill Owners exceed (and in no event will Mobile Energy be liable to pay to the Mill Owners collectively) more than $10,000 a day (as escalated from the Acquisition Closing Date in accordance with a formula based upon a composite escalator comprised of inflation-based indices for capital equipment, labor and intermediate materials). However, Demand Charge Reductions are not subject to any such limitations. Insurance Each of the Mill Owners and Mobile Energy is obligated to maintain (i) workers' compensation insurance, including employer's liability insurance in the minimum amount of $1,000,000 per occurrence and in the aggregate, (ii) comprehensive general liability insurance with a $1,000,000 minimum limit per occurrence for combined bodily injury and property damage with an aggregate of $2,000,000 (iii) comprehensive automobile liability insurance with a $1,000,000 minimum limit per occurrence for bodily injury and property damage and $2,000,000 minimum limit per occurrence for combined bodily injury and property damage, (iv) aircraft and watercraft liability insurance, each having a $25,000,000 minimum limit per occurrence for property damage and bodily injury and (v) umbrella liability or excess insurance with a $24,000,000 minimum limit per occurrence and a $24,000,000 aggregate annual limit. In addition, Mobile Energy is required to maintain (a) property damage insurance in a minimum aggregate amount of $350,000,000 or Mobile Energy's outstanding obligations with respect to the financing or refinancing of the Energy Complex, whichever is greater, (b) boiler and machinery insurance in a minimum aggregate amount equal to the maximum foreseeable loss and expediting expenses in the amount of $2,500,000 and (c) business interruption and extra expense insurance covering as a minimum amount all fixed expenses and debt service for a period of 12 months arising from certain insured losses and (unless waived by the Site Operating Committee) is required to cause its subcontractors to maintain workers' compensation insurance, comprehensive general liability insurance and comprehensive automobile liability insurance. Each policy required to be maintained by Mobile Energy must name the Mill Owners as additional insureds and each policy required to be maintained by a Mill Owner must name Mobile Energy as an additional insured. If it is commercially unreasonable for Mobile Energy or any Mill Owner to obtain any such insurance policy, Mobile Energy and the Mill Owners are obligated by the Master Operating Agreement to devise, in good faith, an equitable and mutually agreeable allocation of risk (that may include self-insurance). There can be no assurance that the insurance coverages required by the Master Operating Agreement will be available to Mobile Energy in the future on commercially reasonable terms or at commercially reasonable rates or that the amounts for which Mobile Energy is insured or amounts that Mobile Energy receives under such insurance coverage will cover all losses. In the event there is a total or partial loss of the Energy Complex, there can be no assurance that the insurance proceeds received by Mobile Energy in respect thereof will be sufficient to satisfy all indebtedness of Mobile Energy. Casualty The following is a description of the provisions set forth in the Master Operating Agreement with respect to the use of the proceeds of insurance maintained by Mobile Energy (the "Mobile Energy Proceeds"). However, in the Mill Owner Consents to Assignment, Scott/Kimberly-Clark and the Mill Owners have agreed that Mobile Energy Proceeds will be disposed of pursuant to the terms of the Mill Owner Consents to Assignment. If any part of the Energy Complex were to suffer physical loss or destruction (a "Casualty") and the cost of repairing the damage to the Energy Complex caused by such Casualty does not exceed $7,500,000 (as escalated from the Acquisition Closing Date, the "Mobile Energy Contribution Amount"), then Mobile Energy is obligated to repair the damage, whether or not the Casualty (or the circumstance that caused the Casualty) is covered by any insurance policy required to be maintained by Mobile Energy. I-28 Generally, if the Energy Complex were to suffer a Casualty for which Mobile Energy is required by the Master Operating Agreement to maintain insurance but the Mills were not materially affected by a Casualty (other than the indirect effects of the Casualty affecting the Energy Complex), and if the sum of the Mobile Energy Proceeds and Mobile Energy Contribution Amount were sufficient to restore the Energy Complex to the level specified by the Master Operating Agreement, then Mobile Energy would be required to rebuild the Energy Complex so that it can once again provide the level of Processing Services specified by the Master Operating Agreement, as follows: (i) if the Energy Complex experienced any Casualty other than a Total Casualty (as defined below) or any Casualty that results in less than $7,500,000 in damages (a "Partial Casualty"), Mobile Energy would be required to restore the Energy Complex to substantially its condition immediately prior to the Partial Casualty; (ii) if the Energy Complex experienced any Casualty that results in more than $150,000,000 in damages or that cannot be repaired within 24 months of the Casualty (a "Total Casualty") on or before December 16, 2011 and the Aggregate Demands for each of the Processing Services immediately prior to the Total Casualty exceeded certain minimum levels set forth in the Master Operating Agreement, Mobile Energy would also be required to restore the Energy Complex to substantially its condition immediately prior to the Total Casualty; and (iii) if the Energy Complex experienced a Total Casualty after December 16, 2011 and the Aggregate Demands for each of the Processing Services immediately prior to the Total Casualty exceeded 50% of each of the Maximum Capacities in effect on the Acquisition Closing Date, Mobile Energy would be required to restore the Energy Complex so that it could produce the Aggregate Demands in effect immediately prior to the Total Casualty. Generally, if (i) the Energy Complex were to suffer any Casualty for which Mobile Energy is required by the Master Operating Agreement to maintain insurance, (ii) the Mills also were materially affected by a Casualty (other than the indirect effects of the Casualty affecting the Energy Complex), (iii) the sum of Mobile Energy Proceeds and Mobile Energy Contribution Amount were sufficient to restore the Energy Complex, and (iv) the Demand for each of the Processing Services were (or upon the completion of any restoration of the Mills undertaken by the Mill Owners would be) greater than the Minimum Economic Demand associated with such Processing Service and at least 50% of Reserved Demand (as hereinafter defined) in effect immediately before the occurrence of such Casualty (unless terminated by the applicable Mill Owner within sixty (60) days of the occurrence of the Casualty) shall continue to be reserved, then Mobile Energy would be required to restore the Energy Complex to a condition necessary to produce the Aggregate Demands and Reserved Demand in effect immediately prior to such Casualty. If Mobile Energy has no obligation under the Master Operating Agreement to restore or rebuild the Energy Complex because (a) the amount of Mobile Energy Proceeds plus Mobile Energy Contribution Amount is insufficient to restore or rebuild the Energy Complex to the operating levels required above, or (b) because the criteria set forth in clause (iv) of the preceding sentence have not been satisfied, then Mobile Energy is required, upon the request of any Mill Owner, to negotiate in good faith for a reasonable period of time (in any event not to exceed 90 days), in order to, in the case of clause (a), develop an acceptable arrangement under which Mobile Energy would use the available Mobile Energy Proceeds to restore or rebuild the Energy Complex to an operating level commensurate with the amount of Mobile Energy Proceeds available for such restoration or rebuilding (without accounting for any Mobile Energy Contribution Amount) or, in the case of clause (b), develop arrangements regarding the future provision of Processing Services and other services at the Mobile Facility. Mobile Energy has no obligation to the Mill Owners under this paragraph other than to negotiate for a reasonable period of time (in any event not to exceed 90 days). If Mobile Energy is required to, or otherwise decides to, restore the Energy Complex following a Casualty, and the restoration work is structural in nature or the cost thereof, as estimated by Mobile Energy, exceeds $5,000,000 (as escalated from the Acquisition Closing Date), then the restoration work is required to be in the charge of an architect or engineer selected by Mobile Energy and reviewed by the Mill Owners (such review not to be unreasonably delayed) and the Mill Owners must be given a reasonable period to review the plans and specifications before the restoration work begins (such review not to be unreasonably delayed). If Mobile Energy is not required to restore the Energy Complex because the sum of Mobile Energy Proceeds and Mobile Energy Contribution Amount is insufficient for the required level of restoration, the Mill Owners (or any of them) may compel Mobile Energy to restore the Energy Complex to such level by paying all restoration costs that exceed the sum of Mobile Energy Proceeds and Mobile Energy Contribution Amount. The Master Operating Agreement provides that I-29 no Mill Owner so contributing to the restoration of the Energy Complex will have any claim on or ownership interest in the Energy Complex assets so restored, and Mobile Energy will have no obligation to repay a contributing Mill Owner for any costs incurred or payments made by such Mill Owner for the restoration of the Energy Complex. If the Mill Owners fail to pay the difference between the restoration costs and the sum of Mobile Energy Proceeds and Mobile Energy Contribution Amount, the consequences set forth in the following paragraph will apply. If the applicable conditions set forth in the Master Operating Agreement are not satisfied (i) Mobile Energy will have no obligation under the Master Operating Agreement to restore the Energy Complex and (ii) the Energy Services Agreements and related rights and obligations under the Master Operating Agreement will terminate as of the date of the Casualty. In addition, Mobile Energy Proceeds will be distributed as follows: (a) first, Mobile Energy will receive that portion of Mobile Energy Proceeds that is equal to the present value of the amount Mobile Energy would have received as Demand Charges and Demand Reservation Charges (as hereinafter defined) for the remainder of the term if the Conversion Demand, Aggregate Steam Processing Demand, Aggregate Power Processing Demand and Reserved Demand in effect immediately prior to such Casualty remained in effect for the remainder of the term. If the Maximum Liquor Processing Capacity, the Maximum Steam Processing Capacity and the Maximum Power Processing Capacity (reduced by any Demand that had been relinquished by any Mill Owner pursuant to the Master Operating Agreement ("Relinquished Demand") prior to the date of the Casualty and any Demand that had been forfeited by any Mill Owner pursuant to the Master Operating Agreement ("Forfeited Demand") and that had not yet been claimed by a Mill Owner pursuant to the Master Operating Agreement) are greater than the Aggregate Demands and Reserved Demand in effect immediately prior to the Casualty, these adjusted Maximum Capacities will be substituted for the Aggregate Demands and Reserved Demand for purposes of calculating the amounts to be received by Mobile Energy. The present value will be calculated using a discount rate that, during the first 15 contract years following the Acquisition Closing Date, is 11%, and, during the remainder of the term, is 12%. The calculation of the amount Mobile Energy would have received as Demand Charges and Demand Reservation Charges for the remainder of the term will exclude any portion of the Demand Charges and Demand Reservation Charges covering fixed operations and maintenance expenses and sustaining capital expenses that Mobile Energy would not actually incur as a result of the Casualty and the termination of the Master Operating Agreement and the Energy Services Agreements pursuant to clause (ii) of the preceding sentence; (b) second, the Mill Owners will receive the lesser of (A) the remaining Mobile Energy Proceeds or (B) that portion of Mobile Energy Proceeds that is equal to the difference between (x) the Mill Owners' costs of acquiring Processing Services from Mobile Energy pursuant to the Project Agreements for the remainder of the term and (y) the Mill Owners' costs of acquiring electricity, steam and green liquor from sources other than the Energy Complex for the remainder of the term. For purposes of calculating the costs referred to in clauses (x) and (y), the Master Operating Agreement assumes that the Conversion Demand, Aggregate Steam Processing Demand, Aggregate Power Processing Demand and Demand Reservation Charges (as hereinafter defined) in effect immediately prior to the Casualty would have remained in effect for the remainder of the term. The Master Operating Agreement also provides that for purposes of calculating the costs referred to in clauses (x) and (y), the Maximum Liquor Processing Capacity, the Maximum Steam Processing Capacity and the Maximum Power Processing Capacity (reduced by any Relinquished Demand that had been relinquished prior to the date of the Casualty and any Forfeited Demand that had not yet been claimed by a Mill Owner pursuant to the Master Operating Agreement) in effect immediately prior to the Casualty will be substituted for the Aggregate Demands and Demand Reservation Charges in effect immediately prior to the Casualty if such adjusted Maximum Capacities are greater than the Aggregate Demands and Demand Reservation Charges; and (c) third, Mobile Energy will receive the remainder of Mobile Energy Proceeds, if any. As noted above, Mobile Energy and the Mill Owners have agreed that the provisions with respect to insurance proceeds set forth in the Mill Owner I-30 Consents to Assignment will override the provisions described above to the extent such provisions are inconsistent with one another. There can be no guarantee that the amounts received by Mobile Energy from insurers will be sufficient to satisfy Mobile Energy's outstanding indebtedness in the event of a Casualty. The Mill Owners have no obligation under the Master Operating Agreement to restore any portion of any Mill affected by a Casualty. Except as provided in the provisions concerning Force Majeure Events and the termination of an Energy Services Agreement upon a Mill Closure, a Casualty with respect to a Mill relieves a Mill Owner of its obligations to pay Demand Charges only if, and to the extent that, the Energy Complex was also affected by such Casualty. Events of Default The following constitute events of default on the part of Mobile Energy under the Energy Services Agreements and the Master Operating Agreement (each a "Mobile Energy Event of Default"): (a) non-payment by Mobile Energy of any payment due by Mobile Energy to the applicable Mill Owner under its Energy Services Agreement or the Master Operating Agreement (if such non-payment continues for 10 days after written notice of non-payment has been given to Mobile Energy by the Mill Owner entitled to payment); (b) non-performance by Mobile Energy of any covenant, obligation or agreement of Mobile Energy to the applicable Mill Owner under its Energy Services Agreement or the Master Operating Agreement (if such non-performance continues for 60 days (or if 60 days is insufficient, 180 days) after written notice of non-performance is given to Mobile Energy by the Mill Owner entitled to performance); (c) certain bankruptcy events with respect to Mobile Energy; (d) transfer of the Energy Complex by Mobile Energy in contravention of the transfer restrictions imposed by the Master Operating Agreement; (e) failure by Southern to comply in any material respect with any covenant, obligation or agreement in the Environmental Guaranty; and (f) failure by Mobile Energy or Southern to comply with their respective obligations under the Mill Owner Maintenance Reserve Account Agreement (as hereinafter defined) if such failure is not remedied within 10 days. The following constitute events of default on the part of each Mill Owner under such Mill Owner's Energy Services Agreement and the Master Operating Agreement, and, subject to the satisfaction of any applicable conditions set forth in such agreements, entitle Mobile Energy to exercise its remedies against the defaulting Mill Owner (each a "Mill Owner Event of Default"): (a) non-payment by a Mill Owner of any payment due by the Mill Owner to Mobile Energy under its Energy Services Agreement or the Master Operating Agreement (if such non-payment continues for 10 days after written notice of non-payment has been given to the defaulting Mill Owner by Mobile Energy); (b) non-performance by a Mill Owner of any covenant, obligation or agreement of the Mill Owner under its Energy Services Agreement or the Master Operating Agreement (if such non-performance continues for 60 days (or if 60 days is insufficient, 180 days) after written notice of non-performance is given to the defaulting Mill Owner by Mobile Energy); and (c) certain bankruptcy events with respect to the Mill Owner. Finally, the following constitute events of default on the part of each Mill Owner under the Master Operating Agreement and, subject to the satisfaction of any applicable conditions set forth in the Master Operating Agreement, entitle the other Mill Owners to exercise their remedies against the defaulting Mill Owner (each an "Inter-Mill Event of Default"): (a) non-payment by a Mill Owner of any payment due by the Mill Owner to another Mill Owner under any Project Contract (if such non-payment continues for 10 days after written notice of non-payment has been given to the defaulting Mill Owner by the Mill Owner entitled to payment, or the cure period specified in the applicable Project Contract has elapsed); and (b) non-performance by a Mill Owner of any covenant, obligation or agreement of the Mill Owner under the Master Operating Agreement (if such non-performance continues for 60 days (or if 60 days is insufficient, 180 days) after written notice of non-performance is given to the defaulting Mill Owner by the Mill Owner entitled to performance). Any non-defaulting Mill Owner may, within the applicable cure periods set forth above and upon notice to the defaulting Mill Owner and Mobile Energy, attempt to cure a default by another Mill Owner, unless such attempt to cure will interfere with the defaulting Mill Owner's diligent attempt to cure. In addition, any Mill Owner (or, if acting in concert, more than one Mill Owner) may, upon notice to Mobile Energy, attempt to cure a default by Mobile Energy under any one of a specified list of contracts to which Mobile Energy is a party (which contracts do not include the Financing Documents or the Project Contracts), unless such attempt to cure will interfere with Mobile Energy's I-31 diligent attempt to cure. A Mill Owner curing a default by Mobile Energy may deduct the reasonable costs incurred by such Mill Owner in effecting the cure from amounts owed by such Mill Owner to Mobile Energy under its Energy Services Agreement and the Master Operating Agreement. If Mobile Energy or any Mill Owner disputes the occurrence or existence of a particular event of default or the availability of any particular remedy in respect thereof, then the applicable parties are obligated to attempt to resolve the dispute (in accordance with the dispute resolution procedures set forth in the Master Operating Agreement) before the non-defaulting party may exercise any of the remedies set forth below (other than Mill Owner Step-In Rights (as hereinafter defined) or Mobile Energy Step-In Rights (as hereinafter defined), which are subject to a separate, expedited dispute resolution mechanism). Institution of such dispute resolution procedures suspends the running of the cure periods until the final resolution of the dispute. Remedies General Remedies Upon the occurrence and during the continuation of a Mobile Energy Event of Default or a Mill Owner Event of Default, any Mill Owner (or Mobile Energy, as applicable) is entitled to do any or all of the following: (a) terminate the applicable Energy Services Agreement (and the rights and obligations under the Master Operating Agreement that are related to such Energy Services Agreement) (unless the event of default was a default with respect to the non-performance of any covenant, obligation or agreement, and the non-performance did not have a Mill Material Adverse Effect or a Mobile Energy Material Adverse Effect, as applicable); (b) obtain specific performance; and (c) pursue all other remedies available at law or in equity, subject to the arbitration provisions set forth in the Master Operating Agreement. Upon the occurrence and during the continuation of an Inter-Mill Event of Default, any non-defaulting Mill Owner may do any or all of the following: (i) obtain specific performance; (ii) seek any applicable remedy available to the non-defaulting Mill Owner under the other Project Agreements; and (iii) pursue all other remedies available at law or in equity, except that, without the prior written consent of Mobile Energy, no Mill Owner can exercise any right to terminate the Master Operating Agreement due to an Inter-Mill Event of Default. If a Mill Owner terminates its Energy Services Agreement due to a Mobile Energy Event of Default, such Mill Owner will stop accruing Demand Charges and Processing Charges as of the date of the termination. The exercise of remedies by Mobile Energy does not limit a defaulting Mill Owner's obligation to pay (for the remainder of the initial term of its Energy Services Agreement) any Demand Charges that accrue under the Energy Services Agreement (to the extent that the Demand Charges constitute costs to and expenses of and the return of capital to Mobile Energy, as opposed to lost profits, loss of use of capital or revenue, or any other incidental, special or consequential losses or damages). However, if a Mill Owner provided notice of a Mill Closure before its event of default, such Mill Owner will not be obligated to pay Demand Charges as described in the preceding sentence, but instead will be obligated to pay the Demand Charges imposed by the Master Operating Agreement in the event of a Mill Closure. Mill Owner Step-In Rights The Master Operating Agreement provides that upon the occurrence of an Energy Complex Triggering Event (as hereinafter defined), and provided that Scott/Kimberly-Clark and the Mill Owners are in compliance with all of their material obligations to Mobile Energy under the Project Agreements, the Mill Owners may, upon unanimous agreement of the Mill Owners, notify Mobile Energy and Mobile Energy's lenders that are financing the Energy Complex or the Acquisition (the "Lenders") in writing of their intention to assume operational responsibility for the Energy Complex in place of, and as agent for, Mobile Energy, in order to undertake to cure the Energy Complex Triggering Event and to operate and maintain the Energy Complex in accordance with the Project Agreements (the "Mill Owner Step-In Rights"). The Mill Owners may exercise the Mill Owner Step-In Rights until the earlier to occur of the following events: (1) such Energy Complex Triggering Event is so cured or has otherwise ceased to exist; (2) Mobile Energy presents a cure plan (the "Mobile Energy Cure Plan") that contains a reasonably expeditious and reasonably technically and economically feasible means for curing the Energy Complex Triggering Event within the time period specified therein; (3) any Mill Owner no longer supports the exercise of the Mill Owner Step-In Rights (and gives 30 days notice of such failure of support to Mobile Energy and the other Mill Owners); (4) subject to the satisfaction of the conditions set forth in the Mill Owner Consents to I-32 Assignment with regard to foreclosure ,the Lenders have foreclosed upon the Energy Complex and have designated another reasonably qualified and experienced person to operate and maintain the Energy Complex (which person has submitted a cure plan that satisfies the conditions described above to which Mobile Energy Cure Plan is subject); and (5) subject to the satisfaction of the conditions set forth in the Mill Owner Consents to Assignment, the Lenders have foreclosed upon the Energy Complex without foreclosing upon the Project Agreements. While the Mill Owners are exercising the Mill Owner Step-In Rights, Mobile Energy would have neither the right nor the obligation to operate the Energy Complex (other than the obligation to permit the Mill Owners to use the Energy Complex employees in the operation of the Energy Complex). The Mill Owners may not, however, exercise the Mill Owner Step-In Rights with respect to any Mobile Energy Event of Default after any Mill Owner has begun to exercise any other remedy with respect to such Mobile Energy Event of Default. "Energy Complex Triggering Events" consist of any of the following occurrences that are not the result of a Force Majeure Event, Permitted Energy Complex Outage, or Mobile Energy receiving an insufficient amount of any Mill Product: (i) a failure by Mobile Energy to provide the Processing Services pursuant to the Energy Services Agreements which (a) has a Mill Material Adverse Effect and (b) is a Mobile Energy Event of Default; (ii) the availability factor for Steam Processing Services (as calculated pursuant to the Master Operating Agreement) is less than 90% for any consecutive 10-day period during the term; (iii) the availability factor for Steam Processing Services (as calculated pursuant to the Master Operating Agreement) is less than 90% for any 10 days within a 20-day period; (iv) an Unscheduled Outage of the entire Pulp Mill, Paper Mill and Tissue Mill for any consecutive five-day period during the term due to a shortfall in Processing Services; (v) an Unscheduled Outage of the entire Pulp Mill, Paper Mill and Tissue Mill for any five-days within a 20-day period during the term due to a shortfall in Processing Services; (vi) one (1) paper machine or one (1) wet lap machine is out of service for any consecutive 15-day period due to a shortfall in a Processing Service; (vii) one paper machine or one wet lap machine is out of service for any 15 days within a 30-day period due to a shortfall in a Processing Service; (viii) the occurrence of four or more Unit Trips during any 20-day period during the term; or (ix) an Abandonment of the Energy Complex has occurred. If Mobile Energy disputes the existence of an Energy Complex Triggering Event or if the Mill Owners fail to accept a Mobile Energy Cure Plan, Mobile Energy may submit the dispute to a technical expert pursuant to the dispute resolution provisions of the Master Operating Agreement, who is required to resolve the dispute in accordance with the expedited timetable set forth in the Master Operating Agreement for the resolution of disputes regarding step-in rights. While exercising the Mill Owner Step-In Rights, the Mill Owners are obligated to, in consultation with Mobile Energy, diligently pursue a cure of the Energy Complex Triggering Event so as to enable Mobile Energy to resume operation of the Energy Complex as soon as is practicable. The Mill Owners may use funds in the Mill Owner Maintenance Reserve Account (as hereinafter defined) established by Mobile Energy under the Master Operating Agreement in order to cure the Energy Complex Triggering Event. However, the Mill Owners are not required to incur out-of-pocket costs or to assume or guarantee any liabilities. While exercising the Mill Owner Step-In Rights, the Mill Owners are obligated to continue to pay Mobile Energy all Demand Charges, Processing Charges and other charges due and payable to Mobile Energy under the Project Agreements (subject to any rights of set-off or reduction including for Liquidated Damages or Demand Charge Reductions). Mobile Energy will be required to distribute such revenues (i) first, to the Mill Owners, as reimbursement for all reasonable expenses actually incurred by the Mill Owners in exercising the Mill Owner Step-In Rights and curing the Energy Complex Triggering Event (including, without limitation, capital expenditures incurred in exercising the Mill Owner Step-In Rights and in curing the Energy Complex Triggering Event, to the extent such capital expenditures are reasonable and are either in accordance with past practice at the Energy Complex or are consistent with the Energy Complex's annual operating plan) and (ii) second, to Mobile Energy. Exercise of the Mill Owner Step-In Rights suspends the running of any of the cure periods (other than for the payment of money) for Mobile Energy Events of Default and prevents the Mill Owners from exercising any termination rights and, subject to the other terms of the Project Agreements, from suspending the provision of any Mill Product. No Mill Owner will have any liability to Mobile Energy in connection with the exercise of the Mill Owner Step-In Rights, except for (i) direct damages I-33 arising out of such Mill Owner's failure to operate the Energy Complex in accordance with specified prudent operating standards, taking into account the circumstances giving rise to the Mill Owner Step-In Rights and (ii) direct damages arising out of such Mill Owner's failure to make reasonable efforts to otherwise operate the Energy Complex in accordance with the Project Agreements. If an Energy Complex Triggering Event were to occur and if the Mill Owners were to exercise the Mill Owner Step-In Rights and assume control of the Energy Complex, Mobile Energy and Southern Electric would cease to control the operation of the Energy Complex and the Energy Complex may be controlled by Mobile Energy's customers. There can be no assurance that an Energy Complex Triggering Event will not occur or that the Mill Owners would effectively operate the Energy Complex in a manner sufficient to permit Mobile Energy to continue to pay its fixed costs, including principal of and interest on debt. Company Step-In Rights The Master Operating Agreement provides Mobile Energy comparable step-in rights (the "Mobile Energy Step-In Rights") with respect to the Process Water Plant, the Waste Water Treatment Plant, the Air Compressors (if any of the Mill Owners are operating the Air Compressors at the time of a Pulp Mill Triggering Event (as hereinafter defined)) and the Pulp Mill's truck scales (each of such facilities, the "Pulp Mill Step-In Equipment"). Such Mobile Energy Step-In Rights are exercisable upon the occurrence of a Pulp Mill Triggering Event and do not require the consent of the non-defaulting Mill Owners (though, during the exercise of Mobile Energy Step-In Rights, Mobile Energy is obligated to consult with the Tissue Mill Owner and the Paper Mill Owner as to the operation and maintenance of the Process Water Plant and the Waste Water Treatment Plant). During the exercise of Mobile Energy Step-In Rights, the Pulp Mill Owner is obligated to deliver all revenues from the Pulp Mill Step-In Equipment to Mobile Energy, which will hold such revenues in trust for the benefit of the Pulp Mill Owner and will distribute such revenues in accordance with the priorities set forth in the Master Operating Agreement. Otherwise, Mobile Energy Step-In Rights are substantially similar to the Mill Owner Step-In Rights. No assurance can be given that Mobile Energy Step-In Rights are legally enforceable or that Mobile Energy will be able successfully to exercise Mobile Energy Step-In Rights. "Pulp Mill Triggering Events" consist of any of the following occurrences that are not the result of a Force Majeure Event: (i) failure of the Pulp Mill Owner to perform any of its obligations under the Water Agreement or to operate the Pulp Mill Step-In Equipment in accordance with specified prudent operating standards which, (a) has a Mobile Energy Material Adverse Effect and (b) is a Mill Owner Event of Default by the Pulp Mill; and (ii) abandonment of the Pulp Mill or a Mill Closure with respect to the Pulp Mill, except that neither clause (i) nor clause (ii) shall constitute a Pulp Mill Triggering Event if (x) the Mill Owners, or any of them, continue to pay Mobile Energy all Demand Charges due to Mobile Energy by all of the Mill Owners despite any reduction of the capacity of the Energy Complex to provide Processing Services to the Mills due to the failure by the Pulp Mill Owner to perform any of its obligations under any of the Project Agreements and (y) each of the Mill Owners waives any Mobile Energy Event of Default caused by the failure of the Pulp Mill Owner to perform any of its obligations under any of the Project Agreements. Claiming Demand and Reserving Demand upon Termination due to an Event of Default Following the termination of an Energy Services Agreement by Mobile Energy due to a Mill Owner Event of Default, the non-terminated Mill Owners can claim as Demand all or any part of the Demand or Reserved Demand (as hereinafter defined) of the terminated Mill Owner. If none of the non-terminated Mill Owners claims as Demand the terminated Mill Owner's Demand or Reserved Demand, then the non-terminated Mill Owners can reserve such Demand (thus converting such Demand into "Reserved Demand") or Reserved Demand by paying Mobile Energy an amount equal to Mobile Energy's shutdown, mothballing and startup costs reasonably incurred in order to reserve such Demand for such Mill Owner (a "Demand Reservation Charge"). If the terminated Mill Owner's Demand or Reserved Demand is not claimed or reserved by a non-terminated Mill Owner within the applicable time periods set forth in the Master Operating Agreement, that Demand or Reserved Demand will no longer be available to the Mill Owners, and Mobile Energy will have the right to supply the Processing Service related to that Demand or Reserved Demand to any other person. The reservation of Demand could have a material adverse effect on Mobile Energy. I-34 Any Mill Owner which has purchased Reserved Demand from Mobile Energy may, at any time, notify Mobile Energy that such Mill Owner wishes to convert such Reserved Demand (or any portion thereof) (the "Converted Demand") into the applicable Demand. Upon receiving such written notice, Mobile Energy is required to provide such Mill Owner, within a reasonable time, with an estimate of the costs, if any, Mobile Energy expects it will incur, and the time Mobile Energy expects it will take, to increase the Aggregate Demand by an amount equal to the Converted Demand. If the Mill Owner directs Mobile Energy to proceed, (x) Mobile Energy will be required to promptly prepare the Energy Complex to provide Processing Services at levels commensurate with both the then existing Demand and the Converted Demand and (y) the Mill Owner will be required to pay Mobile Energy all the costs Mobile Energy reasonably incurs in connection with the foregoing preparations (which costs (i) are required to be determined assuming Mobile Energy used prudent operating standards in shutting down, mothballing and maintaining the equipment in question, (ii) may be audited by such Mill Owner and (iii) are not permitted to be greater than the estimate provided to such Mill Owner by Mobile Energy). Mobile Energy is required to notify the Mill Owners when the preparations described in the preceding sentence are completed. Upon such notification by Mobile Energy, such Converted Demand will be deemed to constitute Demand and the applicable Mill Owner will be required to begin paying Demand Charges which reflect the addition of the Converted Demand to Demand. Mill Closure and Termination of Agreements by Mill Owners Each Mill Owner has the right to terminate its Energy Services Agreement upon a Mill Closure with respect to such Mill Owner's Mill. A terminating Mill Owner is obligated to provide Mobile Energy and the other Mill Owners six months prior written notice of its intention to terminate its Energy Services Agreement; termination is deemed to occur upon the expiration of such six-month period. The terminating Mill Owner is obligated to pay Mobile Energy such Mill's Demand Charges (at the levels in effect immediately prior to the giving of notice) for the greater of (i) six months from the date of termination or (ii) the remainder of the then current Demand Period. All obligations incurred by the terminating Mill Owner prior to the termination of its Energy Services Agreement (and all obligations to pay Demand Charges pursuant to the preceding sentence) survive the termination, and must be timely performed or paid by the terminating Mill Owner. In addition, the terminating Mill Owner must give reasonable assistance to Mobile Energy in Mobile Energy's endeavors to create new business opportunities for the Energy Complex; however, the terminating Mill Owner will have no liability or other monetary obligation to Mobile Energy if such business opportunities are not available or are not created. The Mill Owners have each granted Mobile Energy an irrevocable license to use (in accordance with specified prudent operating standards) any asset of the Tissue Mill or the Paper Mill and the Pulp Mill Step-In Equipment if, following a Mill Closure, the closed Mill stops providing any Mill Product or Shared Service to Mobile Energy. Mobile Energy's exercise of any of these licenses will be at Mobile Energy's sole cost and expense. No assurance can be given that Mobile Energy's use of any of these licenses will be economically beneficial to Mobile Energy. The Master Operating Agreement provides that, notwithstanding the termination of a Mill Owner's Energy Services Agreement, if a closing Mill Owner or any of its successors or assigns recommences operations on its Mill site that require green liquor, steam or electricity, that person must (at least one year prior to the recommencement of operations on the property) request that Mobile Energy reinstate the applicable Energy Services Agreement on terms identical to those contained therein (but without any extension of the term thereof due to the Mill Closure). Upon receipt of such notice, Mobile Energy will have the right, but not the obligation, to reinstate the applicable Energy Services Agreement. If Mobile Energy exercises this right, the applicable Mill Owner is required to pay all costs incurred by Mobile Energy to remobilize the Energy Complex so that it may be operated in accordance with the Project Agreements. The Master Operating Agreement provides that all of the obligations of the Mill Owners described in this paragraph survive the termination of the Master Operating Agreement and any applicable Energy Services Agreement. Claiming Demand and Reserving Demand upon a Mill Closure Following a Mill Closure, the closing Mill Owner can preserve its rights to all or any portion of its Demand by either (i) not terminating its Energy Services Agreement or (ii) notifying Mobile Energy on or prior to the Mill Closure that I-35 the closing Mill Owner will continue, for the period during which the Mill Owner desires to preserve such rights, to pay Demand Charges with respect to the Demand such Mill Owner desires to preserve. If the closing Mill Owner does not preserve its rights to its Demand, any other Mill Owner may claim all or any portion of the closing Mill Owner's Demand by notifying Mobile Energy and the other Mill Owners at any time during the period in which the closing Mill Owner is paying Demand Charges, provided, however, that a Mill Owner may do so only if Mobile Energy has no additional Demand available to provide to the Mill Owner (because Aggregate Demand for the applicable Processing Service is equal to the Maximum Capacity for that Processing Service). The closing Mill Owner would stop paying Demand Charges on any portion of its Demand so claimed by another Mill Owner. If, however, the closing Mill Owner does preserve its rights to its Demand, and if the Aggregate Demand for the applicable Processing Service is equal to its Maximum Capacity, the closing Mill Owner may allow another Mill Owner to "buy" any or all of its Demand, on terms agreed upon by such Mill Owners. Thus, if a Mill Owner plans to close its Mill only temporarily, such Mill Owner can give another Mill Owner the right to (and the obligation to pay for) the closing Mill's Demand for a limited time period, while retaining the closing Mill's right to once again have access to its Demand when it recommences production. In any event, if Aggregate Demand is less than Maximum Capacity, any Mill Owner that wants to increase its Demand is obligated to obtain its additional Demand from Mobile Energy; the non-closing Mill Owners cannot absorb the Demand of the closing Mill Owner if Aggregate Demand is less than Maximum Capacity. If neither the closing Mill Owner nor any other Mill Owner claims the closing Mill Owner's Demand, the closing Mill Owner may reserve that Demand by paying Mobile Energy a Demand Reservation Charge (equal to Mobile Energy's shutdown, mothballing and startup costs reasonably incurred in order to reserve such Demand for such Mill Owner). If the closing Mill Owner does not reserve its Demand, any other Mill Owner may do so by paying Mobile Energy a Demand Reservation Charge. If the closing Mill Owner also maintained Reserved Demand prior to the Mill Closure, the closing Mill Owner can claim such Reserved Demand as Demand by first converting it to Demand (in accordance with the provisions set forth in the Master Operating Agreement) and then claiming it as described above. If the closing Mill Owner does not convert its Reserved Demand into Demand and claim it as Demand, the closing Mill Owner may continue to reserve its Reserved Demand by continuing to pay its Demand Reservation Charge. However, if the closing Mill Owner stops paying its Demand Reservation Charge (or otherwise terminates its Reserved Demand in accordance with the Master Operating Agreement), then such Reserved Demand may be claimed by any other Mill Owner as Demand. If no Mill Owner claims such Reserved Demand as Demand, any such Mill Owner can assume the Reserved Demand by paying Mobile Energy a Demand Reservation Charge. Mobile Energy may use the Processing Services related to any Reserved Demand or sell such Processing Services to another Mill Owner or to any other Person on an as-available, fully interruptible basis. Any Mill Owner which has purchased Reserved Demand from Mobile Energy may, at any time, notify Mobile Energy that such Mill Owner wishes to convert such Reserved Demand to Converted Demand. Upon receiving such written notice, Mobile Energy is required to provide such Mill Owner, within a reasonable time, with an estimate of the costs, if any, Mobile Energy expects it will incur, and the time Mobile Energy expects it will take, to increase the Aggregate Demand by an amount equal to the Converted Demand. If the Mill Owner directs Mobile Energy to proceed, (x) Mobile Energy will be required to promptly prepare the Energy Complex to provide Processing Services at levels commensurate with both the then existing Demand and the Converted Demand and (y) the Mill Owner will be required to pay Mobile Energy all the costs Mobile Energy reasonably incurs in connection with the foregoing preparations (which costs (i) are required to be determined assuming Mobile Energy used prudent operating standards in shutting down, mothballing and maintaining the equipment in question, (ii) may be audited by such Mill Owner and (iii) are not permitted to be greater than the estimate provided to such Mill Owner by Mobile Energy). Mobile Energy is required to notify the Mill Owners when the preparations described in the preceding sentence are completed. Upon such notification by Mobile Energy, such Converted Demand will be deemed to constitute Demand and the applicable Mill Owner will be required to begin paying Demand Charges which reflect the addition of the Converted Demand to Demand. I-36 The reservation of Demand could have a material adverse effect on Mobile Energy. Sale of Relinquished Demand to Third Parties The Master Operating Agreement provides that if Demand is not claimed or reserved by a Mill Owner following a Mill Closure or the termination of an Energy Services Agreement by Mobile Energy due to a Mill Owner Event of Default, the Demand of the closed Mill is deemed to be relinquished, and may be sold by Mobile Energy to third parties. However, there can be no assurance that alternative customers would be willing or able to enter into long- or short-term energy service contracts with Mobile Energy following the termination of an Energy Services Agreement due to a Mill Closure or a Mill Owner Event of Default. The Energy Complex was designed to provide Processing Services to the Mills and benefits from certain efficiencies derived from its relationship with the Mills, including proximity and ready availability of certain fuel products. Other customers requiring power, steam and/or liquor processing are not anticipated to be readily available following the termination of an Energy Services Agreement. In general, sales to other customers may require Mobile Energy to significantly modify (i) the charges currently received by Mobile Energy or (ii) the assets comprising the Energy Complex in order to effectuate such sales or to obtain additional regulatory approvals that could be required in order to enable Mobile Energy to provide the appropriate services. For example, Mobile Energy does not have the necessary regulatory approvals to sell electricity to Alabama Power or any other person that intends to resell the electricity to third parties nor does it own or have contractual rights to use transmission facilities necessary to provide electricity to parties other than the Mills. To make wholesale sales (to Alabama Power, for instance), Mobile Energy would have to obtain approval of the terms of such sales from FERC. In addition, providing power or steam processing services to end users other than the Mill Owners could subject Mobile Energy to regulation by, and could require the approval of, the Alabama PSC. Any modifications of the Energy Complex or its regulatory structure could increase Mobile Energy's projected capital and operational expenditures. Furthermore, no assurance can be given that any regulatory approvals that may be required for Mobile Energy to sell or transmit to other customers would be granted. Overall, failure by Mobile Energy to find a suitable long-term customer to replace one of the Mills after a Mill Closure or termination of an Energy Services Agreement could have a material adverse effect on Mobile Energy's financial condition. Minimum Demand and Termination of Agreements by Mobile Energy Mobile Energy has the right to terminate the Energy Services Agreements if (a) Conversion Demand is less than Minimum Conversion Demand, (b) Aggregate Demand for Steam Processing Services is less than Minimum Steam Processing Demand, (c) Aggregate Demand for Power Processing Services is less than Minimum Power Processing Demand, or (d) the Direct Lease (as hereinafter defined) or any Easement Deed (as hereinafter defined) is terminated and, as a result, Mobile Energy is unable to perform its obligations under the Energy Services Agreements or the Master Operating Agreement. All obligations incurred by Mobile Energy prior to the termination of the Energy Services Agreements survive the termination, and must be timely performed or paid by Mobile Energy. Unlike the Mill Owners, Mobile Energy does not automatically have the right to terminate an Energy Services Agreement upon a Mill Closure. A Mill Closure would give Mobile Energy the right to terminate an Energy Services Agreement only if that Mill Closure caused any Demand to fall below the applicable Minimum Demand. For example, if the Pulp Mill closed, thereby decreasing Conversion Demand to a level less than the Minimum Conversion Demand, Mobile Energy would have the right to terminate all of the Energy Services Agreements. However, if, for example, the Paper Mill closed, thereby decreasing the Aggregate Demand for Steam Processing Services or the Aggregate Demand for Power Processing Services, but the demands for Steam Processing Services and the demands for Power Processing Services of the Pulp Mill and the Tissue Mill were collectively greater than the corresponding Minimum Demands, Mobile Energy would not have the right to terminate any of the Energy Services Agreements. Mobile Energy's right to terminate the Energy Services Agreements is not tied to its ability to pay principal of and interest on its outstanding indebtedness. Operating the Energy Complex at or above the Minimum Demand levels will not necessarily generate sufficient revenues to enable Mobile Energy to pay the principal of and interest on its outstanding indebtedness. I-37 Additions to and Modifications of the Energy Complex and the Mills Mobile Energy may, upon 60 days notice to the Mill Owners, change or modify the Energy Complex (A) at any time, if such changes or modifications, in Mobile Energy's judgment based on prudent operating standards, enhance, or (i) do not decrease the Maximum Capacity of the Energy Complex, except any such decrease that is required by a Change of Law, (ii) do not result in a reduction in the Energy Complex's capacity to burn Solid Waste, on an annual basis, below the average amount of Solid Waste burned by Scott in the 12 month period prior to the Acquisition Closing Date (unless and to the extent that Mobile Energy agrees to pay all reasonable costs incurred by the Pulp Mill Owner in connection with the disposal of all Solid Waste produced by the Pulp Mill that cannot be burned because of such changes) or (iii) are not reasonably expected to have a Mill Material Adverse Effect with respect to any Mill or (B) as a result of the creation of Reserved Demand, Relinquished Demand or Forfeited Demand. Each Mill Owner has the right to approve any changes to or modifications of the Energy Complex that are not in accordance with the preceding sentence. Each Mill Owner may, upon 60 days prior written notice to Mobile Energy, change or modify its Mill if such changes or modifications, in the Mill Owner's reasonable judgment based on prudent operating standards, will not materially and adversely affect the ability of any of the Mill Owners to comply with the terms of the Project Agreements, except as specifically provided therein. The Mill Owners will not be entitled to a pricing adjustment or modification of any Project Agreement (other than with respect to technical specifications) as a result of such changes or modifications. If the Mill's aggregate requirements for any of the Processing Services exceed the capacity of the Energy Complex to provide such Processing Service under the Energy Services Agreements, the Mill Owners may request that Mobile Energy negotiate (which negotiation is required to be conducted in good faith by each of the parties thereto) to determine whether an expansion of the Energy Complex would be mutually advantageous. This obligation to negotiate does not automatically entitle Mobile Energy to provide the Mill Owners with Processing Services in excess of the applicable Maximum Capacity. If the Mill Owners and Mobile Energy fail to agree to any such expansion of the Energy Complex within 60 days of receipt of such request, the Mill Owners will have the right to build new facilities or to contract with another person in order to satisfy the portion of their requirements for Processing Services which Mobile Energy is unable to provide. Transfer and Assignment Each Mill Owner has the right to transfer its Mill (i) without the consent of Mobile Energy (A) if such Mill Owner continues to be responsible for its obligations under the Projects Agreements or (B) in connection with a merger, consolidation or sale of substantially all of the Mill Owner's assets or the sale, lease, or the transfer of 50% or more of the ownership of the Mill, if the transferee or an affiliate thereof has substantial expertise in operating and managing facilities similar to the Mill and there is reasonable basis to conclude that the operations at the Mill will be conducted in accordance with specified prudent operating standards or (ii) with the consent of Mobile Energy, which may not be unreasonably withheld (each, a "Mill Permitted Transfer"). Any person to whom a Mill is transferred in conjunction with a Mill Permitted Transfer is required to become a party to various applicable Project Agreements by assuming the obligations of the Mill Owner whose Mill has been transferred. Any Mill Owner transferring its Mill would be released from its obligations under the Project Agreements (except in the case of a Mill Permitted Transfer pursuant to clause (A) above, in respect of which no such release would be contemplated) only upon the assumption of such obligations by the person to whom its Mill is transferred. The Pulp Mill Owner cannot transfer or otherwise dispose of its interest in the Process Water Plant and the Waste Water Treatment Plant, except as part of a Mill Permitted Transfer of all or substantially all of the Pulp Mill, without the unanimous written consent of Mobile Energy and the other Mill Owners. Mobile Energy may (A) upon prior written notice to, but without the prior consent of, the Mill Owners, (i) transfer all of the Energy Complex or permit to be transferred any interest in Mobile Energy to a direct or indirect wholly owned subsidiary of Southern, (ii) subject to certain conditions set forth in the Master Operating Agreement, transfer portions of the Energy Complex or permit to be transferred portions of Mobile Energy, so as to enable the Energy Complex to be a Qualifying Facility under PURPA, (iii) assign, pledge, mortgage or grant security interests in the Energy Complex and Mobile Energy's interests in the Energy Complex, and permit to be pledged any ownership interest in Mobile Energy, to a Lender (provided that the Lender executes a consent substantially I-38 in the form attached to the Master Operating Agreement) and (iv) transfer portions (by way of undivided interests) of the Energy Complex or permit to be transferred portions of Mobile Energy (which must in each case be less than 10%) (so long as Southern directly or indirectly retains ownership of at least 50% of Mobile Energy and Mobile Energy remains in control of the management of the Energy Complex) and (B) transfer all or substantially all of the Energy Complex, or permit to be transferred all or a portion of the ownership interest in Mobile Energy, with the prior written consent of the Mill Owners, which consent may not be unreasonably withheld (each such transfer, a "Mobile Energy Permitted Transfer"). All transfers pursuant to clause (A) must be to persons who (x) are not direct competitors of Scott/Kimberly-Clark or the Mill Owners (or Affiliates of such competitors), (y) agree to be bound by the Confidentiality Agreement and (z) by making such purchase, will not implicate or otherwise conflict with the Alabama Territorial Law ("Qualified Purchasers"). If Southern Electric and/or Holdings elected to sell any of its or their interests in Mobile Energy in order to qualify the Energy Complex as a Qualifying Facility under PURPA, then, pursuant to PURPA and the applicable regulations and restrictions thereunder, Southern may be required to forego some or all of its indirect control of the management and operations of Mobile Energy, and such control (or portion thereof) so foregone by Southern could become vested in the person(s) or entity(ies) acquiring such interests in Mobile Energy. As such, Southern may cease to control the management and operations of Mobile Energy and Mobile Energy may, in the future, be controlled and partially owned by a third party that is not affiliated with Southern. There can be no assurance that any such third party would control, or participate in the control of, the management and operations of Mobile Energy as effectively as companies affiliated with Southern. The Master Operating Agreement provides that upon a Mill Permitted Transfer or a Mobile Energy Permitted Transfer, the transferee must assume the obligations of the transferor under the applicable Project Agreements. Upon the assumption in writing by the transferee of the transferor's rights and obligations under the Project Agreements (or the portion of the transferor's rights and obligations corresponding to the portion of its Mill or Energy Complex that it has assigned, sold or otherwise transferred), the transferor will be released of its obligations under the Project Agreements, to the extent assigned and assumed, arising on or after the date of assignment and assumption. Dispute Resolution All disputes arising under any of the Operative Documents will be referred initially to the Site Operating Committee. If the Site Operating Committee is unable to resolve the dispute within 15 days, the senior management of the applicable parties will have 15 days to resolve the dispute. All disputes that the parties to the dispute agree are essentially technical in nature ("Technical Disputes") that cannot be resolved by the Site Operating Committee or senior management will be referred to a technical expert, who will be selected by the parties from a list appended to the Master Operating Agreement, and all other disputes that cannot be resolved by the Site Operating Committee or senior management will be resolved by an arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Mill Owner Maintenance Reserve Account Pursuant to the Master Operating Agreement, Mobile Energy is required, to provide for a "Mill Owner Maintenance Reserve Account" with a balance not to exceed $2,000,000. Mobile Energy may use the funds in such account for the payment of debt service or operations and maintenance costs and expenses, and (as discussed above) the Mill Owners may use such funds if they are exercising the Mill Owner Step-In Rights. The Mill Owner Maintenance Reserve Account cannot be subject to any lien or encumbrance pursuant to the Financing Documents. Scott/Kimberly-Clark and S.D. Warren have agreed that Mobile Energy may satisfy all of its obligations under the Master Operating Agreement with respect to the Mill Owner Maintenance Reserve Account by causing Southern to execute an agreement in favor of Mobile Energy, Scott/Kimberly-Clark and the Mill Owners (the "Mill Owner Maintenance Reserve Account Agreement") that would require Southern to deposit up to $2,000,000 in the aggregate in the Mill Owner Maintenance Reserve Account in the circumstances described in such agreement. Operator The Energy Services Agreements provide that Mobile Energy may at any time replace Southern Electric as the operator of the Energy Complex with any person who is a wholly owned, direct or indirect subsidiary of Southern (the "Southern Electric Operator"). Mobile Energy may not replace Southern Electric with any person other than a Southern Electric Operator without the prior written consent of the Mill Owners, which consent is not permitted to be unreasonably withheld I-39 or delayed. The Energy Services Agreements provide that if the proposed replacement operator is reasonably qualified and experienced in the operation of facilities similar to the Energy Complex, there is to be a presumption that the Mill Owners' consent to the proposed replacement operator should not be withheld. Miscellaneous Provisions The Master Operating Agreement provides that Mobile Energy and the Mill Owners will only be liable to the other parties for direct damages as a result of a breach or default by such party under any Operative Document. In no event will Mobile Energy or the Mill Owners be liable for claims of non-party customers, cost of money, loss of profits, loss of use of capital or revenue or any other incidental, special or consequential loss or damage, or for punitive or exemplary damages. However, any party may be liable to any other party for third party claims (other than the claims of non-party customers) against such other party. Each of the Mill Owners and Mobile Energy has agreed to indemnify the others (and certain related parties) from losses incurred by an indemnified party due to or resulting from (i) the breach by the applicable indemnifying party of any of its covenants under any of the Project Agreements (in the absence of any excuse therefor as set forth in the applicable Project Agreement) or (ii) the negligence or willful misconduct of the applicable indemnifying party. Until the Energy Services Agreements have been terminated, Mobile Energy may not, without the prior written consent of the Mill Owners (which consent cannot be unreasonably withheld), change or expand the nature of its business beyond that which is contemplated by the Project Agreements. The Energy Services Agreements and the Master Operating Agreement state that they are governed by the laws of the State of New York. Operations and Maintenance Agreement Mobile Energy and Southern Electric are parties to the O&M Agreement pursuant to which Southern Electric is obligated to assume responsibility for the operation and maintenance of the Energy Complex and provide certain related administrative and management services to Mobile Energy. On the Acquisition Closing Date, Southern Electric hired approximately 119 employees of Scott who were previously dedicated to the operations of the Energy Complex (the "Energy Complex Employees"). The O&M Agreement requires Southern Electric to operate and maintain the Energy Complex using the Energy Complex Employees and such additional employees of Southern Electric or of third-party subcontractors as may be required from time to time. Term The term of the O&M Agreement commenced on the Acquisition Closing Date and will terminate on December 16, 2019, unless earlier terminated in accordance with its terms. If the Energy Services Agreements are extended, Mobile Energy and Southern Electric are obligated to endeavor to extend the term of the O&M Agreement for a period equal to such extension period under the Energy Services Agreements. See, however, "-Termination." Termination Either party may terminate the O&M Agreement upon 30 days written notice in the event of a material breach of any material provision, unless the breach is cured within 30 days of receipt of such notice; however, the defaulting party will have up to an additional 90 days to cure such default if the defaulting party diligently pursues a cure, the breach is not reasonably susceptible to correction within 30 days, and the non-defaulting party is not, as a result of the continuation of the breach, in breach of a material provision of any other agreement. Either party may also terminate the agreement (i) following total casualty of the Energy Complex, (ii) following a Force Majeure Event that continues for more than 12 months, or (iii) for any other reason, with or without cause, upon (in the case of termination by Southern Electric) 180 days written notice or upon (in the case of termination by Mobile Energy) 30 days written notice. Obligations of Southern Electric Southern Electric is responsible for operating and maintaining the Energy Complex at Mobile Energy's expense in accordance with the requirements of the Energy Services Agreements, the Master Operating Agreement, specified prudent operating standards, operating manuals provided by Mobile Energy, all applicable governmental requirements and the annual operating plan for the Energy Complex. The operating and maintenance services include procuring all supplies, parts and I-40 equipment on behalf of Mobile Energy, performing all routine maintenance activities in connection with outages of the Energy Complex, making capital improvements, handling and disposing of wastes (to the extent not covered under agreements between Mobile Energy and other parties), and coordinating operations of the Energy Complex with Alabama Power and the Mill Owners with respect to the scheduling of back-up and supplemental electric service and Scheduled Outages. Southern Electric also is obligated to provide various administrative and management services to Mobile Energy, including administration of all Project Agreements to which Mobile Energy is a party (to the extent that they relate to the operation and maintenance of the Energy Complex), collection of payments to Mobile Energy under the Energy Services Agreements, administration of Mobile Energy's bank accounts and payment of Mobile Energy's expenses from such accounts, maintaining Mobile Energy's books and records, assisting Mobile Energy in obtaining and renewing all required permits and licenses, preparation of regulatory, financial and other reports required of Mobile Energy, and procuring and maintaining on Mobile Energy's behalf the insurance coverages required under the Project Agreements and Financing Documents. In addition, Southern Electric has designated an employee to serve as Mobile Energy's representative on the Site Operating Committee. Obligations of Mobile Energy Mobile Energy is responsible for providing, at its expense, all supplies, parts, stores, inventories (including, without limitation, black liquor, biomass, supplemental fuel, water, lubricants, and chemicals) necessary in connection with the operation and maintenance of the Energy Complex. Mobile Energy also is required to provide to Southern Electric and its subcontractors access to and use of facilities, equipment, vehicles, office equipment, warehouses, and employee amenities (parking, lavatories, dining facilities, etc.) necessary for the operation and maintenance of the Energy Complex. Compensation of Southern Electric; Annual Budget The services to be performed by Southern Electric under the O&M Agreement are provided on a full cost reimbursement basis in accordance with the rules of the SEC under PUHCA. Mobile Energy is obligated to pay, or reimburse Southern Electric for, all operation and maintenance costs incurred in connection with Southern Electric's performance, including all labor costs, and all other expenses that are included in the annual operating plan and budget (the "Operating Plan and Budget") prepared by Southern Electric, as it may be amended from time to time, costs and expenses of additional services that may be requested by Mobile Energy, and legal and other costs incurred by Southern Electric on Mobile Energy's behalf and at Mobile Energy's request in connection with enforcing the Project Agreements and in complying with applicable laws. Labor costs include the direct payroll costs associated with the Energy Complex Employees, including wages, salaries, direct payroll overheads such as pension and employee benefits, payroll taxes, bonuses, insurance, and holiday, sick leave and vacation accruals; and the direct payroll costs of Southern Electric's employees other than the Energy Complex Employees, as identified through a work order system, including an allocable share of such employees' direct payroll overhead costs, plus an allocable share of Southern Electric's general and administrative expenses. Southern Electric is obligated to prepare and submit for Mobile Energy's approval at least 150 days prior to the start of each contract year a proposed form of Operating Plan and Budget, which Mobile Energy is required to approve or disapprove within 60 days after submission. The Operating Plan and Budget is required to include, among other cost items, projected labor costs and other costs of operation and routine and scheduled major maintenance of the Energy Complex, projections of liquor, steam and electricity production, and fuel consumption. If Mobile Energy objects to Southern Electric's proposed Operating Plan and Budget, and such objections cannot be resolved through discussions, then an interim operating budget will go into effect for the following contract year which will be equal to the prior year's operating budget, except that the labor cost, operating expense and maintenance expense categories of the prior year's budget will be escalated in accordance with the U.S. Producers Price Index, and any expenses incurred in connection with scheduled outages and major maintenance will be reimbursed in full. Mobile Energy also is obligated to pay or reimburse Southern Electric in full for all additional operating costs attributable to force majeure events, the execution of new energy services agreements or any amendment to the existing Energy Services Agreements, among other events. I-41 Force Majeure Force majeure events that excuse performance by either party to the O&M Agreement include any circumstance beyond the reasonable control of a party, including but not limited to acts of God, unusually severe weather conditions, accident, fire, strikes, war, riots, actions of governmental authorities, and change of law. As to Southern Electric, force majeure does not include any labor dispute at the Energy Complex or involving the Energy Complex Employees. The party claiming force majeure is required to take steps to mitigate or limit damage to the other party. Miscellaneous Provisions Southern Electric is required to obtain automobile liability insurance, comprehensive general liability insurance and umbrella liability insurance, each of which must name Mobile Energy as the named insured, and workers' compensation insurance. Mobile Energy is required to obtain and maintain workers' compensation insurance, automobile liability insurance and all risk physical damage/business interruption insurance. Southern Electric's sole liability for non-conforming services shall be to correct such non-conforming services. Neither Southern Electric nor Mobile Energy shall be liable to the other party for any claim for any special, incidental, or consequential loss or damage of any nature. Mobile Energy is obligated to indemnify, save harmless and defend Southern Electric and its officers, directors, employees, agents and affiliates from and against all losses arising out of or related to the acts or omissions of Mobile Energy or to the services to be performed by Southern Electric, but only to the extent not caused by any indemnified party's gross negligence or willful misconduct. The O&M Agreement states that it is governed by the laws of the State of Georgia. SCS Agreement Services Mobile Energy and SCS are party to an agreement (including any amendments thereto the "SCS Agreement"), pursuant to which SCS has agreed, as and to the extent required by Mobile Energy, to keep itself and its personnel available and competent to perform for Mobile Energy, or to advise and assist Mobile Energy with respect to, (i) general administrative and advisory services, (ii) general engineering, including system production and transmission studies, preparation and analysis of electrical apparatus specifications, distribution studies and standards, civil engineering and hydraulic studies, fuel supply studies and operations analyses, (iii) design engineering, (iv) purchasing, including the coordination of group purchasing, (v) accounting and statistical services, including appearances before regulatory commissions, internal audits and preparation and analyses of financial and operating reports, (vi) finance and treasury services, including securities matters, banking matters and investment of surplus funds, (vii) tax matters, including preparation of tax returns, (viii) insurance and pension matters, (ix) corporate matters, including maintenance of corporate records and arrangements for stockholders' meetings, (x) rate analyses, (xi) construction and operating budgets and procedures, (xii) business promotion and public relations, (xiii) employee relations, including recruitment, placement, training, compensation, safety, labor relations and health, welfare and employee benefits and (xiv) other matters with respect to Mobile Energy's business and operations that Mobile Energy may request and SCS may be able to perform. Charges The SCS Agreement provides that SCS will be reimbursed by Mobile Energy for the costs SCS incurs in providing any of the foregoing services to Mobile Energy, including (i) direct costs incurred by SCS in the performance of a particular transaction for Mobile Energy and (ii) costs incurred by SCS that cannot be allocated directly to one client or transaction, which costs shall be distributed in a fair and equitable manner as set forth in SCS's cost allocation procedures. Term The SCS Agreement became effective on July 14, 1995 and will remain in effect until terminated by mutual agreement of the parties, except that SCS has the right to terminate the SCS Agreement upon six months notice at any time following the transfer of the Energy Complex. Direct Lease Mobile Energy and Scott/Kimberly-Clark are party to a lease (including any amendments thereto, the "Direct Lease") covering land owned by Scott/Kimberly-Clark located in Mobile County, Alabama on which Mobile Energy I-42 owns, uses, operates, repairs and maintains the Energy Complex and any additions or modifications thereto. Leased Premises The Direct Lease covers two lots ("Lot 7" and "Lot 9") comprising approximately 6.9 acres (the "Leased Premises") within the property owned by Scott/Kimberly-Clark (the "Real Property"). The Direct Lease is a ground lease relating solely to the land comprising the Leased Premises. In connection with obtaining financing through the Industrial Development Board of the City of Mobile, Alabama (the "IDB") for certain components of the Energy Complex located on Lot 9, Scott/Kimberly-Clark previously leased Lot 9 to the IDB pursuant to a lease (the "Scott-IDB Lease") and the IDB subleased Lot 9 back to Scott/Kimberly-Clark pursuant to a sublease (the "IDB-Scott Sublease"). Concurrently with the Acquisition, Scott assigned its rights and obligations under the IDB-Scott Sublease arising after the Acquisition Closing Date to Holdings, and Holdings subsequently assigned such rights and obligations to Mobile Energy. As such, Mobile Energy currently is subleasing Lot 9 from the IDB pursuant to the IDB-Scott Sublease. The Direct Lease and the IDB-Scott Sublease exist and operate concurrently. If, and to the extent that, Mobile Energy's obligations under the Direct Lease with respect to Lot 9 conflict or are inconsistent with Mobile Energy's obligations under the IDB-Scott Sublease, then the Direct Lease does not apply to Lot 9 with respect to such obligations. Term The term of the Direct Lease commenced on the Acquisition Closing Date, and will expire at 11:59 p.m. on December 15, 2019. Provided that all of the Energy Services Agreements are extended and renewed pursuant to such agreements, the Direct Lease will be automatically extended and renewed for a single five year term beginning on December 16, 2019 and expiring at 11:59 p.m. on December 15, 2024. Mobile Energy and Scott/Kimberly-Clark may, but are not required to, otherwise agree to extend the term of the Direct Lease. Rent Base rent during the term of the Direct Lease is $1 per year. In addition, Mobile Energy is required to pay all expenses related to or arising from the Leased Premises or Mobile Energy's activities thereon, except as expressly provided otherwise in the Direct Lease. Subject to the applicable provisions of the Operative Documents, Mobile Energy is required to pay all utility charges related to Mobile Energy's use of the Leased Premises and the expenses of installation, maintenance, use and service connected with such utilities. Mobile Energy is also required to pay all real estate taxes and assessments ("Impositions") related to the Direct Lease, the Leased Premises or the improvements located thereon. Should Mobile Energy fail to pay any Imposition when due and payable, and if such failure continues for 14 days after notice from Scott/Kimberly-Clark, Scott/Kimberly-Clark may pay the Imposition and the amount paid by Scott/Kimberly-Clark will be deemed additional rent payable by Mobile Energy within five days of Scott/Kimberly-Clark notifying Mobile Energy of Scott/Kimberly-Clark's payment of such Impositions. Mobile Energy will not be responsible for taxes or imposts on Scott/Kimberly-Clark's income, including the base rent, nor for Impositions attributable to periods prior to the commencement or subsequent to the expiration or termination of the Direct Lease. Purchase Options Mobile Energy Options Mobile Energy has an option to purchase the Leased Premises for a purchase price of $10 at various times. One such option held by Mobile Energy (the "Transfer Option") becomes effective if Scott/Kimberly-Clark elects, during the term of the Direct Lease, to transfer its interest in the Leased Premises to a third party other than another then Mill Owner. In such event, Scott/Kimberly-Clark is obligated to first give Mobile Energy three months notice of the proposed transfer. Mobile Energy will then have 45 days within which to exercise its Transfer Option to purchase the Leased Premises from Scott/Kimberly-Clark. In addition, Mobile Energy has an option to purchase the Leased Premises at the end of the Lease term for a purchase price of $10 (the "End of Term Option"). The End of Term Option is exercisable (a) if not all of the Energy Services Agreements have been renewed and extended on or before September 16, 2014, by notice from Mobile Energy to Scott/Kimberly-Clark delivered between June 16, 2014 and October 16, 2014 (the "Earlier Option Exercise Period"); (b) if all of the Energy Services Agreements timely have been renewed and extended, by notice from Mobile Energy to Scott/Kimberly-Clark delivered between June 15, 2019 and October 15, 2019 (the "Later Option Exercise Period"); or (c) if the Direct I-43 Lease is terminated prior to the expiration of the Earlier Option Exercise Period or the Later Option Exercise Period, as applicable, and Mobile Energy shall not have exercised its End of Term Option, by notice from Mobile Energy to Scott/Kimberly-Clark delivered within 30 days after the date on which the Direct Lease shall have terminated. If Mobile Energy timely and properly exercises any of its options to purchase the Leased Premises, and provided that, in the case of Mobile Energy's exercise of its End of Term Option, Scott/Kimberly-Clark does not void such exercise by exercising and consummating Scott/Kimberly-Clark's purchase option (described below), then Scott/Kimberly-Clark is obligated to sell the Leased Premises to Mobile Energy for $10. The closing of the purchase, in the case of Mobile Energy's exercise of its Transfer Option, would occur on or before the date on which Scott/Kimberly-Clark's proposed transfer to the third party closes or would have closed. The closing of the purchase, in the case of Mobile Energy's exercise of its End of Term Option, would occur on the last day of the Direct Lease term unless the term shall have terminated prior to Mobile Energy's exercise of its End of Term Option, in which event the closing would occur within 30 days of such exercise of the End of Term Option. Scott/Kimberly-Clark Option As described below, Scott/Kimberly-Clark has an option to repurchase the Energy Complex from Mobile Energy at the end of the term of the Direct Lease (the "Repurchase Option"), which may occur at different points in time. Scott/Kimberly-Clark may give Mobile Energy notice of its intention to exercise the Repurchase Option: (a) if the Direct Lease is not automatically renewed and extended, between July 16, 2014 and November 16, 2014 (the "Earlier Repurchase Option Period"); (b) if the Direct Lease is automatically renewed and extended, between July 15, 2019 and November 15, 2019 (the "Later Repurchase Option Period"); or (c) if the Direct Lease is terminated prior to the expiration of the Earlier Repurchase Option Period or the Later Repurchase Option Period, as applicable, and Scott/Kimberly-Clark shall not have exercised its Repurchase Option, within 30 days after the date on which the Direct Lease shall have terminated. If Scott/Kimberly-Clark were to exercise the Repurchase Option, it would not have the right or obligation to assume any debt of Mobile Energy; however, pursuant to the Consents to Assignment relating to the Direct Lease and the Supplementary Lease (as hereinafter defined), Scott/Kimberly-Clark has agreed that the Senior Secured Parties have no obligation to release the lien of the Financing Documents until all obligations secured thereby have been repaid in full. If Scott/Kimberly-Clark shall timely deliver its repurchase notice to Mobile Energy, then (a) if Mobile Energy previously shall have exercised its End of Term Option, such exercise shall be void and of no further force and effect, unless Scott/Kimberly-Clark fails timely to pay the purchase price for the Energy Complex, and (b) (i) by June 15, 2019, if the Direct Lease shall expire by its terms on December 15, 2019, or (ii) by June 15, 2024, if the Direct Lease shall expire by its terms on December 15, 2024, or (iii) otherwise, within 10 days of Mobile Energy's receipt of Scott/Kimberly-Clark's repurchase notice, Scott/Kimberly-Clark and Mobile Energy will jointly select an independent real estate appraiser to determine the fair market value of the Energy Complex. If Scott/Kimberly-Clark and Mobile Energy fail timely to select an appraiser, an appraiser will be appointed pursuant to the arbitration provisions of the Master Operating Agreement. The appraiser, within 30 days of its selection or appointment, must give written notice to Mobile Energy and to Scott/Kimberly-Clark of the appraiser's determination of the price that a ready and willing buyer would pay, as of the date of the appraiser's selection or appointment, for property comparable to the Energy Complex if the Energy Complex were offered for sale on the open market, taking into account the location of the Energy Complex at the Leased Premises and the purposes for which the Energy Complex may be used, including, without limitation, in conjunction with the Project Agreements and the services and fees provided and obtained thereunder, to the extent that Project Agreements actually or effectively (with respect to documents under which Mobile Energy provides services to Scott/Kimberly-Clark which Scott/Kimberly-Clark could, subsequent to the repurchase, supply to itself) would continue in effect subsequent to the repurchase. The appraiser's determination of the fair market value of the Energy Complex will be the purchase price to be paid by Scott/Kimberly-Clark to Mobile Energy, provided that (a) if the Direct Lease terminates on December 15, 2019, the determined value cannot exceed $69,080,000 or be less than $50,240,000, and (b) if the Direct Lease terminates between December 15, 2019 and December 15, 2024, the determined value cannot exceed $30,000,000 or be less than $22,000,000. I-44 Scott/Kimberly-Clark is obligated to pay the purchase price for the Energy Complex to Mobile Energy by wire transfer on or before the date that is the later of the last day of the Direct Lease term and 5 days after the appraiser delivers its determination of the fair market value for the Energy Complex. If Scott/Kimberly-Clark fails timely to pay the purchase price, and if Mobile Energy previously exercised its End of Term Option, then Mobile Energy's exercise of its End of Term Option again becomes effective and Mobile Energy may purchase the Leased Premises from Scott/Kimberly-Clark for $10. Early Termination of Direct Lease The Direct Lease may be terminated (1) by either party as a result of the occurrence of an event of default by the other party under the Direct Lease (a "Lease Event of Default"), (2) automatically as a result of the total and permanent taking of the Leased Premises in Condemnation (as hereinafter defined), (3) by Mobile Energy as the result of a partial taking of the Leased Premises in Condemnation that has a Mobile Energy Material Adverse Effect, or (4) by the mutual agreement of Mobile Energy and Scott/Kimberly-Clark, and not by any other cause or for any other reason whatsoever. Default The following acts or omissions by either party constitute Lease Events of Default: (i) failure to pay any sum required to be paid under the Direct Lease, which failure continues for 10 days after written notice has been delivered to the nonpaying party (a "Monetary Default"); and (ii) failure to comply in any material respect with any material term, provision or covenant of the Direct Lease, other than the payment of sums due under the Direct Lease, which failure continues for 30 days after written notice has been delivered to the nonperforming party, or, if such failure cannot reasonably be cured within 30 days, if the nonperforming party shall not have begun to cure the failure within such 30-day period or shall not thereafter proceed with all reasonable due diligence and good faith to cure such failure within a reasonable longer period necessary to cure such failure (a "Non-Monetary Default"); provided that if a Non-Monetary Default on the part of Mobile Energy occurs through no act or omission of Mobile Energy and such Non-Monetary Default is not reasonably curable, so long as such Non-Monetary Default does not have a Mill Material Adverse Effect with respect to Scott/Kimberly-Clark, such Non-Monetary Default shall not be deemed a Lease Event of Default. Upon the occurrence and during the continuation of any Lease Event of Default, the non-defaulting party may: (a) terminate the Direct Lease, (b) enforce its rights under the Direct Lease without reentering or resuming possession of the Leased Premises and without terminating the Direct Lease, (c) perform any obligation or make any payment required to cure the Lease Event of Default after at least 10 days' notice (except in case of emergency when action is required to protect lives or property) to the defaulting party of the nondefaulting party's intent to pursue this remedy if the defaulting party does not cure the Lease Event of Default within such time period, and (d) exercise any other rights it has at law or in equity. In addition to the foregoing, subject to the rights of the Leasehold Mortgagee(s) (as hereinafter defined) under the Direct Lease or pursuant to the Estoppel and Consent attached as Exhibit D to the Direct Lease (the "Estoppel and Consent"), either party may terminate the Direct Lease, effective immediately, if a bankruptcy event occurs with respect to the other party. Condemnation If the Leased Premises are totally and permanently taken by (i) the exercise of any governmental power, whether by legal proceedings or otherwise, by any public or quasi public authority, or private corporation or individual having the power of condemnation or (ii) the voluntary sale or transfer by Scott/Kimberly-Clark or Mobile Energy to any condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending ("Condemnation"), the Direct Lease will terminate on the effective date of the Condemnation (the "Date of Taking"). If a portion of the Leased Premises is taken by Condemnation and such partial Condemnation has a Mobile Energy Material Adverse Effect, Mobile Energy may elect to terminate the Direct Lease upon 30 days notice to Scott/Kimberly-Clark delivered to Scott/Kimberly-Clark not more than 30 days after the Date of Taking, which termination will be effective on the later of (i) the Date of Taking and (ii) 30 days after delivery of such termination notice to Scott/Kimberly-Clark. In either case, if the Direct Lease terminates, Mobile Energy will be entitled to receive that portion of any award attributable to the value of the Energy Complex and its interest in the Direct Lease and the Leasehold Premises ("Leasehold Interest"), each to the extent taken; and I-45 Scott/Kimberly-Clark will be entitled to receive that part of any award attributable to the value of the Leased Premises, exclusive of the Leasehold Interest, to the extent taken. If a portion of the Leased Premises are taken by Condemnation and such partial Condemnation does not have a Mobile Energy Material Adverse Effect, or if Mobile Energy does not elect to terminate the Direct Lease despite such Condemnation having a Mobile Energy Material Adverse Effect, the Direct Lease will remain in effect, and Mobile Energy, at its cost, is obligated to restore the Energy Complex as necessary, provided that Mobile Energy will not be required to expend an amount exceeding the amount of the entire award paid in compensation for such taking (all of which award will be paid to Mobile Energy). If all or any portion of the Leased Premises are taken by any public authority for a period of six months or less, such taking will not constitute a Condemnation, and during such temporary taking, all of the provisions of the Direct Lease will remain in full force and effect. Assignment and Subletting Mobile Energy, without the consent of Scott/Kimberly-Clark, may encumber its Leasehold Interest, or any portion thereof, with one or more mortgages (each, a "Leasehold Mortgage") for the benefit of lenders providing financing to Mobile Energy (each such lender, a "Leasehold Mortgagee"). Scott/Kimberly-Clark has agreed to permit Mobile Energy to mortgage the Leasehold Interest pursuant to the Financing Documents, and Scott/Kimberly-Clark has entered into the Estoppel and Consent with the Collateral Agent under the Financing Documents. Mobile Energy also may transfer its Leasehold Interest, or a portion thereof, in connection with a Mobile Energy Permitted Transfer. Otherwise, Mobile Energy may not (i) sublet, assign, pledge or otherwise transfer the Leased Premises without the prior written consent of Scott/Kimberly-Clark, which consent cannot be unreasonably withheld or (ii) assign or transfer a portion of its Leasehold Interest. Scott/Kimberly-Clark, in conjunction with any Mill Permitted Transfer, may assign, sell or otherwise transfer all or a corresponding portion of its interests in the Direct Lease and/or the Leased Premises without the prior written consent of Mobile Energy. Otherwise, Scott/Kimberly-Clark may assign, sell or otherwise transfer all or a portion of its interests in the Direct Lease and/or the Leased Premises with the prior written consent of Mobile Energy, which consent cannot be unreasonably withheld or delayed. If either party effects a permitted assignment or other transfer of its interests under the Direct Lease (other than a transfer for security purposes unless and until such security is foreclosed upon), the permitted assignee or transferee shall expressly assume, in documentation reasonably satisfactory to the non-transferring party, all existing and future obligations of the transferring party under the Direct Lease with respect to the transferred interests, and the transferring party will be relieved of all further liability under the Direct Lease with respect to the transferred interests from and after the date of the transfer. Leasehold Mortgages The Direct Lease provides that no Leasehold Mortgagee will be deemed to be an assignee or transferee or mortgagee in possession of the Leasehold Interest unless, and only for so long as, the Leasehold Mortgagee has obtained possession of the Leased Premises as a mortgagee or has acquired the Leasehold Interest by foreclosure or a deed or assignment in lieu thereof ("Control of the Premises"). No Leasehold Mortgagee or purchaser at a foreclosure sale held pursuant to a Leasehold Mortgage will be liable under the Direct Lease unless and until it becomes, and only for so long as it remains, the owner of the Leasehold Interest. If any existing or prospective Leasehold Mortgagee requires any modification to the Direct Lease, which modification does not materially adversely affect any of Scott/Kimberly-Clark's rights or obligations thereunder, or confirmation of the rights of Leasehold Mortgagees under the Direct Lease, at Mobile Energy's request, Scott/Kimberly-Clark is obligated to execute and deliver to Mobile Energy written instruments in recordable form effecting such modifications or confirming such rights. The Direct Lease provides that upon a Leasehold Mortgagee providing Scott/Kimberly-Clark with written notice of such Leasehold Mortgagee's name and address, then as to such Leasehold Mortgagee: (i) No cancellation, termination, surrender or modification of the Direct Lease will bind the Leasehold Mortgagee or affect the lien of its Leasehold Mortgage without the prior written consent of the Leasehold Mortgagee; I-46 (ii) No notice to Mobile Energy will be effective or will trigger any Lease Event of Default unless and until a copy of such notice has been given to the Leasehold Mortgagee; (iii) The Leasehold Mortgagee may perform any obligation of Mobile Energy under the Direct Lease and remedy any default, which performance Scott/Kimberly-Clark is obligated to accept as if performed by Mobile Energy; (iv) Upon the occurrence of a Lease Event of Default on the part of Mobile Energy, Scott/Kimberly-Clark is obligated to give the Leasehold Mortgagee additional written notice of the Lease Event of Default and additional time to cure such Lease Event of Default (including time to obtain Control of the Premises if necessary to commence or complete such cure) ("Mortgagee's Cure Rights"), and if the Lease Event of Default is properly cured (or the time for Leasehold Mortgagee to exercise Mortgagee's Cure Rights has not expired), the Direct Lease will continue in effect as if no default occurred and Scott/Kimberly-Clark may not exercise any of its rights or remedies under the Direct Lease by reason of such Lease Event of Default; (v) If a Leasehold Mortgagee (or its nominee or a purchaser at a foreclosure sale) acquires Control of the Premises and cures all Monetary Defaults and diligently proceeds to exercise Mortgagee's Cure Rights, Scott/Kimberly-Clark is obligated to recognize the Leasehold Mortgagee (or its nominee or assignee or the purchaser) as the lessee under the Direct Lease; and (vi) If the Direct Lease terminates for any reason prior to the stated expiration date, Scott/Kimberly-Clark is obligated to give notice to the Leasehold Mortgagee of such termination within 30 days of the termination, and the Leasehold Mortgagee (or its nominee) may enter into a new lease of the Leased Premises for the remainder of the term of the Lease on the same terms and conditions as the Direct Lease. If there is more than one Leasehold Mortgagee, the Leasehold Mortgagee most senior in lien (as shown on a then-current title report or commitment by a reputable company licensed to do business in Alabama) desiring to exercise Mortgagee's Cure Rights will have the right to do so. The ability of the Collateral Agent to foreclose upon the Direct Lease and the Energy Complex without foreclosing upon the other Project Contracts is limited by the provisions of the Consents to Assignment. Superiority of the Direct Lease The Direct Lease provides that any fee mortgage granted by Scott/Kimberly-Clark encumbering all or any portion of the Leased Premises will be required to expressly state that it is subject and subordinate to the Direct Lease and to any and all Leasehold Mortgages. At the request of Mobile Energy or any Leasehold Mortgagee, Scott/Kimberly-Clark will be required to cause each fee mortgagee to acknowledge in writing that the Direct Lease and Mobile Energy's and the Leasehold Mortgagees' right of quiet enjoyment under the Direct Lease are superior to and not to be disturbed by such fee mortgagee. Liens The Direct Lease provides that Scott/Kimberly-Clark is not permitted to commit or omit to do any act that would cause a lien to arise with respect to the Energy Complex, other than certain permitted liens, nor to amend any of the "Permitted Encumbrances" listed on Exhibit C to the Direct Lease without the consent of Mobile Energy if such amendment would affect the Leased Premises or Mobile Energy's ability to use and operate the Energy Complex. Scott/Kimberly-Clark is obligated to discharge or bond against any such lien that is not permitted within 30 days of notice of the filing of such lien unless Scott/Kimberly-Clark is contesting such lien in good faith and such contest does not place Mobile Energy's ownership, lease or use, as applicable, of the Energy Complex, or any portion thereof, in imminent danger of sale, forfeiture or loss. The Direct Lease provides that Mobile Energy will keep the Leased Premises and any interest therein free of all liens other than liens arising under the Financing Documents and other specified permitted liens. Mobile Energy is obligated to discharge or bond against any such lien that is not permitted within 30 days of notice of the filing of such lien unless Mobile Energy is contesting such lien in good faith and such contest does not place Scott/Kimberly-Clark's ownership of the Pulp Mill, the Tissue Mill or the Real Property, or any portion thereof, in imminent danger of sale, forfeiture or loss. I-47 If a party (the "Responsible Party") discovers a lien required to be discharged by it, it is required to promptly to give notice of such lien to the other party. If the Responsible Party does not timely discharge the lien (including proper contest of such lien, if applicable), the other party may procure the discharge of the lien by payment, deposit of the amount in dispute in court or bonding. The Responsible Party is required to pay to the other party any amount so paid or deposited by the other party and all related costs and expenses, including reasonable attorneys' fees, incurred in procuring the discharge, together with interest from the date of payment or deposit, within 15 days of demand. Force Majeure Neither party will be considered in default under the Direct Lease as a result of any Force Majeure Event, so long as the party claiming a Force Majeure Event (i) gives reasonably detailed notice to the other party promptly after becoming aware of the Force Majeure Event and keeps the other party informed of any changes in such circumstances, including when the Force Majeure Event ends, (ii) makes all reasonable efforts to remedy the circumstances constituting the Force Majeure Event and mitigate the adverse effects thereof, and (iii) promptly resumes its performance following the end or remedy of the Force Majeure Event. Dispute Resolution All disputes between Scott/Kimberly-Clark and Mobile Energy that arise out of, under or in connection with the Direct Lease are required to be resolved in accordance with the dispute resolution procedures set forth in the Master Operating Agreement. Surrender Unless Mobile Energy has exercised its option to purchase the Leased Premises and Scott/Kimberly-Clark has not nullified such exercise by timely opting to repurchase and consummating the repurchase of the Energy Complex from Mobile Energy, upon termination or expiration of the Direct Lease, Mobile Energy will surrender the Leased Premises to Scott/Kimberly-Clark, "as-is," "where-is" and lien-free except for such liens to which Scott/Kimberly-Clark has expressly consented to remain in effect on or after such termination. Mobile Energy will take reasonable steps to vest title to the Energy Complex in Scott/Kimberly-Clark. If Scott/Kimberly-Clark has not repurchased the Energy Complex, within the six months following the later of (i) the termination of the Direct Lease and (ii) the last day on which Scott/Kimberly-Clark could have delivered its repurchase notice to Mobile Energy, Mobile Energy may dismantle and remove the Energy Complex from the Leased Premises. Any portion of the Energy Complex not timely removed from the Leased Premises will be deemed surrendered to Scott/Kimberly-Clark. Indemnification Indemnification provisions in the Direct Lease are substantially similar to those in the Energy Services Agreements. Supplementary Lease Mobile Energy and Scott/Kimberly-Clark are party to a lease (including any amendments thereto, the "Supplementary Lease") covering land owned by Scott/Kimberly-Clark located at the Mobile Facility, on which Mobile Energy will own, erect, construct, use, operate, repair and maintain a black liquor tank and Mobile Energy's maintenance facility (collectively, the "Supplementary Facility") and any additions or modifications thereto. The Supplementary Lease is identical to the Direct Lease except in the following respects: Site The Supplementary Lease covers two portions of one lot ("Lot 11") of the Real Property comprising approximately 3.86 acres (the "Supplementary Leased Premises"). The Supplementary Lease is a ground lease relating solely to the land comprising the Supplementary Leased Premises; Mobile Energy holds title to the Supplementary Facility located on the Supplementary Leased Premises. Term If Mobile Energy timely exercises and consummates either its Transfer Option or its End of Term Option to purchase the Leased Premises under and pursuant to the Direct Lease, the term of the Supplementary Lease will automatically be renewed for an additional period of 25 years. I-48 Rent If the Supplementary Leased Premises are not assessed separately but instead assessed as part of a larger tract of land (because the Supplementary Leased Premises comprise only a portion of Lot 11), Scott/Kimberly-Clark and Mobile Energy will be required to apportion any Impositions resulting from such assessment, Mobile Energy shall pay its proportionate share of the Impositions to Scott/Kimberly-Clark, and Scott/Kimberly-Clark shall promptly deliver to Mobile Energy proof of Scott/Kimberly-Clark's timely payment of the entire amount of such Impositions to the applicable taxing authorities. Purchase Option Neither party has any purchase options under the Supplementary Lease. Early Termination of Lease As additional grounds for termination, the Supplementary Lease may be terminated upon Scott/Kimberly-Clark's timely exercise and consummation of its Repurchase Option pursuant to the Direct Lease. Default If a bankruptcy event shall occur with respect to Mobile Energy and in the event that Mobile Energy timely exercises and consummates its End of Term Option pursuant to the Direct Lease, then (i) if prior to the consummation of Mobile Energy's End of Term Option, Scott/Kimberly-Clark exercised its right to terminate the Supplementary Lease because of the bankruptcy event, then the Supplementary Lease will be reinstated immediately and will continue in full force and effect as if it had never been terminated, and (ii) after such consummation of Mobile Energy's End of Term Option, in no event will the occurrence and continuation of such bankruptcy event be deemed a Lease Event of Default or give rise to the right that Scott/Kimberly-Clark otherwise would have to terminate the Supplementary Lease because of such bankruptcy event. Surrender Mobile Energy has no dismantling rights under the Supplementary Lease. Easement Deeds Mobile Energy, Scott/Kimberly-Clark and S.D. Warren are party to bilateral easement deeds (the "Easement Deeds"), pursuant to which Scott/Kimberly-Clark has granted Mobile Energy easements with respect to the Tissue Mill and the Pulp Mill, S.D. Warren has granted Mobile Energy easements with respect to the Paper Mill, and Mobile Energy has granted easements to Scott/Kimberly-Clark and S.D. Warren with respect to the Energy Complex. Mobile Energy and Scott/Kimberly-Clark are party to an easement deed (the "Supplementary Easement Deed") pursuant to which Scott/Kimberly-Clark has granted Mobile Energy non-exclusive easements benefiting the Supplementary Leased Premises. The easements are non-exclusive blanket easements over the lots owned or controlled by each Mill Owner or Mobile Energy, as applicable, which are intended to give the grantee sufficient access, use and encroachment rights to operate its Mill or the Energy Complex, as applicable, and to utilize the Common Facilities (as hereinafter defined). Easement Deeds to Mobile Energy The term of the Easement Deeds ends upon the termination of the Direct Lease; provided that if Mobile Energy purchases the Leased Premises from Scott/Kimberly-Clark pursuant to the Direct Lease, the Easement Deeds. In addition, each of the Mill Owners has granted Mobile Energy a non-exclusive temporary easement (the "Interim Easements") for access to the warehousing, receiving, storeroom and capital spares buildings and facilities (including the use of capital spare parts, Dedicated Consumables (as hereinafter defined) and common spare parts in accordance with the provisions of the Transition Agreement (as hereinafter defined)), and the central drawing files. The term of the Interim Easements ends on the earlier of April 16, 1996, and the date on which the maintenance facility to be constructed by Mobile Energy is substantially completed. Each grantee is obligated to use its easements so as not to (a) interfere unreasonably with the grantor's use, occupancy or enjoyment of its portion of the Mobile Facility and (b) cause unnecessary foreseeable injury to persons or damage to adjacent property. If a grantee undertakes any maintenance, repair or replacement work within any easement area, upon completion, the grantee is obligated to restore the affected area to its former condition. I-49 The grantors are not permitted to interfere with the easements or with the location of a grantee's equipment, systems or facilities, the Common Facilities, or other equipment and facilities used by the grantee located on the grantor's portion of the Mobile Facility; provided that a grantor may relocate, at its own expense, any of the foregoing located on the grantor's portion of the Mobile Facility if (a) the grantor gives the grantee and the Site Operating Committee 30 days' advance written notice of the proposed relocation, (b) the grantee gives the grantor written approval of the proposed relocation, which approval the grantee may not unreasonably withhold, and (c) the grantor conducts post-construction tests of the relocated equipment, system or facility as reasonably required by the grantee. Common Services Agreement The Common Services Agreement provides for the sharing by Mobile Energy, Scott/Kimberly-Clark, and the Paper Mill Owner of security services, major maintenance and capital improvements to the Air Compressors, computerized data concerning the Energy Complex and the Mills ("Data Sharing") and maintenance of common roads (the "Essential Common Services") and medical services, the training of new maintenance personnel ("Maintenance Training Services"), maintenance of certain parking lots, and certain food service to employees (the "Optional Common Services" and collectively with the Essential Common Services, the "Common Services"), including, in each case, the cost thereof. The term of the Common Services Agreement as to any party to it began on the Acquisition Closing Date and will end on the date of the termination of the Master Operating Agreement with respect to that party, unless otherwise agreed by the parties. Performance of Common Services Scott/Kimberly-Clark, in its capacity as either the Tissue Mill Owner or the Pulp Mill Owner (as applicable), is required to perform the Essential Common Services (other than Data Sharing, which is the obligation of all parties), in a manner consistent with prudent operating standards and subject to the direction of the Site Operating Committee. Scott/Kimberly-Clark, in its capacity as the Tissue Mill Owner or the Pulp Mill Owner, is required to provide the Optional Common Services to the other parties in substantially the same manner and according to the same standards as Scott/Kimberly-Clark provides for its own use and benefit from time to time. Scott/Kimberly-Clark may alter in its reasonable discretion the particulars of any Optional Common Service, provided that any change in the costs of such Optional Common Service will be accounted for in accordance with the Common Services Agreement. Outsourcing Scott/Kimberly-Clark, after providing 30 days written notice to the other parties (or such lesser notice as is reasonable under the circumstances), may outsource any Optional Common Service to responsible third parties that, in the good faith and reasonable judgment of Scott/Kimberly-Clark, are experienced and competent to provide such services. With the concurrence of the Site Operating Committee, Scott/Kimberly-Clark may outsource any of the Essential Common Services not already outsourced as of the date of the Common Services Agreement to experienced, competent and responsible third parties. Unless the parties agree otherwise, the fees payable under the Common Services Agreement will be adjusted in accordance with the terms thereof to account for the costs of any outsourced Common Service. To the extent permitted under the applicable outsourcing contract, the Site Operating Committee may adjust the fee payable to the provider of an outsourced Essential Common Service. At Scott/Kimberly-Clark's election and if required by applicable law and approved by the Site Operating Committee and appropriate under the circumstances, the third party providing an outsourced Common Service may do so by contracting directly with the parties requiring that Common Service. The limitations of liability set forth in the Common Services Agreement apply to Scott/Kimberly-Clark's decision to outsource any Common Service. However, the terms of any contract with a third-party provider of Common Services shall control as to that third party's required standard of performance, provided that Scott/Kimberly-Clark shall use good faith efforts to cause each third-party provider of Essential Common Services to achieve a level of service substantially equivalent to the specified prudent operating standard. Termination of Particular Common Services The Paper Mill Owner, Mobile Energy, or any new owner of the Pulp Mill may, upon 30 days written notice to the other parties, begin providing or procuring for I-50 itself any Optional Common Service, including any outsourced Optional Common Service. The party providing its own service shall no longer be liable to Scott/Kimberly-Clark for the costs of the corresponding Optional Common Service and the fees payable under the Common Services Agreement will be adjusted in accordance with the terms thereof. Furthermore, Scott/Kimberly-Clark will not be required to provide Maintenance Training Services past January 1, 2000. Facilities; Easements All right, title and interest to the cafeteria, the compressed air facility, the maintenance training facility, certain medical facilities and certain common road and parking lots (the "Common Facilities") is vested solely in Scott/Kimberly-Clark except as otherwise set forth in the Easement Deeds. Scott/Kimberly-Clark expressly disclaims any warranty of title to or condition of the Common Facilities. All rights of ingress, egress and access necessary for the parties to perform their obligations under the Common Services Agreement are set forth in the Easement Deeds. Payments Within ten days after the last day of each month, Scott/Kimberly-Clark is required to deliver an invoice to each of the other parties setting forth each party's Common Services fees for the immediately preceding month as set forth in Schedule A to the Common Services Agreement. Each party is required to pay to Scott/Kimberly-Clark the amount due within 15 days of receipt of the invoice. In the case of any outsourced Common Service where the parties are not billed separately, Scott/Kimberly-Clark is required to forward the third-party invoice at least 10 business days before it is due (or as soon as possible) and the other parties are required to reimburse Scott/Kimberly-Clark for their share in accordance with the percentage allocation set forth in the second column of Schedule A to the Common Services Agreement at least two business days before payment is due to the third party. Overdue charges assessed by a third-party provider shall be paid by the party whose late payment caused such charges. The Common Services fees and the allocations thereof set forth in Schedule A to the Common Services Agreement are required to be adjusted immediately to account for Scott/Kimberly-Clark outsourcing any Common Service and a party's termination of a Common Service as to itself. The parties also are required to review the Common Services fees and allocations at the beginning of each year to account for changes in the cost of complying with any law affecting the providing of a Common Service, changes to the nature of a Common Service, and reasonably anticipated changes, based on experience or expected developments, in Scott/Kimberly-Clark's cost of providing any Common Service. Future Transfer of the Pulp Mill and/or the Tissue Mill Until such time as Scott/Kimberly-Clark may choose to sell or otherwise transfer the Pulp Mill, the Common Services fee allocated to the Pulp Mill pursuant to Schedule A to the Common Services Agreement will be for the account of Scott/Kimberly-Clark. Following such transfer, the new owner of the Pulp Mill will become a party to the Common Services Agreement and will assume the rights and obligations of Scott/Kimberly-Clark in its capacity as the Pulp Mill Owner. The Common Services Agreement provides that if Scott/Kimberly-Clark chooses to sell or otherwise transfer the Tissue Mill, the new owner of the Tissue Mill will be required to assume all rights and obligations of Scott/Kimberly-Clark in its capacity as the Tissue Mill Owner under the Common Services Agreement. Standard of Service Except as set forth in certain sections of the Common Services Agreement, none of the parties makes any warranty or covenant with respect to the level or extent of services performed by such party or by any third party engaged by such party under the Common Services Agreement. Miscellaneous Provisions Each party to the Common Services Agreement has agreed to indemnify, defend and hold harmless each other party from and against any losses incurred by an indemnified party due to or resulting from (i) the indemnified party's performance of any action or service to be performed for the indemnifying party pursuant to the Common Services Agreement in the absence of any gross negligence or willful misconduct on the part of the indemnified party, (ii) the gross negligence or willful misconduct of the indemnifying party or (iii) the breach by an indemnifying party of any of its representations or warranties contained in the Common Service Agreement. I-51 The Common Services Agreement provides that no party will be liable for any incidental, special or consequential damages or for punitive or exemplary damages, provided that the foregoing limitation shall not limit any party's obligation to indemnify the other parties for any losses occasioned by third party claims against the indemnified party. The provisions of the Master Operating Agreement apply with respect to the determination of, response to and obligations arising out of any Force Majeure Event. Each party may assign or transfer its rights and obligations under the Common Services Agreement only in accordance with the Master Operating Agreement's assignment provisions. Upon the transfer or sale of one of the Mills or the Energy Complex, the assignment by the transferring party of its rights and obligations under the Common Services Agreement corresponding to the portion of the transferring party's interest in the Mill or Energy Complex being transferred and the written assumption of such rights and obligations by the transferee releases the transferring party from all obligations so assigned and assumed. The Common Services Agreement states that it is governed by the laws of the State of New York. Transition Agreement Mobile Energy and Scott/Kimberly-Clark are party to a Transition Agreement (including any amendments thereto, the "Transition Agreement") which requires Scott/Kimberly-Clark to provide certain services to the Energy Complex after the Acquisition Closing Date in the same manner in which Scott provided such services to the Energy Complex before the Acquisition Closing Date. Spare Parts Services In conjunction with the Acquisition, Scott sold to Mobile Energy certain spare parts used in connection with the Energy Complex ("Dedicated Consumables") for approximately $2,400,000. During a period which will expire at the earlier of the time when Mobile Energy begins to operate its own warehouse for the Energy Complex or April 16, 1996, (the "Pre-Warehouse Period") Scott/Kimberly-Clark will store and manage the Dedicated Consumables for the benefit of Mobile Energy. Mobile Energy may also reorder Dedicated Consumables and cause Scott/Kimberly-Clark to store and manage such reordered Dedicated Consumables. Scott/Kimberly-Clark is obligated to deliver any Dedicated Consumable stored in the warehouse to Mobile Energy at Mobile Energy's direction, provided that Scott/Kimberly-Clark will not incur any liability (other than for gross negligence or willful misconduct) to Mobile Energy for failure to deliver a requested Dedicated Consumable if it is not in fact in the inventory regardless of whether it is on an inventory list. To ensure the accuracy of any inventory list, Mobile Energy is entitled, from time to time, to inspect the inventory against the inventory list maintained by Scott/Kimberly-Clark. Mobile Energy shall pay a five percent handling fee on each delivered Dedicated Consumable. At the end of the Pre-Warehouse Period, Scott/Kimberly-Clark shall deliver to Mobile Energy all Dedicated Consumables remaining in its warehouse. In addition, Scott/Kimberly-Clark may, at Mobile Energy's request, sell to Mobile Energy any common spare part in Scott/Kimberly-Clark's warehouse at a price equal to Scott/Kimberly-Clark's invoice cost plus taxes, freight and an 18% handling fee. Other Services Other services covered by the Transition Agreement include software services, PBX services and telephone services, each of which is provided by Scott/Kimberly-Clark to Mobile Energy for some period following the Acquisition Closing Date at the prices provided in the Transition Agreement. In addition, the Transition Agreement permits Mobile Energy to use certain maintenance facilities and two-way radio station facilities for some time period following the Acquisition at the prices provided in the Transition Agreement. Miscellaneous Provisions Mobile Energy is required to pay any invoice received from Scott/Kimberly-Clark under the Transition Agreement within fifteen days of receipt. However, for any service provided to Mobile Energy under the Transition Agreement for which Scott/Kimberly-Clark receives an invoice from a third party on behalf of Mobile Energy, Scott/Kimberly-Clark is required to forward the invoice to Mobile Energy at least 10 business days before it is due, and Mobile Energy is obligated to pay Scott/Kimberly-Clark the amount Mobile Energy owes at least two business days before it is due. I-52 Neither Scott/Kimberly-Clark nor Mobile Energy makes any representations or warranties by virtue of the Transition Agreement or with respect to the goods and services to be provided under the Transition Agreement. Upon written notice to Mobile Energy, Scott/Kimberly-Clark may, in connection with the sale or transfer of a Mill, assign any of its rights, duties or obligations under the Transition Agreement to the Tissue Mill Owner or the Pulp Mill Owner, as appropriate, provided, however, that such assignee is capable of providing the service so assigned in the same manner as Scott/Kimberly-Clark has provided such service. Upon such assignment, Scott/Kimberly-Clark shall thereafter be released of any obligation with respect to the service so assigned for events occurring after the assignment. Each of Scott/Kimberly-Clark and Mobile Energy has agreed to indemnify and hold harmless the other party from all damages incurred by either indemnified party arising from any acts of negligence or willful misconduct by such indemnifying party with respect to the indemnifying party's performance of its obligations under the Transition Agreement. However, Scott/Kimberly-Clark will have no liability arising from any third party's performance of or failure to perform any services under the Transition Agreement. Finally, the Transition Agreement provides that neither party will be liable for any indirect, special or consequential damages arising under the Transition Agreement or from the performance of or the failure to perform any service under the Transition Agreement. The Transition Agreement states that it is governed by the laws of the State of New York. Water Procurement and Effluent Services Agreement Mobile Energy and the Mill Owners are party to the Water Agreement which, among other things, defines and allocates among the Mill Owners and Mobile Energy certain rights and obligations relating to water usage and procurement and the provision of water treatment-related utilities and services, including waste water treatment services. The term of the Water Agreement commenced on the Acquisition Closing Date and will terminate with respect to each party when such party is no longer a party to the Master Operating Agreement. Pursuant to the Water Agreement, Mobile Energy has appointed the Pulp Mill Owner as its agent for purposes of (1) procurement and treatment of process water and (2) procurement and supply of potable water, sanitary sewer service and water for fire protection. The Pulp Mill Owner has also agreed to accept waste water effluent from each of the Mills and the Energy Complex, so long as the effluent meets certain specifications, caps and prohibitions set forth in the Water Agreement, the State Indirect Discharge Permits ("SID Permits"), as applicable, and in any other applicable Governmental Rule, and which is discharged in accordance with those certain Rules Governing Discharge to the Waste Water Treatment Plant (the "Rules Governing Discharge"). The Pulp Mill Owner will treat such effluent in its Waste Water Treatment Plant for discharge in accordance with the terms of its NPDES permit. If reasonably possible and consistent with its NPDES permit and other requirements of law, the Pulp Mill Owner is required to accept and treat effluent from any of the Mills or the Energy Complex which does not comply with applicable specifications. In the event of a noncomplying discharge, however, the Pulp Mill Owner may undertake one or more of the following actions: (1) prohibit the discharge after reasonable notice and opportunity to cure; (2) impose additional reasonable discharge conditions; (3) require reasonably necessary pretreatment; (4) require reasonably necessary control over the quality, quantities and rates of discharges to the Waste Water Treatment Plant; or (5) require payment by the noncomplying discharger of the Pulp Mill Owner's reasonable additional costs associated with the noncomplying discharge. The Pulp Mill Owner may modify the discharge specifications or prohibitions set forth in the Water Agreement and the Rules Governing Discharge as reasonably required to maintain compliance with its NPDES permit or other Governmental Rule or as reasonably required by the capability of its Waste Water Treatment Plant. The Pulp Mill Owner is required to provide each of the other Mill Owners and Mobile Energy a monthly invoice for the services provided during the preceding month. The current pro-rata shares of the parties for purposes of the Water Agreement are as follows: I-53 Pulp Mill................................. 44.4% Tissue Mill............................... 24.4% Paper Mill................................ 21.8% Energy Complex............................ 9.4% Pro-rata shares are based upon, and may be adjusted annually by the Pulp Mill Owner in accordance with changes in, percentage of total site process water usage by the Mill Owners and actual effluent discharges by Mobile Energy. Each party to the Water Agreement has agreed to indemnify each other for damages (excluding consequential damages) to the extent that they result from such party's acts or omissions in connection with the Water Agreement or the services used or provided thereunder. Boiler Ash Disposal Agreement Mobile Energy and the Pulp Mill Owner are party to the Ash Agreement, which, among other things, provides for the collection and disposal of boiler ash produced as a waste product by the operation of the Energy Complex ("Boiler Ash"). Term The term of the Ash Agreement commenced on the Acquisition Closing Date and, except as provided below, will terminate when either the Pulp Mill Owner or Mobile Energy is no longer party to the Master Operating Agreement. The term of the Ash Agreement will automatically extend to coincide with any extension(s) of the Master Operating Agreement to which both the Pulp Mill Owner and Mobile Energy are parties. Mobile Energy may terminate the Ash Agreement upon 30 days prior written notice, if Mobile Energy reasonably believes that continuation of the services provided for under the Ash Agreement would make Mobile Energy liable for Environmental Claims or Environmental Expenses, and Mobile Energy may terminate the Ash Agreement for any other reason upon 180 days prior written notice. Boiler Ash Service The Pulp Mill Owner is required to provide the Energy Complex with services consisting of (1) the removal of Boiler Ash from the Energy Complex, (2) transportation or arrangement for the transportation of Boiler Ash, and (3) disposal of or arrangement for the disposal of Boiler Ash (collectively, "Boiler Ash Service"). The Pulp Mill Owner is required to (i) transport and dispose, or arrange for the transportation and disposal, of Boiler Ash in the same manner and at the same disposal facility that the Pulp Mill Owner uses for the solid waste streams resulting from the operation of the Pulp Mill or (ii) give or sell Boiler Ash for use as a soil amendment aid, an additive for concrete or for another beneficial re-use, and, in either case, to take into account all applicable Governmental Rules. As reflected in the Ash Agreement, the Pulp Mill Owner has chosen and intends, for approximately the first five years of the term of the Ash Agreement, to dispose of Boiler Ash in the Jackson Lott Road landfill (the "Lott Road Landfill") and thereafter at another facility or facilities of the Pulp Mill Owner's choice. The Pulp Mill Owner is required to notify and consult with Mobile Energy prior to using any facility other than the Lott Road landfill for the disposal of Boiler Ash. The Pulp Mill Owner's obligations under the Ash Agreement, however, are not conditioned on the availability of the Lott Road Landfill. Boiler Ash From Approved Fuels Except as provided below, the Pulp Mill Owner is required to provide Mobile Energy with Boiler Ash Service only with respect to Boiler Ash resulting from the use of Approved Fuels (as defined below). Such fuels are defined by agreement of the parties to be (i) natural gas; (ii) wood waste (biomass); (iii) Pulp Mill sludge; (iv) coal with average sulfur content not to exceed 1.1%; (v) black liquor; and (vi) fuel oil with a sulfur content not to exceed 1.1% (such fuels constituting "Approved Fuels"). The Pulp Mill Owner is not obligated to provide Boiler Ash Service with respect to Boiler Ash resulting from use of an Approved Fuel, if as a result of a Change of Law, such Boiler Ash is deemed hazardous waste under federal or state law ("Hazardous Waste"), in which case, Mobile Energy shall be responsible for arranging for removal, transport and disposal of such Boiler Ash. However, the Pulp Mill Owner is obligated to continue to provide Boiler Ash Service to Mobile Energy if the Boiler Ash is deemed to be a Hazardous Waste as a result of the Energy Complex's use of a Mill Product. There can be no assurance that changes in existing laws or regulations on Hazardous Waste will not occur in the future, or that other changes in existing laws or regulations that also could have a material adverse effect on Mobile Energy will not occur in the future. I-54 Boiler Ash From Other Than Approved Fuels Except as provided above, Mobile Energy is prohibited from using any fuel in the operation of the Energy Complex that results in Boiler Ash that is deemed a Hazardous Waste, or that fails to satisfy the Alabama Department of Agriculture and Industry's requirements for bioash to be licensed as a soil amendment aid. Mobile Energy is to obtain the Pulp Mill Owner's permission prior to using any fuel other than an Approved Fuel in the operation of the Energy Complex, which permission may not to be unreasonably withheld. Service Charge, Billing and Recoupment If the Pulp Mill Owner disposes of Boiler Ash at a facility owned and operated by a third party, the Pulp Mill Owner will charge Mobile Energy for Boiler Ash Service by computing the percentage by volume or weight, in accordance with the disposal facility's basis for determining charges, that Boiler Ash constitutes of the total volume or weight, as the case may be, of waste disposed of by the Pulp Mill Owner and by charging Mobile Energy for that percentage of the Pulp Mill Owner's total cost of removing, transporting, and disposing of Pulp Mill waste and Boiler Ash. If the Pulp Mill Owner disposes of Boiler Ash at a facility owned or operated by itself or an Affiliate, the Pulp Mill Owner will charge Mobile Energy for Boiler Ash Service by computing the percentage by volume or weight, as the case may be, that Boiler Ash constitutes of the total volume or weight, whichever is less, of waste disposed of by the Pulp Mill Owner and by charging Mobile Energy for that percentage of the Pulp Mill Owner's total cost of removing, transporting, and disposing of Pulp Mill waste and Boiler Ash. Mobile Energy may recoup the amount it is charged for Boiler Ash Service under the Ash Agreement by allocating its charges among the Pulp Mill Owner, the Paper Mill Owner, and the Tissue Mill Owner pursuant to the terms of the Master Operating Agreement. Indemnification and Limitation of Liability Mobile Energy and the Pulp Mill Owner have agreed to indemnify, defend and hold harmless each other against all penalties, losses, claims and damages resulting, in whole or in part, from such party's acts or omissions in connection with the Ash Agreement or the services used or provided thereunder. Mobile Energy is not obligated to indemnify the Pulp Mill Owner in the case of Boiler Ash that is deemed a Hazardous Waste as a result of the use by the Energy Complex of a Mill Product. Additionally, the Ash Agreement obligates the parties to consult and cooperate with each other regarding notice of, response to and defense of any claim that may result in a claim for indemnification under the Ash Agreement. If the Pulp Mill fails to provide Mobile Energy with Boiler Ash Service required by the Ash Agreement, Mobile Energy will be entitled solely to indemnification and to compensation for the reasonable actual costs incurred by Mobile Energy to secure such service from another source, unless such failure is excused pursuant to the terms of the Ash Agreement. Notwithstanding the foregoing, if the Pulp Mill Owner fails to provide Boiler Ash Service, Mobile Energy's rights and obligations under the Energy Services Agreements and the Master Operating Agreement will be governed by the provisions of the Master Operating Agreement described above under "-Energy Services Agreements and Master Operating Agreement-Mobile Energy's Supply Obligations in the Event of a Mill Product Shortfall." Under the Ash Agreement, Mobile Energy and the Pulp Mill Owner are liable only for direct damages and penalties, and not for claims of non-party customers, cost of money, loss of profits, loss of use of capital or revenue or any other incidental, special or consequential loss or damage of any nature. Mobile Energy and the Pulp Mill Owner have agreed that, notwithstanding any other provision of the Ash Agreement, any claim for indemnification by either Mobile Energy or the Pulp Mill Owner with respect to any Environmental Claims or Environmental Expenses arising out of any Environmental Noncompliance or Environmental Condition will be governed by the provisions of the Pulp Mill Environmental Indemnity Agreement. All disputes arising under this Agreement are required to be handled in accordance with the procedures for dispute resolution provided in the Master Operating Agreement. The Ash Agreement states that it is governed by the laws of the State of New York, except that federal law, Alabama law or the law of any other applicable state, as applicable, is stated to govern as to compliance with permits and other Governmental Rules. I-55 Mill Environmental Indemnity Agreements Mobile Energy is a party to agreements with each of the Pulp Mill Owner (including any amendments thereto, the "Pulp Mill Environmental Indemnity Agreement"), the Tissue Mill Owner (including any amendments thereto, the "Tissue Mill Environmental Indemnity Agreement") and the Paper Mill Owner (including any amendments thereto, the "Paper Mill Environmental Indemnity Agreement"), pursuant to which Mobile Energy and the applicable Mill Owner are required to indemnify each other for certain specified environmental claims relating to certain environmental conditions, if and when any such claims arise. Environmental Covenants Mobile Energy has agreed not to cause, or suffer the existence of, any Environmental Conditions or Environmental Noncompliances at the Energy Complex that could reasonably be expected to lead to any material Environmental Claim or Environmental Expense asserted against, or incurred by, a Mill Owner or its Affiliates. Similarly, each Mill Owner has agreed not to cause, or suffer the existence of, any Environmental Conditions or Environmental Noncompliances at its Mill that could reasonably be expected to lead to any material Environmental Claim or Environmental Expense asserted against, or incurred by, Mobile Energy or its Affiliates. Environmental Indemnification by Mill Owners and Mobile Energy Each Mill Owner is required to indemnify, defend and hold harmless Mobile Energy, its Affiliates, and its and their respective officers, directors, agents, attorneys and employees from and against any and all Environmental Claims brought against, and any and all Environmental Expenses imposed upon or reasonably incurred by, such indemnified party, in connection with (1) breaches by such Mill Owner of any representations and warranties, covenants or other obligations in its Energy Services Agreement or the Master Operating Agreement, or (2) any Environmental Conditions that give rise to, or could give rise to, Environmental Claims or other liabilities, or Environmental Noncompliances located at or otherwise relating to its Mill or associated facilities, to the extent arising out of facts or circumstances that occur or come into existence after December 12, 1994 (including without limitation (in the case of the Pulp Mill Owner) any Environmental Condition or Environmental Noncompliance associated with the present or future use of the two underground fuel-oil storage tanks owned by Scott/Kimberly-Clark and located on Lot 7). If any Mill Owner sells its Mill, such Mill Owner will retain all of its obligations and liabilities under its Mill Environmental Indemnity Agreement arising out of any facts or circumstances existing as of or prior to the date of any such sale (whether known at the time of any such sale or thereafter discovered as having existed as of the date thereof), and the party to whom such Mill Owner sells its Mill will be required to assume all obligations and liabilities of such Mill Owner arising out of facts or circumstances that occur or come into existence after the date of any such sale. Mobile Energy is required to indemnify, defend and hold harmless each Mill Owner, its Affiliates, and its and their respective officers, directors, agents, attorneys and employees from and against any and all Environmental Claims brought against, and any and all Environmental Expenses imposed upon or reasonably incurred by, any of such indemnified parties, in connection with (1) breaches by Mobile Energy of any representations and warranties, covenants or other obligations of Mobile Energy in any Energy Services Agreement or the Master Operating Agreement, or (2) any Environmental Conditions that give rise to, or could give rise to, Environmental Claims or other liabilities, or Environmental Noncompliances located at or otherwise relating to the Energy Complex, to the extent arising out of facts or circumstances that occur or come into existence after December 12, 1994. If any Mill Owner sells its Mill, such Mill Owner will retain all rights of such Mill Owner arising out of any facts or circumstances existing as of or prior to the date of any such sale (whether known at the time of any such sale or thereafter discovered as having existed as of the date thereof), and the party to whom the Mill Owner sells its Mill will, upon the assumption of the relevant Mill Environmental Indemnity Agreement by such party, assume all rights of such Mill Owner arising out of facts or circumstances that occur or come into existence after the date of any such sale. If any Environmental Claims or Environmental Expenses arise, directly or indirectly, in whole or in part, out of the joint or concurrent negligence of a Mill Owner and Mobile Energy, or their respective Affiliates, officers, directors, agents, attorneys or employees, each party's liability therefor will be limited to such party's proportionate degree of fault. The Mill Environmental Indemnity Agreements provide that Mobile Energy and each of the Mill Owners will only be liable for direct damages, not for claims of non-party customers, cost I-56 of money, loss of profits, loss of use of capital or revenue or any other incidental, special or consequential loss or damage of any nature, or for punitive or exemplary damages. Scott/Kimberly-Clark Environmental Indemnity Agreement Mobile Energy and Scott/Kimberly-Clark are party to an environmental indemnity agreement (including any amendments thereto, the "Scott/Kimberly-Clark Environmental Indemnity Agreement"), pursuant to which Scott/Kimberly-Clark is required to indemnify Mobile Energy for certain specified Environmental Claims relating to certain Environmental Conditions, if and when any such claims arise. Environmental Indemnification by Scott/Kimberly-Clark Scott/Kimberly-Clark is required to indemnify, defend and hold harmless Mobile Energy Indemnified Parties from and against any and all Environmental Claims brought against, and any and all Environmental Expenses imposed upon or incurred by, such Mobile Energy Indemnified Parties, in connection with (1) breaches of any Scott/Kimberly-Clark representations and warranties, or other provisions of the Asset Purchase Agreement, relating to or otherwise concerning Environmental Conditions or Environmental Noncompliances relating to the Mills or Energy Complex, or (2) any (a) Environmental Conditions that give rise to, or could give rise to, Environmental Claims or other liabilities or (b) Environmental Noncompliances (each with respect to applicable Governmental Rules in effect as of December 12, 1994) located at or otherwise relating to the Mills or the Energy Complex, or associated facilities, to the extent arising out of any facts or circumstances existing as of or prior to December 12, 1994. Scott/Kimberly-Clark is liable only for direct damages, not for claims of non-party customers, cost of money, loss of profits, loss of use of capital or revenue or any other incidental, special or consequential loss or damage. Employee Transition Agreement All of the personnel who work at the Energy Complex are currently employed by Southern Electric. Most of these employees worked for Scott at the Energy Complex prior to the Acquisition. Pursuant to an agreement (the "Employee Transition Agreement") entered into by Southern Electric, Mobile Energy and Scott concurrently with the Acquisition, Southern Electric agreed to recognize United Paperworkers International Union Local 423 and 1421 (the "UPIU") and International Brotherhood of Electrical Workers Local 2129 (the "IBEW") as the authorized collective bargaining agents for certain hourly Energy Complex workers and agreed to continue in substantial and material part the terms and conditions set forth in the collective bargaining agreements in effect between Scott and each of the UPIU and the IBEW immediately prior to the Acquisition. Item 2. PROPERTIES The Energy Complex is located at the Mobile facility on property leased by Scott/Kimberly-Clark to Mobile Energy in accordance with the terms of the Direct Lease and the Supplementary Lease. The Energy Complex is comprised of three power boilers (commonly referred to as the "Number 5 Power Boiler," the Number 6 Power Boiler," and the "Number 7 Power Boiler"), two recovery boilers (commonly referred to as the "Number 7 Recovery Boiler" and the "Number 8 Recovery Boiler"), three turbine generators, two black liquor evaporator sets, and associated feedwater systems, air emissions controls, and other auxiliary systems. These facilities are located in two separate power houses, known as the north power house and the south power house, on approximately 11 acres leased from Scott/Kimberly-Clark at the Mobile Facility. All of the liquor processing, substantially all of the power processing and most of the steam processing conducted at the Mobile Facility occur at the north power house. The major components of the north power house were constructed in 1984 and 1985, and an addition to the north power house facilities was completed in 1994. The major components of the south power house were constructed between 1960 and 1963. The combined facilities currently are designed to produce approximately 111 MW (gross) of electricity and approximately 2,100,000 lbs/hr of steam. In addition, the Energy Complex currently is designed to process up to approximately 6,350,000 lbs/day of virgin dry black liquor solids. Although a majority of the components of the Energy Complex have an operating history ranging from 10 to 30 years, certain components (including a recovery boiler and an evaporator train that were completed in early 1994) have a limited operating history. Moreover, although most of the personnel currently I-57 employed by Southern Electric to operate the Energy Complex were employed by Scott to operate the Energy Complex prior to the acquisition, the Energy Complex has been owned by Mobile Energy or its affiliates and has been operated as an independent business, and Southern Electric has employed the Energy Complex personnel and has dealt with the unions that represent many of such personnel, only since December 1994. In general, as with any sophisticated energy and recovery plant, operation of the Energy Complex involves many risks, including, among other things, the risk of equipment breakdown, failure or explosion. For example, recovery boilers such as those used at the Energy Complex may explode under certain circumstances, such as if the smelt at the bottom of the boilers comes into contact with water. The possibility also exists that the Energy Complex will perform below expected levels of output or efficiency, or that labor disputes or other events such as fires, hurricanes, floods, droughts, changes in law or acts of eminent domain will disrupt or disable Mobile Energy's operations. The occurrence of any such events could significantly increase the expenses of operating the Energy Complex, and have a material adverse effect on the financial condition of Mobile Energy. While Mobile Energy will maintain insurance to protect against certain of these operating risks, the proceeds of such insurance may not be sufficient to cover the Energy Complex's lost revenues or increased expenses. Mortgage Mobile Energy and the IDB, as mortgagors, have entered into a Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 (including any amendments thereto, the "Mortgage") and have granted to the Collateral Agent, as mortgagee, for the benefit of the Senior Secured Parties mortgages and security interests in all real property interests (including fee interests, easement interests and leasehold interests, if any) of Mobile Energy to the Energy Complex and the Easement Deeds and all fixtures, equipment and improvements thereon and personal property now owned or hereafter acquired. Pursuant to the terms of the Mortgage, if any event of default under the Intercreditor Agreement (a "Trigger Event") has occurred and is continuing and, except in the case of any such Trigger Event that shall have resulted from a Bankruptcy Event in respect of Mobile Energy or Holdings, the Collateral Agent shall have received from the requisite senior creditors the notice required by the Intercreditor Agreement, then, to the maximum extent permitted by law, the Collateral Agent may exercise any right, power or remedy permitted to it under the Mortgage and under certain other security documents or by law, and, without limiting the generality of the foregoing, the Collateral Agent may, personally or by its agents, to the maximum extent permitted by law, do any or all of the following: (a) without assuming liability for the performance of any of Mobile Energy's obligations, enter and take possession of the mortgaged property or any part thereof, exclude Mobile Energy and all persons claiming under Mobile Energy whose claims are junior to the Mortgage wholly or partly therefrom, and use, operate, manage and control the same either in the name of Mobile Energy or otherwise as the Collateral Agent shall deem best, and upon such entry, from time to time at the expense of Mobile Energy, make all such repairs, replacements, alterations, additions or improvements to the mortgaged property or any part thereof as the Collateral Agent may deem proper and, whether or not the Collateral Agent has so entered and taken possession of the mortgaged property or any part thereof, collect and receive all the rents and apply the same, to the extent permitted by law, to the payment of all expenses that the Collateral Agent may be authorized to make under the Mortgage, the remainder to be applied to the payment of the obligations secured by the Mortgage until the same shall have been repaid in full; if the Collateral Agent demands or attempts to take possession of the mortgaged property or any portion thereof in the proper exercise of any rights hereunder, Mobile Energy shall promptly turn over and deliver complete possession thereof to the Collateral Agent; (b) with or without entry: (i) subject to applicable law, sell all or any part of the mortgaged property for cash at an auction or foreclosure sale held at such place or places and time and upon such notice and, otherwise in such manner as may be required by law, or in the absence of any such requirement, as the Collateral Agent (acting in accordance with an opinion of counsel upon which the Collateral Agent may conclusively rely) may deem appropriate, and from time to time adjourn any such sale by announcement at the time and place specified for such sale or for such adjourned sale without further notice, except as may be required by law; (ii) proceed to protect and enforce its rights under the Mortgage, by suit for specific performance of any covenant contained in the Mortgage or I-58 in certain other security documents or in aid of the execution of any power granted in the Mortgage or in the other security documents, or for the foreclosure of the Mortgage (as a mortgage or otherwise) and the sale for cash of the mortgaged property under the judgment or decree of a court of competent jurisdiction, or for the enforcement of any other right as the Collateral Agent (acting in accordance with an opinion of counsel upon which the Collateral Agent may conclusively rely) shall deem most effectual for such purpose; provided, however, that in the event of a sale, by foreclosure or otherwise, of less than all of the mortgaged property, the Mortgage shall continue as a lien on, and security interest in, the remaining portion of the mortgaged property, and the Collateral Agent shall not be obligated to sell upon credit unless the Collateral Agent shall have expressly consented in writing to a sale upon credit; or (iii) exercise any or all of the remedies available to a secured party under the Uniform Commercial Code; and (c) if a Trigger Event shall have occurred and be continuing and, except in the case of any such Trigger Event that shall have resulted from a Bankruptcy Event in respect of Mobile Energy or Holdings, the Collateral Agent shall have received notice from the requisite senior creditors under the Intercreditor Agreement, and the Collateral Agent shall have declared the obligations secured by the Mortgage to be immediately due and payable, or upon the actual or threatened waste to any part of the mortgaged property, the Collateral Agent, to the maximum extent permitted by law, shall be entitled to the appointment of a receiver of the mortgaged property, without notice or demand, and without regard to the adequacy of the security for the obligations secured by the Mortgage or the solvency of Mobile Energy. Notwithstanding the foregoing, if a Trigger Event shall have occurred and be continuing, and the Collateral Agent shall have received notice from the requisite senior creditors under the Intercreditor Agreement and in the event of threatened waste to any part of the mortgaged property (but not actual waste), the Collateral Agent shall provide notice to Mobile Energy of its intent to appoint a receiver and shall permit Mobile Energy a reasonable period of time to eliminate such threatened waste prior to the appointment of said receiver. Proceeds from the exercise of remedies will be applied in accordance with the Intercreditor Agreement. Security Agreement Mobile Energy has entered into the Security Agreement dated as of August 1, 1995 (including any amendments thereto the "Security Agreement") with the Collateral Agent for the benefit of the Senior Secured Parties providing for the granting of a security interest in all of Mobile Energy's personal property interests including, but not limited to, all contract rights, all equipment, receivables, insurance proceeds (other than those paid under third-party liability insurance), eminent domain proceeds, rights pursuant to any governmental approval (to the extent permitted by applicable law), patents and trademarks, and certain accounts. The Security Agreement does not provide for the granting of a security interest in Mobile Energy's rights under the Mill Owner Maintenance Reserve Account and monies on deposit therein. Pursuant to the terms of the Security Agreement, the Collateral Agent may, upon the occurrence of a Trigger Event and satisfaction of certain conditions contained in the Intercreditor Agreement, take possession of all of the foregoing capital, which also secures the Working Capital Facility. Proceeds from the exercise of remedies will be applied in accordance with the Intercreditor Agreement. The Tax-Exempt Bonds In December 1983, the IDB issued tax-exempt bonds (the "1983 Tax-Exempt Bonds") to finance the construction of the Number 7 Power Boiler and certain auxiliary systems, which are "solid waste disposal facilities" as such term is defined in the Internal Revenue Code and the regulations promulgated thereunder (the "Solid Waste Disposal Facilities"). In December 1984, the IDB issued tax-exempt bonds (the "1984 Tax-Exempt Bonds") to refund the 1983 Tax-Exempt Bonds. The Solid Waste Disposal Facilities are located on the land on which the north power house is situated, which is owned by Scott/Kimberly-Clark and leased by Scott/Kimberly-Clark to the IDB pursuant to the Scott-IDB lease and leased back to Scott/Kimberly-Clark pursuant to the IDB-Scott Sublease. The IDB held, and continues to hold, title to the Solid Waste Disposal Facilities. In December 1984, the IDB leased the Solid Waste Disposal Facilities to Scott pursuant to the IDB-Scott Sublease (so named because the lease of the Solid Waste Disposal I-59 Facilities to Scott was made pursuant to the same agreement by which the real property on which the north power house is situated was subleased by the IDB to Scott). Pursuant to a Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and Holdings (the "Lease Assignment and Assumption Agreement"), Scott assigned to Holdings all of Scott's right, title and interest in and to the IDB-Scott Sublease and the Solid Waste Disposal Facilities, and Holdings assumed all of Scott's obligations arising after the Acquisition Closing Date under the IDB-Scott Sublease (although Scott remained liable to the IDB under the IDB-Scott Sublease). Holdings subsequently assigned to Mobile Energy all of Holdings' rights and obligations under the IDB-Scott Sublease. In August 1995, the Tax-Exempt Bonds were issued by the IDB under an Amended and Restated Trust Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture") between the IDB and First Union National Bank of Georgia, as trustee (the "Tax-Exempt Trustee"). The proceeds of the offering of the Tax-Exempt Bonds were used to refund the 1984 Tax-Exempt Bonds. Concurrently with the issuance of the Tax-Exempt Bonds, the IDB released Scott from liability under the IDB-Scott Sublease and the IDB and Mobile Energy entered into an Amended and Restated Lease and Agreement with respect to the Solid Waste Disposal Facilities (the "IDB Lease Agreement"). The IDB Lease Agreement grants Mobile Energy the right to purchase the Solid Waste Disposal Facilities for $10 upon the expiration thereof. Mobile Energy's obligations under the IDB Lease Agreement are unconditionally guaranteed by Holdings (the "IDB Lease Agreement Guaranty"). Also in August 1995, Mobile Energy, the IDB, the Tax-Exempt Trustee and the Collateral Agent entered into the Recognition, Cooperation and Consent Agreement dated as of August 1, 1995 (the "Tax-Exempt Bonds Recognition Agreement") pursuant to which the IDB will, among other things, (i) consent to the assignment and grant of a security interest by Mobile Energy pursuant to certain security documents in all of Mobile Energy's rights in the Energy Complex and the IDB Lease Agreement, (ii) in the event of a filing of a bankruptcy petition by or against Scott/Kimberly-Clark under Chapter 7 or 11 of the Bankruptcy Code, and the election by Scott/Kimberly-Clark to reject the Scott-IDB Lease, upon the written request of Mobile Energy and at Mobile Energy's expense, exercise its rights under Section 365(h) of the Bankruptcy Code to retain its rights under the Scott-IDB Lease (including, without limitation, rights relating to the amount of timing of payment of rent and other amounts payable by it thereunder and any right of use, possession, quiet enjoyment, subletting, assignment or hypothecation) that are in or appurtenant to the real property covered thereby for the balance of the term of the Scott-IDB Lease and for any renewal or extension thereof to the extent that such rights are enforceable under applicable non-bankruptcy law, and (iii) if, for any reason (other than following Mobile Energy's payment in full of the Tax-Exempt Bonds and the exercise by Mobile Energy of its purchase option under the IDB Lease Agreement), the IDB fails or is otherwise unable to continue to have the right to sublease Lot 9 to Mobile Energy pursuant to the IDB Lease Agreement (whether by bankruptcy court order that Section 365(h) of the Bankruptcy Code is not applicable or otherwise), or upon any termination of the IDB Lease Agreement, upon the written request of Mobile Energy and at Mobile Energy's expense, lease the Solid Waste Disposal Facilities to Mobile Energy directly pursuant to a separate lease (with Mobile Energy agreeing to make the same rental payments to the IDB as Mobile Energy would have otherwise been obligated to make under the IDB Lease Agreement). The Mixed-Use Bonds In December 1984, the IDB issued a total of $172,000,000 in aggregate principle amount of taxable Industrial Development Revenue Bonds due December 1, 2019 (the "Mixed-Use Bonds") to finance the acquisition of certain facilities at the Energy Complex (the "Energy Complex Equipment") and at the Pulp Mill. The IDB holds title to the financed facilities (including the Energy Complex Equipment) and leases them to Scott/Kimberly-Clark pursuant to a Facilities Lease and Agreement dated as of December 1, 1984 (as amended, the "Facilities Lease and Agreement"). The Energy Complex Equipment is located on the land on which the north power house is situated. The term of the Facilities Lease and Agreement is coextensive with the term of the Mixed-Use Bonds. Scott/Kimberly-Clark's rent payment obligations under the Facilities Lease and Agreement are calculated to pay all principal and interest on the Mixed-Use Bonds. Scott/Kimberly-Clark has an option to purchase the Energy Complex Equipment at the end of the lease term for $10. The Mixed-Use Bonds are secured by a security interest in all of the IDB's right, title and interest in and to the Facilities Lease and Agreement and I-60 all revenues accruing to the IDB thereunder. The Mixed-Use Bonds finance facilities that are not entitled to tax-exempt treatment under the Internal Revenue Code. However, the financing of these facilities (as well as the facilities purchased with the Environmental Bonds and the 1994 Bonds (each as defined below)) by the IDB were structured in order to entitle such facilities to exemption from sales and property taxation. The Mixed-Use Bonds are held by Three Rivers Timber Company, a wholly owned subsidiary of Scott/Kimberly-Clark (the "Scott Subsidiary"). Pursuant to a Sublease and Assignment Agreement dated as of December 12, 1994 (the "Sublease and Assignment Agreement"), Scott, in return for a lump-sum payment by Holdings to Scott on the Acquisition Closing Date, (i) subleased to Holdings the Energy Complex Equipment and (ii) assigned to Holdings its right to purchase the Energy Complex Equipment from the IDB at the expiration of the Facilities Lease and Agreement. Scott and Holdings also agreed to indemnify each other for certain losses that may be incurred in connection with the Mixed-Use Bonds, the Energy Complex Equipment or the Sublease and Assignment Agreement. The Scott Subsidiary, the holder of the Mixed-Use Bonds, has delivered to Holdings an agreement (the "Estoppel and Nondisturbance Agreement") pursuant to which, among other things, the Scott Subsidiary has agreed (i) to look solely to rent paid by Scott/Kimberly-Clark under the Facilities Lease and Agreement for payments due in respect of the Mixed-Use Bonds and not to seek to recover any such amounts from Holdings or any successor as sublessee or owner of the Energy Complex Equipment, (ii) at no time to seek to take possession of, impose a lien on, or interfere with the use or possession of the Energy Complex Equipment and (iii) not to sell the Mixed-Use Bonds without Holdings' prior written consent. Holdings assigned to Mobile Energy all of Holdings' rights to sublease and to purchase the Energy Complex Equipment and all of its rights under the Estoppel and Nondisturbance Agreement. In order to secure Mobile Energy's right to acquire the Energy Complex Equipment upon the expiration of the Facilities Lease and Agreement, Scott/Kimberly-Clark has granted to Mobile Energy a security interest in all of Scott/Kimberly-Clark's right, title and interest in the Energy Complex Equipment and in the Facilities Lease and Agreement as it relates to the Energy Complex Equipment. In addition, in August 1995 Mobile Energy, the IDB, AmSouth Bank of Alabama, the Collateral Agent and the Scott Subsidiary entered into the Recognition, Cooperation and Consent Agreement (the "Mixed-Use Bonds Recognition Agreement")pursuant to which the IDB has agreed (with the consent of the Scott Subsidiary and the trustee under the indenture for the Mixed-Use Bonds) that in the event that the Facilities Lease and Agreement is rejected by Scott/Kimberly-Clark or otherwise terminated for any reason it will either (i) lease the Energy Complex Equipment directly to Mobile Energy for nominal consideration pursuant to a new facilities lease and agreement for a term equal to the term of the Facilities Lease and Agreement (with an option of Mobile Energy to purchase the Energy Complex Equipment at the end of the lease term for $10) or (ii) sell the Energy Complex Equipment to Mobile Energy for nominal consideration. The Environmental Bonds Between 1973 and 1980, the IDB issued four series of 30-year bonds having an aggregate principal amount of $24,000,000 (the "Environmental Bonds") to finance the purchase of certain pollution control equipment at the Energy Complex (the "Energy Complex Pollution Control Equipment") and the Mills. Approximately $21,385,000 in principal amount of the Environmental Bonds are still outstanding. Title to the pollution control equipment is held by the IDB but the equipment is subject to sale to Scott/Kimberly-Clark pursuant to two Construction, Financing and Installment Sale Agreements (as supplemented, the "Installment Sale Agreements"). The Installment Sale Agreements give Scott/Kimberly-Clark sole use and exclusive possession of the pollution control equipment and provide that Scott/Kimberly-Clark is purchasing the equipment through fixed installment payments that, in sum, equal the principal and interest due on the applicable Environmental Bonds. When the applicable bonds have been fully redeemed, the IDB is to transfer to Scott/Kimberly-Clark title to the applicable equipment. The bonds of each series are secured by the money payable by Scott/Kimberly-Clark to the IDB under the corresponding Installment Sale Agreement. A substantial portion of the Energy Complex Pollution Control Equipment financed with the Environmental Bonds is no longer in operation. Pursuant to two separate Lease and Assignment Agreements, each dated as of December 12, 1994 (collectively, the "Lease and Assignment Agreements"), Scott, in return for a lump-sum payment, (i) leased to Holdings the Energy Complex Pollution Control Equipment and (ii) assigned to Holdings its right and interest I-61 in and to the Energy Complex Pollution Control Equipment arising under the Installment Sale Agreements, including its right to receive instruments of conveyance from the IDB pursuant to the Installment Sale Agreements, and Holdings assumed certain obligations of Scott under the Installment Sale Agreements. Scott and Holdings also agreed to indemnify each other for certain losses that may be incurred in connection with the Environmental Bonds, the Energy Complex Pollution Control Equipment and the Lease and Assignment Agreements. Holdings subsequently assigned to Mobile Energy all of Holdings' rights and obligations under the Lease and Assignment Agreements. In order to secure Mobile Energy's rights to become the owner of the Energy Complex Pollution Control Equipment at the end of the terms of the respective Installment Sale Agreements, Scott/Kimberly-Clark has granted to Mobile Energy a security interest in all of Scott/Kimberly-Clark's rights in the Energy Complex Pollution Control Equipment and in the Installment Sale Agreements as it relates to the Energy Complex Pollution Control Equipment. The 1994 Bonds The construction of the Number 8 Recovery Boiler and related facilities (the "Number 8 Recovery Boiler Facilities), which began operation in 1994, was financed by Scott and the IDB through the issuance of $117,000,000 principal amount of Industrial Development Revenue Bonds (Scott Paper Recovery Boiler Project) 1994 Series A (the "1994 Bonds") due December 1, 2014. The structure of the 1994 Bonds transaction is similar to that for the Mixed-Use Bonds. The IDB holds title to the Number 8 Recovery Boiler Facilities and, prior to the Acquisition, leased it to Scott pursuant to a Recovery Boiler Lease and Agreement dated as of December 1, 1994 (the "Recovery Boiler Lease and Agreement"). The 1994 Bonds were purchased by the Scott Subsidiary. The Recovery Boiler Lease and Agreement gives Scott/Kimberly-Clark the right to purchase the Number 8 Recovery Boiler Facilities at the expiration of the lease term for $10 (or earlier upon the payment of $10 plus an amount equal to all principal, premium, if any, and interest payable or to be payable with respect to all outstanding 1994 Bonds). Pursuant to a Lease Assignment and Assumption Agreement, dated as of December 12, 1994, between Scott and Holdings (the "1994 Bond Agreement"), Scott assigned to Holdings, with the consent of the Scott Subsidiary, all of its right, title and interest in the Recovery Boiler Lease and Agreement and the Number 8 Recovery Boiler Facilities (including the right to purchase the Number 8 Recovery Boiler Facilities as provided in the Recovery Boiler Lease and Agreement). In connection with the assignment of the Recovery Boiler Lease and Agreement to Holdings, Scott caused the Scott Subsidiary to transfer the 1994 Bonds to Holdings pursuant to the Bond Transfer Instrument. Holdings subsequently assigned the 1994 Bonds and all of its rights under the 1994 Bond Agreement to Mobile Energy. Therefore, Mobile Energy is currently the holder of the 1994 Bonds and the de facto obligor thereunder (by virtue of its obligation to make payments under the Recovery Boiler Lease and Agreement to cover debt service obligations on the 1994 Bonds). The 1994 Bonds have been pledged to the Collateral Agent pursuant to the Security Agreement. The Collateral Agent is the trustee with respect to the 1994 Bonds. Pursuant to the Intercreditor Agreement, the Collateral Agent is authorized to make payments under the Lease and Agreement by debiting certain Intercreditor Agreement accounts. Payments made to Mobile Energy as the holder of the 1994 Bonds will be made immediately following payments by Mobile Energy under the Lease and Agreement. The Intercreditor Agreement provides that when Mobile Energy receives such payments on the 1994 Bonds, such monies will be credited to the account or accounts that were debited by the Collateral Agent (to the extent of any such debit) in order to pay Mobile Energy's obligations under the Lease and Agreement. Item 3. LEGAL PROCEEDINGS Other than legal proceedings involving the application by Mobile Energy and Holdings for various governmental approvals required to operate and finance the Energy Complex, neither Mobile Energy nor Holdings is currently a party to any material legal proceeding. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Omitted pursuant to General Instruction J. I-62 PART II Item 5. COMMON EQUITY MARKET There is no established public trading market for Holdings' common stock, all of which is owned by Southern. There also is no established public trading market for Mobile Energy's members' equity, all of which is held by Holdings and Southern Electric. Item 6. SELECTED FINANCIAL DATA Omitted pursuant to General Instruction J. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Background Mobile Energy and Holdings were formed to acquire, own and manage the Energy Complex at the Mobile Facility. Holdings acquired the Energy Complex and commenced operations on December 16, 1994. Holdings transferred all its interests in the Energy Complex to Mobile Energy on July 14, 1995. Mobile Energy's sole business consists exclusively of the ownership and management of the Energy Complex. Holdings, which owns 99% of the equity interests in Mobile Energy, does not conduct any independent operations. Southern Electric owns the remaining equity interest in Mobile Energy. The Mobile Facility is a physically integrated complex that produces tissue and paper products from timber that is processed into bleached and unbleached pulp by the Pulp Mill. The Pulp, Paper and Tissue Mills currently obtain all of their aggregate steam processing needs and 98 percent of their aggregate power processing needs from the Energy Complex. In addition, the Energy Complex processes weak black liquor delivered by the Pulp Mill Owner into green liquor, a necessary component of the pulp making process. The conversion of weak black liquor into green liquor involves a combustion process which provides heat that is further used to generate steam used for Steam Processing Services. Mobile Energy's revenues are comprised almost entirely of Demand Charges and Processing Charges for services provided to the Mills. Demand Charges represent compensation to Mobile Energy for dedicating a portion of the Energy Complex's capacity to the Mills. Demand Charges are designed generally to cover, among other things, costs that are in the nature of fixed costs, including debt service. Processing Charges are paid by each Mill Owner to Mobile Energy based on formulary usage charges which vary from month to month, based on the amount of Processing Services required by, and provided to, each Mill Owner, and on Mobile Energy's efficiency with respect to fuel usage. Processing Charges are designed generally to cover the balance of Mobile Energy's costs that are not projected to be covered by Demand Charges, including fuel expenses. Results of Operations Because the Energy Complex was not operated as an independent business prior to its acquisition by Holdings, Holdings did not purchase a business from Scott but, rather, purchased assets. Since the Acquisition, Holdings and subsequently Mobile Energy have operated such assets as an independent business. The business with respect to the Energy Complex commenced on December 16, 1994 when Holdings began operations. Accordingly, financial statements are not provided with respect to the period prior to December 16, 1994 and this discussion will not include financial comparisons of current and prior year periods. Additionally, as a consequence of the relatively short time period Holdings and Mobile Energy have operated the Energy Complex, discussion and analysis of their results of operations is necessarily limited in scope, and may not be indicative of their future results of operations and financial condition. Thus, the financial information contained herein is not necessarily representative of the future results of operations and financial condition of Mobile Energy or Holdings. The relationship between Holdings and Mobile Energy is a parent-subsidiary relationship. Holdings' material assets are comprised solely of its ownership interest in Mobile Energy and its rights in respect of a tax sharing agreement (the "Southern Master Tax Sharing Agreement"), which apportions consolidated income tax among Southern and its corporate subsidiaries, including Holdings. Accordingly, the consolidated financial statements of Holdings reflect the assets, liabilities, and operating results of Mobile Energy. Furthermore, although Mobile Energy did not exist prior to July 13, 1995, the following II-1 discussion of its results of operations assumes that, for purposes of presentation, Mobile Energy was in existence and operating the Energy Complex as of the beginning of calendar year 1995. Revenues Operating revenues for 1995 were $82.5 million, including Demand Charges of $58.3 million and Processing Charges of $23.6 million. The level of Processing Charges for this period reflects utilization of the Energy Complex near capacity levels. Demand Charges and Processing Charges for 1995, in thousands of dollars and expressed as a percent of total revenues, were as follows: Dollars Percent ------- ------- (in thousands) Demand Charges: Pulp Mill $38,074 46.2% Tissue Mill 9,980 12.1 Paper Mill 10,244 12.4 ------- ----- 58,298 70.7 Processing Charges: Pulp Mill 4,486 5.4 Tissue Mill 9,538 11.6 Paper Mill 9,563 11.6 ------- ----- 23,587 28.6 Other revenues 612 .7 ------- ----- Total revenues $82,497 100.0% ======= ===== The Mills' peak usage of Processing Services from December 16, 1994 through December 31, 1995 were as follows: 1995 Peak Contractual Mill Processing Services Demand Demand ---- ------------------- --------- ----------- Pulp Liquor Conversion MMLBs/week 38.9 42.7 Steam MMBTUs/hr 602.2 500.0 Electricity not MW/hr available 32.0 Tissue Steam MMBTUs/hr 239.3 280.0 Electricity not MW/hr available 39.5 Paper Steam MMBTUs/hr 506.2 420.0 Electricity not MW/hr available 22.5 Prior to the installation of certain electrical waters, which was completed in February 1996, Mobile Energy could not precisely determine the peak Demands of each Mill for Power Processing Services. Expenses Total operating expenses for 1995 aggregated $44.0 million. Operating expenses are comprised of operations and maintenance expenses, fuel, and depreciation and amortization and aggregated $26.1 million, $6.3 million and $11.6, respectively for 1995. Interest expense for 1995 was $18.5 million. Interest expense reflects the issuance of $255.2 million First Mortgage Bonds in August 1995 bearing a coupon interest rate of 8.665%, interest on $85 million Tax-Exempt Bonds issued in August 1995 bearing a coupon rate of 6.95%, and the amortization of swap breakage costs relative to interest rate hedging agreements entered into in connection with the Acquisition. These interest rate hedging agreements are discussed further in Note 6 to Mobile Energy's financial statements and Note 7 to Holdings' financial statements herein. Mobile Energy's net income for 1995 was $21.0 million. Holdings' net income for this same period was $12.8 million after deducting minority interest of $0.2 million and income taxes of $8.0 million. Income taxes were provided for based on a combined 38.25% state and federal rate applied to pre-tax income of $21.0 million. Liquidity and Capital Resources As of December 31, 1995, Holdings had $41,118,000 in cash and cash equivalents and total debt of $354,285,000. This level of liquidity (as applied to Mobile Energy) will be affected by Mobile Energy's operating performance, capital expenditures and dividend policies. Mobile Energy's working capital needs generally relate to Operation and Maintenance Costs and debt service. In accordance with the Intercreditor Agreement, Mobile Energy will reserve funds for certain operation and maintenance activities in a separate account (the " Maintenance Reserve Account") before such operation and maintenance activities are performed for Mobile Energy. II-2 Operation and Maintenance Costs are budgeted at $28,200,000 and $29,600,000 for 1996 and 1997, respectively. In addition, in 1996, Mobile Energy expects to spend approximately $1,000,000 to construct or install certain facilities and equipment (some of which Mobile Energy is required to construct or install pursuant to the Master Operating Agreement) and to purchase inventory. As of December 31, 1995 Mobile Energy had spent approximately $11,900,000 on such construction, installations, and purchases. Furthermore, in 1995, Mobile Energy spent approximately $32,300,000 to pay certain termination costs related to interest rate hedging agreements to which Mobile Energy was a party that were entered into in connection with the Acquisition. The interest rate hedging agreements were not entered into in respect of existing indebtedness of Holdings or of Mobile Energy. Rather, the interest rate hedging agreements were entered into in anticipation of the issuance of the First Mortgage Bonds and Tax Exempt Bonds issued in August 1995 in order to enable Holdings, following the Acquisition, to structure its financing around a targeted aggregate annual debt service (including principal and interest), while resulting in approximately the same amount of aggregate net proceeds available to Mobile Energy (inclusive of amounts payable to Mobile Energy, and net of amounts payable by Mobile Energy, in connection with the termination of such interest rate hedging agreements). In "terminating" the interest rate hedging agreements, Mobile Energy assigned it rights and obligations under the agreements to a bank on a non-recourse basis. The interest rate hedging agreements served to reduce the potential impact of interest rate fluctuations between the date of the Acquisition and the date on which the interest rates on the First Mortgage Bonds and the Tax-Exempt Bonds were fixed (the "Pricing Date"), because both the settlement amount required to terminate Mobile Energy's rights and obligations under the interest rate hedging agreements and Mobile Energy's debt service obligations with respect to the First Mortgage Bonds and the Tax-Exempt Bonds were determined simultaneously upon the pricing of such financings, and reflected interest rates then in effect in the applicable markets. Because market interest rates decreased between the Acquisition Closing Date and the Pricing Date (causing the interest rate hedging agreements to be "out of the money"), Mobile Energy paid the assignee of the agreements a settlement amount. However, as Mobile Energy's interest expense component of debt service was reduced by the decline in interest rates, thereby offsetting the higher principal component of debt service that was incurred as a result of additional debt raised to fund the settlement amount, Mobile Energy's aggregate debt service obligations were maintained at approximately the level projected at the time of Acquisition. Mobile Energy has no plans to enter into other agreements to fix or otherwise manage interest rate risk in the near future. The indebtedness evidenced by the First Mortgage Bonds and the Tax-Exempt Bonds bears fixed rate interest, and the indebtedness represented by borrowings under a revolving credit facility providing for working capital loans to Mobile Energy (the "Working Capital Facility"), which is limited to $15,000,000, bears interest at variable rates. Subject to Mobile Energy's right to incur additional indebtedness, the indebtedness represented by the First Mortgage Bonds, the Tax-Exempt Bonds and the Working Capital Facility currently represent Mobile Energy's only material long-term indebtedness. Mobile Energy's projected accrued obligations for required payments of principal and interest on long-term debt for calendar years 1996 and 1997 are $34,693,000 and $34,710,000, respectively. Mobile Energy's principal sources of working capital are cash flow from operations, borrowings under the Working Capital Facility, balances in the Maintenance Reserve Account and drawings under a Southern guaranty in respect of the Maintenance Reserve Account and/or under any revolving credit facility maintained by Southern to provide liquidity with respect to such Southern guaranty. Since December 31, 1995, Mobile Energy has drawn an aggregate of $5,750,000 under such a revolving credit facility maintained by Southern with Banque Paribas. In order to provide for Mobile Energy's working capital needs, in August 1995 Mobile Energy entered into the Working Capital Facility with Banque Paribas (the "Working Capital Facility Provider") providing working capital loans to Mobile Energy. The Working Capital Facility provides for a maximum available amount of $15,000,000 and may be drawn on by Mobile Energy from time to time. Borrowings under the Working Capital Facility generally will be used by Mobile Energy to pay for operation and maintenance costs incurred by Mobile Energy. Each working capital loan is due and payable no later than 90 days from the date II-3 such working capital loan was advanced to Mobile Energy, and no more than $5,000,000 (to be adjusted in proportion to any adjustments to the maximum available amount under the Working Capital Facility) of working capital loans may be scheduled to mature during any calendar month. Mobile Energy is required to repay each working capital loan on its due date and may upon notice to the Working Capital Facility Provider, repay or prepay any working capital loan on any business day without premium or penalty, other than certain funding breakage costs in respect of working capital loans bearing interest at the LIBOR Rate (as defined in the Working Capital Facility). Mobile Energy is permitted to re-borrow all amounts repaid or prepaid. Mobile Energy is required to repay all working capital loans such that no amounts are outstanding under the Working Capital Facility one time each year (other than 1995) for a period of five consecutive days. Subject to earlier termination under certain circumstances and subject to extension thereof by the Working Capital Facility Provider, the Working Capital Facility will expire on December 31, 2001. Amounts payable under the Working Capital Facility are secured ratably with all other senior debt of Mobile Energy (subject to the priority of the lien of the Working Capital Facility Provider on receivables and fuel inventory). The Working Capital Facility Provider is entitled to the repayment of principal, interest, fees and other amounts scheduled to be due under the Working Capital Facility prior to the payment of operation and maintenance costs (other than certain operation and maintenance costs payable to the Mill Owners in connection with the exercise of certain remedies the Mill Owners have under the Project Agreements) and (together with, upon the occurrence and continuation of certain bankruptcy events in respect of Mobile Energy or Holdings, all amounts due upon the acceleration thereof) prior to any amounts payable in respect of other senior debt, including the First Mortgage Bonds and any amounts payable under the lease entered into in connection with the Tax-Exempt Bonds. Upon the distribution of certain monies or proceeds of pledged collateral following certain events of default or bankruptcy events, the Working Capital Facility Provider is entitled to payment in full in priority to all other holders of senior debt out of (i) Mobile Energy's receivables and (ii) the proceeds of the sale of the Energy Complex's fuel inventory. Upon its establishment in August 1995 at the time of the issuance of the First Mortgage Bonds and the Tax Exempt Bonds, the Maintenance Reserve Account was credited in an amount equal to $11,000,000. In lieu of funding the Maintenance Reserve Account with cash at that time, Mobile Energy provided instead a guaranty from Southern in an amount equal to $11,000,000. Monies in the Maintenance Reserve Account are applied to the payment of Maintenance Expenditures. The Intercreditor Agreement requires Mobile Energy to make deposits into the Maintenance Reserve Account periodically sufficient to cover projected future Maintenance Expenditures, any shortfalls in the amounts of prior deposits required to be made into the account by Mobile Energy, and any withdrawals in excess of the projected Maintenance Expenditures. Mobile Energy may also make additional, discretionary deposits into the Maintenance Reserve Account. In lieu of funding the Maintenance Reserve Account with cash, or in replacement of monies required to be on deposit therein, Mobile Energy may from time to time deliver "Reserve Account Security," which is either, or any combination of, (i) a guaranty from Southern provided Southern satisfies certain credit standards set out in the Intercreditor Agreement, or (ii) one or more letters of credit issued by a commercial bank or banks whose long-term unsecured debt is rated at least "A" by Standard & Poors' Ratings Group, "A" by Fitch Investors Service, L.P. and "A2" by Moody's Investors Service, Inc. Mobile Energy has established a separate account, the Mill Owner Maintenance Reserve Account, pursuant to the Master Operating Agreement and the Mill Owner Maintenance Reserve Account Agreement for the benefit of Mobile Energy and, while the Mill Owners are exercising the Mill Owner Step-In Rights, the Mill Owners. The Mill Owner Maintenance Reserve Account is currently funded in an amount equal to $2,000,000. In lieu of funding the Mill Owner Maintenance Reserve Account with cash, Mobile Energy provided capital infusion arrangements executed by Southern in favor of Mobile Energy and the Mill Owners in an amount equal to $2,000,000 in the aggregate. The Mill Owner Maintenance Reserve Account and monies on deposit therein, or otherwise credited thereto, do not secure Mobile Energy's senior indebtedness. Nevertheless, given that the Master Operating Agreement and the Mill Owner Maintenance Reserve Account Agreement permit funds on deposit in the Mill Owner Maintenance Reserve Account to be used, under certain limited circumstances, for, among other things, operations II-4 and maintenance expenses, amounts on deposit therein, or otherwise credited thereto, will be credited against Mobile Energy's funding obligation in respect of the Maintenance Reserve Account. Cash flow from operations is expected to consist almost exclusively of payments of Demand Charges and Processing Charges by the Mill Owners for Processing Services. Accordingly, the loss of revenues from any one Mill, whether due to a Mill Closure or otherwise, could have a material adverse impact on Mobile Energy's financial condition. The Energy Services Agreements and the Master Operating Agreement require the Mill Owners to pay Demand Charges and Processing Charges. The Demand Charges were designed generally to cover, among other things, Mobile Energy's projected costs that are in the nature of fixed costs (including the payment of debt service), assuming that certain operating performance standards are satisfied. The Processing Charges were designed generally to cover the balance of Mobile Energy's costs that are not projected to be covered by Demand Charges, including variable costs such as fuel related expenses. Under the Energy Services Agreements, the Demand Charges in effect at any given time are due and payable on a monthly basis regardless of whether a Mill Owner actually utilizes any or all of the Processing Services corresponding to its dedicated Demand and are subject to automatic reduction due to a shortfall in the provision of Processing Services by Mobile Energy that is not excused by the Master Operating Agreement. The Processing Charges vary from month to month in accordance with the amount of Processing Services required by, and provided to, the Mill Owners and Mobile Energy's efficiency with regard to fuel usage. In 1995, 70.7% of Mobile Energy's total operating revenues were attributable to Demand Charges with almost all of the remainder attributable to Processing Charges. The Demand Charges and the Processing Charges, collectively, were designed so as to result in Mobile Energy having net income. There can be no assurance, however, that (i) the assumptions with respect to operating performance standards that underlay the design of the Demand Charges and the Processing Charges will at all times be satisfied, (ii) the Demand Charges will at all times cover Mobile Energy's costs that are in the nature of fixed costs, including debt service payments, (iii) the Processing Charges will at all times cover the costs that are not covered by Demand Charges, including variable costs such as fuel related expenses, or (iv) the payment of Demand Charges and Processing Charges will at all times result in Mobile Energy having net income. Payments of Demand Charges and Processing Charges by the Mill Owners under the Energy Services Agreements are expected to provide virtually all of Mobile Energy's operating revenues and are therefore the primary source of funds for the payment of debt service. There are no significant alternative sources of funds available to Mobile Energy to make such debt service payments (other than a debt service reserve account established for the benefit of the holders of the First Mortgage Bonds (the "Debt Service Reserve Account"), a debt service reserve account established for the benefit of the holders of the Tax Exempt Bonds (the "Tax-Exempt Debt Service Reserve Account") and, under certain circumstances, certain other accounts). The Debt Service Reserve Account is funded in an amount equal to $21,936,000 (the "Debt Service Reserve Account Required Balance"). Mobile Energy may, in whole or in part, replace monies on deposit in, or fund amounts required to be deposited in, the Debt Service Reserve Account with Reserve Account Security. Currently Mobile Energy has funded the Debt Service Reserve Account with Reserve Account Security (in the form of a guaranty from Southern) in an amount equal to the Debt Service Reserve Account Required Balance. Currently, the Tax-Exempt Debt Service Reserve Account is funded with Reserve Account Security (in the form of a letter of credit) in an amount equal to $5,908,000. If Demand Charges and Processing Charges were at any time to be insufficient to cover Mobile Energy's fixed costs (including payment of debt service) Mobile Energy could be unable to make its required debt service payments (particularly if funds then available in the Debt Service Reserve Account, the Tax Exempt Debt Service Reserve Account or the other accounts were also insufficient to cover such payments) or could be unable to pay its other fixed costs. The implementation of the Process Model will modify the manner in which the Processing Charges currently are calculated. Once the Process Model is implemented, Mobile Energy will be permitted to charge the Mill Owners, as a component of the Processing Charges, for only those quantities of coal as are II-5 calculated by the Process Model to be efficient quantities and only those quantities of gas as are determined by the Process Model to be in accordance with a specified protocol for boiler dispatch incorporated in the Process Model. If the Energy Complex uses more coal or gas than the quantities calculated or determined by the Process Model (because, for example, Mobile Energy has been inefficient in its use of gas, coal, black liquor, biomass, or sludge or has inappropriately dispatched its equipment), the costs attributable to the excess quantities of coal or gas will not be permitted to be included in the Processing Charges and, as a result, will be borne by Mobile Energy. By contrast, if the Energy Complex uses less coal or gas than the quantities calculated or determined by the Process Model, Mobile Energy will be permitted to include in the Processing Charges the costs associated with the Process Model quantities of coal and gas, notwithstanding that such calculated or determined quantities may exceed the actual quantities used by the Energy Complex. Thus, Mobile Energy will be rewarded for operating the Energy Complex more efficiently than the standards set forth in the Process Model and will bear the risk of operating the Energy Complex less efficiently than those standards. Mobile Energy believes that it generally will be able to operate the Energy Complex as efficiently as the standards set forth in the Process Model. Accordingly, Mobile Energy believes that the implementation of the Process Model alone will not cause its future results of operations to differ materially from its historical results of operations. Nevertheless, there can be no assurance that the Energy Complex will use fuel in accordance with the standards set forth in the Process Model, that Mobile Energy will operate the Energy Complex as or more efficiently than the standards set forth in the Process Model or that the Process Model will perform in accordance with its design or the principles set forth in the Master Operating Agreement. Mobile Energy believes that its cash flow from operations, together with its other available sources of liquidity will be adequate to make all required payments of principal of and interest on its debt, to permit anticipated capital expenditures and to fund working capital and other cash requirements for the foreseeable future. Environmental Matters Mobile Energy is subject to comprehensive and dynamic federal, state and local environmental laws and regulations, including those governing air emissions, waste water discharges and hazardous and non-hazardous waste disposal. Mobile Energy recognizes that both it and the Mills may incur capital and operating costs in the future to comply with currently existing laws and regulations, new regulatory requirements and possible new statutory requirements. One proposed regulatory requirement is the Cluster Rule, which has been proposed, but has not yet been promulgated, by the EPA. The EPA has indicated that it expects to propose a revised version of the water effluent guidelines and emissions standards contained in the Cluster Rule in the spring of 1996. None of the Mills is contractually obligated to Mobile Energy to comply with the Cluster Rule or any other environmental regulation. Thus, the Mills could choose to close entirely rather than incur the costs imposed by the Cluster Rule. As such, the failure by the Mills to spend the monies necessary to comply with the Cluster Rule could, indirectly, have a material adverse impact on Mobile Energy's results of operations, to the extent that it were to reduce the amount of Processing Services the Mills purchase from the Energy Complex. Another such regulation is the Combustion Rule, which has not yet been officially proposed but which the EPA has indicated may be proposed in the late summer of 1996. If promulgated in some form, the Combustion Rule (which would principally apply to the Energy Complex) could require significant capital expenditures by Mobile Energy and equipment and operational modifications to the Energy Complex. Because the Combustion Rule has not yet been proposed, Mobile Energy cannot estimate the expense required to comply with such a rule. Under the Master Operating Agreement, Mobile Energy generally is permitted to charge the Mills the reasonable cost of capital expenditures or operation and maintenance expenses incurred by Mobile Energy as a result of the Combustion Rule or the Cluster Rule. Nevertheless, there can be no assurance that the Mill Owners will comply with their obligations under the Master Operating Agreement with respect to the Combustion Rule or the Cluster Rule. As such, the promulgation of the Cluster Rule or the Combustion Rule, together with the failure by the Mill Owners to comply with such obligations under the Master Operating Agreements, could have a material adverse effect on the financial condition of Mobile Energy. II-6 As regulatory agencies have not yet promulgated final standards for some existing programs, and as some proposed requirements (such as the Cluster Rule) and suggested requirements (such as the Combustion Rule) have not yet been enacted or adopted, Mobile Energy cannot at this time reasonably estimate its costs of compliance with these additional programs and requirements (some of which will not take effect for several years or may not be promulgated at all) or the timing of any such costs. Nevertheless, assuming that the current environmental regime (exclusive of any proposed or suggested statutes, rules or regulations) remains in effect, Mobile Energy is not aware of any environmental conditions at the Energy Complex that would reasonably be expected to have a material adverse effect on the financial condition of Mobile Energy. Finally, in the event that the Lott Road Landfill or any other landfill at which Mobile Energy's boiler ash is disposed requires remediation in the future, Mobile Energy may be required to participate. At present, Mobile Energy cannot estimate the amount by which its costs would increase as a result thereof. However, a requirement to participate in landfill remediation could have a material adverse impact on Mobile Energy. Funding of the Maintenance Reserve Account The Intercreditor Agreement requires Mobile Energy to make certain deposits into the Maintenance Reserve Account, and permits Mobile Energy to make additional, discretionary deposits into the Maintenance Reserve Account. The amount of such required and discretionary deposits in any given fiscal year may be greater than the maintenance expenses actually incurred by Mobile Energy in such fiscal year. For purposes of calculating debt service coverage ratios under Mobile Energy's Financing Documents, deposits into the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account are deemed to be operating expenses in the fiscal year such deposits are made, rather than in the fiscal year funds are withdrawn from the Maintenance Reserve Account or the Mill Owner Maintenance Reserve Account to pay maintenance expenses. The effect of deeming such deposits to be operating expenses in the fiscal year the deposits are made (together with the funding provisions set forth in the Intercreditor Agreement that may cause or permit such deposits to be higher than actual maintenance expenses in any given fiscal year) is to levelize debt service coverage ratios over the term of the First Mortgage Bonds and the Tax-Exempt Bonds. Tax Matters Mobile Energy is required to comply with the provisions of federal, state and local tax laws. Future legislative, judicial or administrative changes to or interpretations of existing tax laws may occur that could result in Mobile Energy becoming subject to certain taxes to which it is not currently subject. Such changes could have a material adverse effect on the financial condition of Mobile Energy. The Alabama Department of Revenue has requested information from Mobile Energy in order to determine if Mobile Energy's property, including its intangible property, is subject to central assessment of ad valorem taxes by the Alabama Department of Revenue under Chapter 40-21 of the Code of Alabama (which applies to certain companies in the nature of public utilities, including companies operating a plant or business for the production, distribution, or sale of electricity, electric light, electric power, or steam heat) rather than being subject to local assessment of ad valorem taxes by the County of Mobile. Central assessment of ad valorem taxes under Chapter 40-21 of the Code of Alabama could materially increase the ad valorem taxes owed by Mobile Energy due to differences in assessment ratios and the types of property subject to taxation. Mobile Energy has responded to the Department of Revenue that Mobile Energy is not a company in the nature of a public utility subject to central assessment of ad valorem taxes by the Alabama Department of Revenue under Chapter 40-21 of the Code of Alabama. Under Alabama law, property owned by the IDB and used by a private user pursuant to a lease or other agreement entered into prior to May 1992 (or entitled to be used by a private user at some future time pursuant to an inducement entered into or adopted prior to May 1992) is not subject to ad valorem taxes. The Energy Complex equipment refinanced with the Tax-Exempt Bonds, the 1994 Bonds, the Mixed-Use Bonds and the Environmental Bonds is all owned by the IDB and was constructed and leased to a private user prior to May 1992 or, in the case of the equipment financed with the 1994 Bonds, pursuant to an inducement agreement entered into prior to May 1992. Accordingly, Mobile II-7 Energy has also responded to the Alabama Department of Revenue that such equipment is not subject to ad valorem taxes (and that no such taxes have ever been paid with respect to such equipment) In addition, Mobile Energy has received no notice or other determination from the Alabama Department of Revenue finding that such equipment actually is (or will be) subject to ad valorem taxes or that Mobile Energy's property is subject to central assessment of ad valorem taxes by the Alabama Department of Revenue. There can be no assurance, however, that the Alabama Department of Revenue will not challenge Mobile Energy's position with respect to central assessment of ad valorem taxes, that Mobile Energy will at all times be considered to be in compliance with all applicable tax statutes and regulations or, if Mobile Energy's property were subject to central assessment of ad valorem taxes by the Alabama Department of Revenue or if such equipment were subject to ad valorem taxes, that any action required to bring Mobile Energy into compliance with applicable tax statutes and regulations would not materially adversely affect Mobile Energy's financial condition. II-8
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO 1995 FINANCIAL STATEMENTS Mobile Energy Services Company, L.L.C. Page Report of Independent Public Accountants II-12 Statements of Income for the Year Ended December 31, 1995 and the Period from Inception (December 16, 1994) to December 31, 1994 II-13 Statements of Changes in Members' Equity for the Year Ended December 31, 1995 and the Period from Inception (December 16, 1994) to December 31, 1994 II-14 Statements of Cash Flows for the Year Ended December 31, 1995 and the Period from Inception (December 16, 1994) to December 31, 1994 II-15 Balance Sheets at December 31, 1995 and 1994 II-16 Notes to Financial Statements II-18 Mobile Energy Services Holdings, Inc. and Subsidiary Report of Independent Public Accountants II-25 Consolidated Statements of Income for the Year Ended December 31, 1995 and the Period from Inception (December 16, 1994) to December 31, 1994 II-26 Consolidated Statements of Changes in Stockholder's Equity for the Year Ended December 31, 1995 and the Period from Inception (December 16, 1994) to December 31, 1994 II-27 Consolidated Statements of Cash Flows for the Year Ended December 31, 1995 and the Period from Inception (December 16, 1994) to December 31, 1994 II-28 Consolidated Balance Sheets at December 31, 1995 and 1994 II-29 Notes to Financial Statements II-31 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
II-9 MOBILE ENERGY SERVICES COMPANY, L.L.C. FINANCIAL SECTION II-10 Mobile Energy Services Company, L.L.C. Financial Statements as of December 31, 1995 and 1994 Together With Auditors' Report II-11 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Mobile Energy Services Company, L.L.C.: We have audited the accompanying balance sheets of MOBILE ENERGY SERVICES COMPANY, L.L.C. (an Alabama limited liability company) as of December 31, 1995 and 1994 and the related statements of income, changes in Members' equity, and cash flows for the year ended December 31, 1995 and the period from inception (December 16, 1994) to December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mobile Energy Services Company, L.L.C. as of December 31, 1995 and 1994 and the results of its operations and its cash flows for the year ended December 31, 1995 and the period from inception (December 16, 1994) to December 31, 1994 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 21, 1996 II-12 MOBILE ENERGY SERVICES COMPANY, L.L.C. STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD FROM INCEPTION (DECEMBER 16, 1994) TO DECEMBER 31, 1994 (In Thousands) 1995 1994 -------- ------ OPERATING REVENUES: Demand charges $ 58,298 $2,603 Processing sales 23,587 1,151 Other 612 42 -------- ------ Total operating revenues 82,497 3,796 -------- ------ OPERATING EXPENSES: Operations and maintenance 26,094 919 Fuel 6,303 26 Depreciation and amortization 11,608 468 -------- ------ Total operating expenses 44,005 1,413 -------- ------ OPERATING INCOME 38,492 2,383 INTEREST EXPENSE (18,501) (215) OTHER INCOME 1,012 4 -------- ------ NET INCOME $ 21,003 $2,172 ======== ====== The accompanying notes are an integral part of these statements. II-13 MOBILE ENERGY SERVICES COMPANY, L.L.C. STATEMENT OF CHANGES IN MEMBERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD FROM INCEPTION (DECEMBER 16, 1994) TO DECEMBER 31, 1994 (In Thousands) BALANCE, prior to inception $ 0 Equity infusion by the Members 76,405 -------- BALANCE, December 16, 1994 76,405 Net income 2,172 Capital contributions 1,173 -------- BALANCE, December 31, 1994 79,750 Net income 21,003 Capital contributions 3,077 Distributions to Members (37,058) -------- BALANCE, December 31, 1995 $ 66,772 ======== The accompanying notes are an integral part of this statement. II-14 MOBILE ENERGY SERVICES COMPANY, L.L.C. STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD FROM INCEPTION (DECEMBER 16, 1994) TO DECEMBER 31, 1994 (In Thousands)
1995 1994 --------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 21,003 $ 2,172 --------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,608 468 Changes in certain operating assets and liabilities: Increase in trade accounts receivable (9,568) (3,796) Increase (decrease) in payables to associated companies (5,238) 4,677 Increase in accrued interest 9,570 319 Other, net 852 224 --------- -------- Total adjustments 7,224 1,892 --------- -------- Net cash provided by operating activities 28,227 4,064 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant, and equipment (3,288) (4,064) Construction work in progress (7,810) 0 -------- ------- Net cash used in investing activities (11,098) (4,064) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from the issuance of long-term debt 294,590 0 Proceeds from working capital facility (Note 5) 14,075 0 Equity contributions 3,077 1,173 Redemption of long-term debt (85,000) 0 Redemption of note payable to associated company (190,000) 0 Payment of member distributions (14,054) 0 -------- ------- Net cash provided by financing activities 22,688 1,173 -------- ------- INCREASE IN CASH AND CASH EQUIVALENTS 39,817 1,173 CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,173 0 -------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 40,990 $ 1,173 ======== ======= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 8,493 $ 0 ======== =======
The accompanying notes are an integral part of these statements. II-15 MOBILE ENERGY SERVICES COMPANY, L.L.C. BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (In Thousands)
ASSETS 1995 1994 ---------------------- --------- --------- CURRENT ASSETS: Cash and cash equivalents $ 40,990 $ 1,173 Trade accounts receivable 13,798 4,230 Receivables from associated companies 0 1,403 Materials and supplies 2,518 2,116 Prepaid expenses 1,107 1,102 Other 525 134 -------- -------- Total current assets 58,938 10,158 -------- -------- PROPERTY, PLANT, AND EQUIPMENT 361,076 357,789 Less accumulated depreciation (11,795) (468) Construction work in process 7,810 0 -------- -------- Property, plant, and equipment, net 357,091 357,321 -------- -------- DEFERRED LOAN COSTS, net of accumulated amortization of $285 and $0 at December 31, 1995 and 1994, respectively 14,862 1,822 -------- -------- Total assets $430,891 $369,301 ======== ========
The accompanying notes are an integral part of these balance sheets. II-16 MOBILE ENERGY SERVICES COMPANY, L.L.C. BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (In Thousands)
LIABILITIES AND MEMBERS' EQUITY 1995 1994 ---------------------------------------- ---------- ---------- CURRENT LIABILITIES: Trade accounts payable $ 783 $ 2,275 Accounts payable--associated company 5,985 11,223 Distribution payable 23,004 0 Note payable 14,075 0 Note payable--associated company 0 190,000 Current portion--long-term debt 5,895 0 Accrued interest 9,889 319 Other 2,022 734 -------- ------- Total current liabilities 61,653 204,551 -------- ------- LONG-TERM DEBT (Note 5) 302,466 85,000 COMMITMENTS AND CONTINGENCIES (Notes 3 and 7) MEMBERS' EQUITY 66,772 79,750 -------- ------- Total liabilities and Members' equity $430,891 $369,301 ======== ========
The accompanying notes are an integral part of these balance sheets. II-17 MOBILE ENERGY SERVICES COMPANY, L.L.C. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Mobile Energy Services Company, L.L.C. ("Mobile Energy") was organized on July 13, 1995. An equity interest of 99% in Mobile Energy was acquired by Mobile Energy Services Holdings, Inc. ("Holdings"), a wholly owned subsidiary of The Southern Company ("Southern"), and 1% of the equity interest in Mobile Energy was acquired by Southern Electric International, Inc. ("SEI"), a wholly owned subsidiary of Southern (together, the "Members"). Mobile Energy was created to own and operate an energy and chemical recovery complex located in Mobile, Alabama (the "Energy Complex"), purchased by Holdings on December 16, 1994 (the "Acquisition") from Scott Paper Company ("Scott Paper"). During 1995, Scott Paper merged with a subsidiary of Kimberly-Clark ("Scott/Kimberly-Clark"). Most of the Energy Complex's fuel needs are met from waste and by-products generated by a pulp mill (the "Pulp Mill"), a paper mill (the "Paper Mill"), and a tissue mill (the "Tissue Mill", and together with the Pulp Mill and the Paper Mill, the "Mills") located in Mobile, Alabama. Concurrent with the Acquisition, Holdings entered into various long-term contracts with Scott Paper in its capacity as the owner of the Pulp Mill and the Tissue Mill and with S.D. Warren Company ("S.D. Warren"), a wholly owned subsidiary of Scott Paper, in its capacity as the owner of the Paper Mill (Note 3). Ownership of S.D. Warren was subsequently transferred to an entity unaffiliated with Scott Paper. Pursuant to the contracts, the Energy Complex provides substantially all of the power, steam, and liquor processing services required by the Mills. Effective July 14, 1995, Holdings contributed all of its assets (other than an agreement for the provision of administrative and other services with Southern Company Services, Inc.), liabilities, and operations (the "Transfer"), including the Energy Complex, to Mobile Energy in the form of a tax-free contribution. The Transfer has been accounted for in a manner similar to a pooling of interests, and accordingly, the financial statements for prior periods include the accounts of Holdings prior to the Transfer. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Presentation Certain prior period amounts presented in the financial statements have been reclassified to conform to the current period presentation. II-18 Property, Plant, and Equipment Property, plant, and equipment are recorded at cost, as adjusted (Note 2). Depreciation is provided using the straight-line method over the estimated economic lives of the related assets (ranging from 5 to 35 years). Upon the retirement or sale of assets, the costs of such assets and the related accumulated depreciation are removed from the balance sheet and the gain or loss, if any, is included in income. At December 31, 1995 and 1994, property, plant, and equipment consisted of the following (in thousands): 1995 1994 --------- -------- Buildings $ 16,491 $ 16,443 Machinery and equipment 344,585 341,346 -------- -------- $361,076 $357,789 ======== ======== Cash and Cash Equivalents Cash equivalents consist primarily of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates fair value. Fair Value of Financial Instruments The carrying values of financial assets and liabilities, as defined in Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About Fair Value of Financial Instruments," in the accompanying balance sheets approximate fair value. Deferred Loan Costs Loan costs represent amounts incurred for professional services and other related costs for the offering of bonds discussed in Note 5. These costs will be amortized using the straight-line method over the life of the related bonds. Income Taxes As a limited liability company, Mobile Energy is not subject to federal and state income taxes. The taxable income or loss of Mobile Energy is included in the income tax returns of its Members. Accordingly, no provision for income taxes has been reflected in the accompanying financial statements. Derivatives Mobile Energy was a party to two interest rate swap options ("Swap Options") and two interest rate swaps ("Swaps") to manage exposure to fluctuations in interest rates by trading variable rate obligations for fixed rate obligations. In all cases, the Swaps related to specific portions of Mobile Energy's anticipated debt commitments and were of notional amounts and maturities that were consistent with such commitments. The Swap Options and Swaps were treated as hedges for the anticipated debt. Accordingly, the gains and losses on the Swap Options and Swaps were deferred and are being amortized to interest expense over the period of the related debt. Premiums paid for the Swap Options and Swaps were deferred and are being amortized over the life of the related debt (Note 6). II-19 2. PURCHASE OF PROPERTY, PLANT, AND EQUIPMENT On December 16, 1994, Mobile Energy purchased certain property, plant, and equipment located near Mobile, Alabama, from Scott Paper for approximately $264,000,000 cash and assumed various liabilities of Scott Paper totaling approximately $85,000,000. The excess of the fair value of assets acquired over the purchase price paid was allocated among the assets purchased in accordance with Accounting Principles Board Opinion No. 16. The total cash purchase price of approximately $263,597,000 was allocated as follows (in thousands): Utility plant $353,724 Long-term obligations (85,000) Current liabilities (5,127) -------- $263,597 Prior to December 31, 1994, a purchase price adjustment of approximately $2,428,000 related to the assumption of certain accrued pension and other retirement benefits was recorded as an adjustment to the fair value of the purchased assets. 3. COMMITMENTS AND CONTINGENCIES Mobile Energy is contractually obligated under three energy service agreements (the "Agreements") to provide power processing services and steam processing services to the Mills and liquor processing services to the pulp mill for a period of 25 years beginning December 16, 1994. Under the terms of the Agreements, the mill owners are obligated to pay monthly fixed demand charges for dedicated capacity of the Energy Complex and also variable charges for actual amounts purchased. In connection with the Acquisition, Mobile Energy entered into noncancelable land leases (the "Leases") with Scott/Kimberly-Clark. Rent expense under the Leases approximates $1 per year from 1995 through 2019. Also contained in the Leases is a right to purchase the land from Scott/Kimberly-Clark at the end of the lease term for $10. However, retention of the property is not under the control of Mobile Energy due to Scott/Kimberly-Clark's superseding option to repurchase the Energy Complex from Mobile Energy at the end of the lease term at fair market value. Accordingly, Mobile Energy's repurchase option is not reasonably assured and therefore is not considered a bargain purchase option under SFAS No. 13, "Accounting for Leases." 4. RELATED-PARTY TRANSACTIONS Under the terms of an agreement between SEI and Mobile Energy, SEI provides all operations and maintenance services for the Energy Complex. Such services are billed to Mobile Energy at SEI's direct cost plus an overhead cost allocation and totaled approximately $40,854,000 and $862,000 for the year ended December 31, 1995 and for the period from inception (December 16, 1994) to December 31, 1994, respectively. In addition, SEI billed Mobile Energy approximately $3,506,000 during 1995 in connection with acquisition, financing, and other administrative costs paid on Mobile Energy's behalf. Mobile Energy's bridge loan payable to Southern in the amount of $190,000,000 at December 31, 1994 represented Southern's temporary financing of the Acquisition. The note was repaid in connection with Mobile Energy's issuance of first mortgage bonds (Note 5) and accrued interest at a variable rate, determined monthly based on Southern's incremental cost of short-term debt outstanding. In the event that Southern did not have debt outstanding to the extent of the note, Mobile Energy was only charged interest on its pro rata amount of all of Southern's outstanding intercompany debt. As of December 31, 1994, Southern had approximately $190,000,000 outstanding related to Mobile II-20 Energy at an interest rate of 6.36%. Mobile Energy's note receivable from Southern in the amount of $1,403,497 at December 31, 1994 related to Southern's initial capitalization of Mobile Energy; this amount was received in connection with Mobile Energy's repayment of the bridge loan from Southern discussed above. As of December 31, 1995, accounts payable--associated company represents amounts payable to SEI for operations and maintenance services provided on behalf of Mobile Energy. As of December 31, 1994, accounts payable - associated company represents amounts payable to SEI as follows: (1) $1,822,000 premium paid for interest rate swap option (Note 7), (2) $3,428,135 of accrued pension and other retirement benefits attributable to SEI employees dedicated to perform under the operations and maintenance agreement between SEI and Mobile Energy, (3) $5,360,769 of acquisition-related costs, and (4) $612,245 for unpaid operation and maintenance services due for the period from inception (December 16, 1994) to December 31, 1994. 5. LONG-TERM DEBT Details of long-term debt in thousands are as follows at December 31, 1995 and 1994:
1995 1994 -------- -------- 8.665% first mortgage bonds, due serially on a semi-annual basis through 2017; secured by the Energy Complex; net of unamortized discount of $23.231 million at December 31, 1995 $231,979 $ 0 Obligations incurred in connection with the sale by public authorities of tax-exempt industrial revenue bonds (Series 1995), 6.95%, due serially on an annual basis beginning January 1, 2017 and ending January 1, 2020; secured by the Energy Complex; net of unamortized discount of $8.618 million at December 31, 1995 76,382 0 Obligations incurred in connection with the sale by public authorities of tax-exempt remarketable industrial revenue bonds (Series 1984 A through E) variable interest rates; due 2019; secured by the Energy Complex 0 85,000 Less current portion 5,895 0 -------- ------- Long-term debt $302,466 $85,000 ======== =======
On August 15, 1995, Mobile Energy issued $255,210,000 of first mortgage bonds, the proceeds from which were used primarily to repay Southern the $190,000,000 bridge loan (Note 4) and to terminate the Swaps (Note 6). The loss on termination of the related swap of $23.6 million has been treated as discount on the related debt. This discount and the rate of interest represent an effective interest rate, compounded monthly, of 10.037%. Also on August 15, 1995, Mobile Energy joined with public authorities and issued $85,000,000 of tax-exempt bonds, the proceeds of which were used to refund the Series 1984 bonds described above. The loss on termination of the related Swap of $8.7 million has been treated as discount on the related debt. This discount and the rate of interest represent an effective interest rate, compounded monthly, of 7.893%. In connection with the Series 1984 bonds, Mobile Energy incurred various remarketing fees of .125% on the outstanding bonds' principal. Any II-21 remarketing of the bonds was funded through five letter-of-credit agreements with banks which were terminated upon the redemption of the Series 1984 bonds in August, 1995. Aggregate maximum borrowings under the letter-of-credit agreements were $86,700,000. Commitment fees of .625% per annum were charged to Mobile Energy based on the unused portion of these agreements. On August 24, 1995, Mobile Energy entered into a revolving credit agreement expiring December 31, 2001 with Banque Paribas which allows Mobile Energy to draw up to $15,000,000 at an interest rate of LIBOR plus 1% ($4,675,000 at 6.9375%, $4,700,000 at 6.875%, and $4,700,000 at 6.8125% on December 31, 1995). Mobile Energy is required to have no borrowings for a period of five consecutive business days during each year; therefore, the borrowings of $14,075,000 at December 31, 1995 are classified as current in the accompanying balance sheets. In addition, Southern entered into a separate working capital facility aggregating to $16,908,000 with Banque Paribas expiring December 31, 2001 at an interest rate of LIBOR plus .35% under which Mobile Energy may draw funds but for which it has no liability to Banque Paribas. There were no borrowings under this facility during 1995. Commitment fees ranging from .1% to .375% per annum were charged to Mobile Energy based on the unused portion of these agreements. At December 31, 1995, the annual scheduled maturities of long-term debt during the next five years were as follows (in thousands): 1996 $5,895 1997 7,350 1998 7,885 1999 8,340 2000 8,840 6. DERIVATIVE FINANCIAL INSTRUMENTS In anticipation of potential interest rate risks associated with the Acquisition, SEI purchased the Swap Options (Note 1) during October 1994. The Swap Options were subsequently transferred to Mobile Energy. On December 19, 1994, the Swap Options were sold and Mobile Energy concurrently entered into the Swaps with a bank. The purpose of the Swaps was to reduce the potential impact of interest rate fluctuations between December 19, 1994 and the date the rates on Mobile Energy's outstanding industrial revenue bonds and the anticipated offering of first mortgage bonds were fixed (Note 5). As of December 31, 1994, the notional amounts, fair market values, and maturity dates of the Swaps were as follows:
Notional Fair Market Maturity Amount Value Date ---------- ------------ --------- Swap 1--industrial revenue bonds $ 85,000,000 $ 150,632 January 1, 2019 Swap 2--first mortgage bonds 224,000,000 (619,397) November 1, 2016 ------------ ---------- $309,000,000 $(468,765) ============ ==========
As of December 31, 1995 and 1994, the Swap Options premium of approximately $1,822,000 is included in deferred loan costs. The fair value of the Swaps was estimated using pricing models, which determined the present value of the difference between the contracted swap rates and market interest rates over the remaining life of the Swaps. The fair value of the Swaps represent the amounts the bank would have received or paid to terminate the Swaps at the reporting date. Mobile Energy terminated the Swaps on August 15, 1995, incurring a loss on termination of approximately $32,300,000. Such termination costs are accounted for as a discount on the related debt (Note 5) and are being amortized to interest expense using the effective interest rate method over the period of the related debt. Such amortization totaled approximately $446,000 for the year ended December 31, 1995. II-22 7. SIGNIFICANT CUSTOMERS, SUPPLIERS, AND CONCENTRATION OF CREDIT RISK Mobile Energy derived approximately 80% and 82% of its revenues during the year ended December 31, 1995 and during the period from inception (December 16, 1994) to December 31, 1994, respectively, from Scott/Kimberly-Clark. The remainder of Mobile Energy's revenues were derived from S.D. Warren . Receivables outstanding from sales to Scott/Kimberly-Clark and S.D. Warren were approximately $10,531,000 and $3,263,000, respectively, at December 31, 1995 and were approximately $3,120,000 and $676,000, respectively, at December 31, 1994. In addition, as indicated in Note 1, the majority of the Energy Complex's fuel needs are met by the Mills. These concentrations expose Mobile Energy's operations to the risk of severe impact in the near term should any of the Mills cease operations. Substantially all of SEI's employees at the Energy Complex (Note 4) are subject to collective bargaining agreements, none of which expire during 1996. II-23 MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY FINANCIAL SECTION II-24 Mobile Energy Services Holdings, Inc. and Subsidiary Consolidated Financial Statements as of December 31, 1995 and 1994 Together With Auditors' Report II-25 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Mobile Energy Services Holdings, Inc.: We have audited the accompanying consolidated balance sheets of MOBILE ENERGY SERVICES HOLDINGS, INC. (an Alabama corporation and a wholly owned subsidiary of The Southern Company) AND SUBSIDIARY as of December 31, 1995 and 1994 and the related consolidated statements of income, changes in stockholder's equity, and cash flows for the year ended December 31, 1995 and for the period from inception (December 16, 1994) to December 31, 1994. These financial statements are the responsibility of Holdings' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mobile Energy Services Holdings, Inc. and subsidiary as of December 31, 1995 and 1994 and the results of their operations and their cash flows for the year ended December 31, 1995 and for the period from inception (December 16, 1994) to December 31, 1994 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 21, 1996 II-26 MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD FROM INCEPTION (DECEMBER 16, 1994) TO DECEMBER 31, 1994 (In Thousands) 1995 1994 ---------- -------- OPERATING REVENUES: Demand charges $ 58,298 $2,603 Processing sales 23,587 1,151 Other 612 42 -------- ------ Total operating revenues 82,497 3,796 -------- ------- OPERATING EXPENSES: Operations and maintenance 26,094 919 Fuel 6,303 26 Depreciation and amortization 11,608 468 -------- ------ Total operating expenses 44,005 1,413 -------- ------ OPERATING INCOME 38,492 2,383 INTEREST EXPENSE (18,501) (215) OTHER INCOME 1,076 4 MINORITY INTEREST (210) (48) -------- ------ INCOME BEFORE INCOME TAXES 20,857 2,124 PROVISION FOR INCOME TAXES 8,058 831 -------- ------ NET INCOME $ 12,799 $1,293 ======== ====== The accompanying notes are an integral part of these consolidated statements. II-27 MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD FROM INCEPTION (DECEMBER 16, 1994) TO DECEMBER 31, 1994 (In Thousands)
Common Paid-In Retained Stock Capital Earnings Total ------ ------- -------- ------- BALANCE, prior to inception $ 0 $ 0 $ 0 $ 0 Sale of common stock at inception 1 74,249 0 74,250 ------ -------- ------- -------- BALANCE, December 16, 1994 1 74,249 0 74,250 Net income 0 0 1,293 1,293 ------ -------- ------- ------- BALANCE, December 31, 1994 1 74,249 1,293 75,543 Net income 0 0 12,799 12,799 Dividends 0 0 (14,694) (14,694) Capital repayments 0 (32,882) 0 (32,882) ------ -------- ------- ------- BALANCE, December 31, 1995 $ 1 $ 41,367 $ (602) $ 40,766 ====== ======== ======= ========
The accompanying notes are an integral part of these consolidated statements. II-28
MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD FROM INCEPTION (DECEMBER 16, 1994) TO DECEMBER 31, 1994 (In Thousands) 1995 1994 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 12,799 $ 1,293 --------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,608 468 Deferred income taxes 18,880 3,173 Minority interest 210 48 Changes in certain operating assets and liabilities: Increase in accounts receivable (8,165) (3,796) Increase in materials and supplies (402) 0 Increase in prepaids and other current assets (765) (1,275) Increase (decrease) in accounts payable (6,709) 4,677 Increase in current income tax payable 3,943 0 Increase in accrued interest 9,570 0 Increase in other current liabilities 869 649 Other, net 111 0 --------- ------- Total adjustments 29,150 3,944 --------- ------- Net cash provided by operating activities 41,949 5,237 --------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant, and equipment (3,287) (4,064) Construction work in progress (7,810) 0 --------- ------- Net cash used in investing activities (11,097) (4,064) --------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from the issuance of long-term debt 294,590 0 Proceeds from working capital facility (Note 5) 14,075 0 Redemption of long-term debt (85,000) 0 Redemption of note payable to associated company (190,000) 0 Payment of dividends (14,694) 0 Return of capital (9,878) 0 --------- ------- Net cash provided by financing activities 9,093 0 --------- ------- INCREASE IN CASH AND CASH EQUIVALENTS 39,945 1,173 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,173 0 --------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,118 $ 1,173 ========= ======= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest $ 8,412 $ 0 ========= ======= Income benefits (Note 6) $ (13,005) $(2,578) ========= ======= The accompanying notes are an integral part of these consolidated statements.
II-29 MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (In Thousands)
ASSETS 1995 1994 ------------------------------- -------- -------- CURRENT ASSETS: Cash and cash equivalents $ 41,118 $ 1,173 Customer receivables 13,798 4,230 Receivables from associated companies 0 1,403 Materials and supplies 2,518 2,116 Prepaid expenses 1,107 1,102 Other 526 134 -------- -------- Total current assets 59,067 10,158 -------- -------- PROPERTY, PLANT, AND EQUIPMENT 361,076 357,789 Less accumulated depreciation (11,795) (468) Construction work in process 7,810 0 -------- -------- Property, plant, and equipment, net 357,091 357,321 -------- -------- DEFERRED LOAN COSTS (net of accumulated amortization of $285 and $0 at December 31, 1995 and December 31, 1994, respectively) 14,862 1,822 -------- -------- Total assets $431,020 $369,301 ======== ======== The accompanying notes are an integral part of these consolidated balance sheets.
II-30 MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (In Thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994 - ------------------------------------------------ ---------- --------- CURRENT LIABILITIES: Trade accounts payable $ 783 $ 2,275 Accounts payable--associated company 6,007 11,223 Capital repayments and dividends payable 23,004 0 Note payable 14,075 0 Note payable--associated company 0 190,000 Current portion - long-term debt 5,895 0 Current income tax payable 3,335 0 Accrued interest 9,889 319 Other 2,038 1,169 -------- -------- Total current liabilities 65,026 204,986 -------- -------- DEFERRED INCOME TAXES (Note 6) 22,094 2,974 -------- -------- LONG-TERM DEBT 302,466 85,000 -------- -------- MINORITY INTEREST 668 798 -------- -------- COMMITMENTS AND CONTINGENCIES (Notes 3 and 8) STOCKHOLDER'S EQUITY: Common stock, $1 par value; 1,000 shares authorized and outstanding 1 1 Paid-in capital 41,367 74,249 Retained earnings (deficit) (602) 1,293 -------- -------- Total stockholder's equity 40,766 75,543 -------- -------- Total liabilities and stockholder's equity $431,020 $369,301 ======== ======== The accompanying notes are an integral part of these consolidated balance sheets.
II-31 MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Mobile Energy Services Holdings, Inc. ("Holdings"), a wholly owned subsidiary of The Southern Company ("Southern"), was incorporated on August 25, 1994 as Mobile Energy Services Company, Inc. and subsequently changed its name to Mobile Energy Services Holdings, Inc. Holdings was created to purchase an energy and chemical recovery complex located in Mobile, Alabama (the "Energy Complex"), from Scott Paper Company ("Scott Paper"). This transaction occurred on December 16, 1994 (the "Acquisition"). Most of the Energy Complex's fuel needs are met from waste and by-products generated by a pulp mill (the "Pulp Mill"), located in Mobile, Alabama that is part of an integrated pulp, paper, and tissue manufacturing facility that also includes a paper mill (the "Paper Mill") and a tissue mill (the "Tissue Mill," and together with the Pulp Mill and the Paper Mill, the "Mills"). Concurrent with the Acquisition, Holdings entered into various long-term contracts with Scott Paper in its capacity as the owner of the pulp mill and the tissue mill and with S.D. Warren Company ("S.D. Warren "), a wholly owned subsidiary of Scott Paper, in its capacity as the owner of the paper mill (Note 3). Ownership of S.D. Warren was subsequently transferred to an entity unaffiliated with Scott Paper. During 1995 Scott Paper merged with a subsidiary of Kimberly-Clark ("Scott/Kimberly-Clark"). Pursuant to the contracts, the Energy Complex provides substantially all of the power, steam, and liquor processing services required by the Mills. Effective July 14, 1995, Holdings contributed all of its assets (other than an agreement for the provision of administrative and other services with Southern Company Services, Inc., a wholly owned subsidiary of Southern), liabilities, and operations (the "Transfer"), including the Energy Complex, to Mobile Energy Services Company, L.L.C. ("Mobile Energy") in the form of a tax-free exchange. The Transfer has been accounted for in a manner similar to a pooling of interests, and accordingly, the financial statements for prior periods include the accounts of Holdings prior to the Transfer. Of the equity interest in Mobile Energy, 99% was acquired by Holdings and 1% was acquired by Southern Electric International, Inc. ("SEI"), a wholly owned subsidiary of Southern. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Presentation The consolidated financial statements include the accounts of Holdings and its majority-owned subsidiary, Mobile Energy. All significant intercompany accounts and transactions have been eliminated. Certain prior period amounts presented in the financial statements have been reclassified to conform to the current period presentation. II-32 Property, Plant, and Equipment Property, plant, and equipment are recorded at cost, as adjusted (Note 2). Depreciation is provided using the straight-line method over the estimated economic lives of the related assets (ranging from 5 to 35 years). Upon the retirement or sale of assets, the costs of such assets and the related accumulated depreciation are removed from the balance sheet and the gain or loss, if any, is included into income. At December 31, 1995 and 1994, property, plant, and equipment consisted of the following (in thousands): 1995 1994 ---------- ---------- Buildings $ 16,491 $ 16,443 Machinery and equipment 344,585 341,346 -------- -------- $361,076 $357,789 ======== ======== Cash and Cash Equivalents Cash equivalents consist primarily of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates fair value. Fair Value of Financial Instruments The carrying values of financial assets and liabilities, as defined in Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About Fair Value of Financial Instruments," in the accompanying balance sheets approximate fair value. Deferred Loan Costs Loan costs represent amounts incurred for professional services and other related costs for the offering of bonds discussed in Note 5. These costs will be amortized using the straight-line method over the life of the related bonds. Income Taxes Holdings provides deferred income taxes for all significant income tax temporary differences in accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires, among other things, the use of an asset and liability method for the recognition of deferred tax liabilities and assets. Derivatives Mobile Energy was a party to two interest rate swap options ("Swap Options") and two interest rate swaps ("Swaps") to manage exposure to fluctuations in interest rates by trading variable rate obligations for fixed rate obligations. In all cases, the Swap Options and Swaps related to specific portions of Mobile Energy's anticipated debt commitments and were of notional amounts and maturities that are consistent with such commitments. The Swap Options and Swaps were treated as hedges for the anticipated debt. Accordingly, the gains and losses on the Swap Options and Swaps were deferred and are being amortized to interest expense over the period of the related debt. Premiums paid for the Swap Options and Swaps were deferred and are being amortized over the life of the related debt (Note 7). II-33 2. PURCHASE OF PROPERTY, PLANT, AND EQUIPMENT On December 16, 1994, Mobile Energy purchased certain property, plant, and equipment located near Mobile, Alabama, from Scott Paper for approximately $264,000,000 cash and assumed various liabilities of Scott Paper totaling approximately $85,000,000. The excess of the fair value of assets acquired over the purchase price paid was allocated among the assets purchased in accordance with Accounting Principles Board Opinion No. 16. The total cash purchase price of approximately $263,597,000 was allocated as follows (in thousands): Utility plant $353,724 Long-term obligations (85,000) Current liabilities (5,127) -------- $263,597 ======== Prior to December 31, 1994, a purchase price adjustment of approximately $2,428,000 related to the assumption of certain accrued pension and other retirement benefits was recorded as an adjustment to the fair value of the purchased assets. 3. COMMITMENTS AND CONTINGENCIES Mobile Energy is contractually obligated under three energy service agreements (the "Agreements") to provide power processing services and steam processing services to the Mills and liquor processing services to the pulp mill for a period of 25 years beginning December 16, 1994. Under the terms of the Agreements, the mill owners are obligated to pay monthly fixed demand charges for dedicated capacity of the Energy Complex and also variable charges for actual amounts purchased. In connection with the Acquisition, Mobile Energy entered into noncancelable land leases (the "Leases") with Scott/Kimberly-Clark. Rent expense under the Leases approximates $1 per year from 1995 through 2019. Also contained in the Leases is a right to purchase the land from Scott/Kimberly-Clark at the end of the lease term for $10. However, retention of the property is not under the control of Mobile Energy due to Scott/Kimberly-Clark's superseding option to repurchase the Energy Complex from Mobile Energy at the end of the lease term at fair market value. Accordingly, Mobile Energy's repurchase option is not reasonably assured and therefore is not considered a bargain purchase option under SFAS No. 13, "Accounting for Leases." 4. RELATED-PARTY TRANSACTIONS Under the terms of an agreement between SEI and Mobile Energy, SEI provides all operations and maintenance services for the Energy Complex. Such services are billed to Mobile Energy at SEI's direct cost plus an overhead cost allocation and totaled approximately $40,854,000 for the year ended December 31, 1995 and approximately $862,000 for the period from inception (December 16, 1994) to December 31, 1994. In addition, SEI billed Mobile Energy $3,506,000 during 1995 in connection with acquisition, financing, and other administrative costs paid on Mobile Energy's behalf. Mobile Energy's bridge loan payable to Southern in the amount of $190,000,000 at December 31, 1994 represented Southern's temporary financing of the Acquisition. The note was repaid in connection with Mobile Energy's issuance of first mortgage bonds (Note 5) and accrued interest at a variable rate, determined monthly based on Southern's incremental cost of short-term debt outstanding. In the event that Southern did not have debt outstanding to the extent of the note, Mobile Energy was only charged interest on its pro rata amount of all of Southern's outstanding intercompany debt. As of December 31, 1994, Southern had approximately $190,000,000 outstanding related to Mobile Energy at an interest rate of 6.36%. Mobile Energy's note receivable from Southern in the amount of $1,403,497 at December 31, 1994 related to II-34 Southern's initial capitalization of Mobile Energy; this amount was received in connection with Mobile Energy's repayment of the bridge loan from Southern discussed above. As of December 31, 1995, accounts payable--associated company represents amounts payable to SEI for operations and maintenance services provided on behalf of Mobile Energy. As of December 31, 1994, accounts payable - associated company represents amounts payable to SEI as follows: (1) $1,822,000 premium paid for interest rate swap option (Note 7), (2) $3,428,135 of accrued pension and other retirement benefits attributable to SEI employees dedicated to perform under the operations and maintenance agreement between SEI and Mobile Energy, (3) of acquisition-related costs, and (4) $612,245 for unpaid operation and maintenance services due for the period from inception (December 16, 1994) to December 31, 1994. 5. LONG-TERM DEBT Details of long-term debt in thousands are as follows at December 31, 1995 and 1994:
1995 1994 ------------ ---------- 8.665% first mortgage bonds, due serially on a semi-annual basis through 2017; secured by the Energy Complex; net of unamortized discount of $23.231 million at December 31, 1995 $231,979 $ 0 Obligations incurred in connection with the sale by public authorities of tax-exempt industrial revenue bonds (Series 1995), 6.95%, due serially on an annual basis beginning January 1, 2017 and ending January 1, 2020; secured by the Energy Complex; net of unamortized discount of $8.618 million at December 31, 1995 76,382 0 Obligations incurred in connection with the sale by public authorities of tax-exempt remarketable industrial revenue bonds (Series 1984 A through E); variable interest rates ; due 2019; secured by the Energy Complex 0 85,000 Less current portion 5,895 0 -------- ------- Long-term debt $302,466 $85,000 ======== =======
On August 15, 1995, Mobile Energy issued $255,210,000 of first mortgage bonds, the proceeds from which were used primarily to repay Southern the $190,000,000 bridge loan (Note 4) and to terminate the Swaps (Note 7). The loss on termination of the related Swap of $23.6 million has been treated as discount on the related debt. This discount and the rate of interest represent an effective interest rate, compounded monthly, of 10.037%. Also on August 15, 1995, Mobile Energy joined with public authorities and issued $85,000,000 of tax-exempt bonds, the proceeds of which were used to refund the Series 1984 bonds described above. The loss on termination of the related Swap of $8.6 million has been treated as discount on the related debt. This discount and the rate of interest represent an effective interest rate, compounded monthly, of 7.893%. On August 24, 1995, Mobile Energy entered into a revolving credit agreement with Banque Paribas which allows Mobile Energy to draw up to $15,000,000 at an interest rate of LIBOR plus 1% ($4,675,000 at 6.9375%, $4,700,000 at 6.875%, and $4,700,000 at 6.8125% on December 31, 1995). Mobile Energy is required to have no borrowings for a period of five consecutive business days during each year; therefore, the borrowings of $14,075,000 at December 31, 1995 are classified as current in the II-35 accompanying balance sheets. In addition, Southern entered into a separate working capital facility aggregating to $16,908,000 with Banque Paribas expiring December 31, 1995 at a rate of LIBOR plus .35% under which Mobile Energy may draw funds but for which it has no liability to Banque Paribas. There were no borrowings under this facility during 1995. Commitment fees ranging from .1% to .375% per annum were charged to Mobile Energy based on the unused portion of these agreements. In connection with the Series 1984 bonds, Mobile Energy incurred various remarketing fees of .125% on the outstanding bonds' principal. Any remarketing of the bonds was funded through five letter-of-credit agreements with banks which were terminated upon the redemption of the Series 1984 bonds in August 1995. Aggregate maximum borrowings under the letter-of-credit agreements were $86,700,000. Commitment fees of .625% per annum were charged to Mobile Energy based on the unused portion of these agreements. At December 31, 1995, the annual scheduled maturities of long-term debt during the next five years were as follows (in thousands): 1996 $5,895 1997 7,350 1998 7,885 1999 8,340 2000 8,840 6. INCOME TAXES Details of the income tax provision for the years ended December 31, 1995 and 1994 are set forth below (in thousands): 1995 1994 ----------- --------- Current benefit: Federal $(10,038) $2,143) State 0 0 ------- ------ (10,038) (2,143) Deferred provision: Federal 16,820 2,903 State 1,276 71 ------- ------ 18,096 2,974 ------- ------ Total income tax provision $ 8,058 $ 831 ======= ====== The effective income tax rate of 38.25% differs from the statutory federal tax rate due to the impact of state taxes, net of the related federal benefit. The tax effects of temporary differences between the amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows (in thousands):
1995 1994 ----------------------------- --------------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax Assets Liabilities Assets Liabilities ------ ----------- ------ ----------- Accelerated depreciation $ 0 $12,961 $ 0 $2,974 Investment basis differences 0 8,262 0 0 Other 436 1,307 0 0 --- ------- ---- ------- Total 436 22,530 0 2,974 Less current portion 0 0 0 0 ---- ------- ---- ------ Total noncurrent $436 $22,530 $ 0 $2,974
II-36 Holdings and the other corporate subsidiaries of Southern file a consolidated federal tax return. Under a joint consolidated income tax agreement, each company's current and deferred taxes due are computed on a stand-alone basis. Payments are made between the subsidiaries of Southern when tax benefits generated by one subsidiary are utilized by another subsidiary. Under this agreement, Holdings received tax refunds of approximately $13,005,000 and $2,578,000 during the year ended December 31, 1995 and during the period from inception (December 16, 1994) to December 31, 1994, respectively. 7. DERIVATIVE FINANCIAL INSTRUMENTS In anticipation of potential interest rate risks associated with the Acquisition, SEI purchased the Swap Options (Note 1) during October 1994. The Swap Options were subsequently transferred to Mobile Energy. On December 19, 1994, the Swap Options were sold and Mobile Energy concurrently entered into the Swaps with a bank. The purpose of the Swaps was to reduce the potential impact of interest rate fluctuations between December 19, 1994 and the date the rates on Mobile Energy's outstanding industrial revenue bonds and the offering of first mortgage bonds were fixed (Note 5). As of December 31, 1994, the notional amounts, fair market values, and maturity dates of the Swaps were as follows:
Notional Fair Market Maturity Amount Value Date --------------- ------------ -------------- Swap 1--industrial revenue bonds $ 85,000,000 $ 150,632 January 1, 2019 Swap 2--first mortgage bonds 224,000,000 (619,397) November 1, 2016 ------------ --------- $309,000,000 $(468,765) ============ =========
As of December 31, 1995 and 1994, the Swap Options premium of $1,822,000 is included in deferred loan costs. The fair value of the Swaps was estimated using pricing models, which determined the present value of the difference between the contracted swap rates and market interest rates over the remaining life of the Swaps and represent the amounts the bank would receive or pay to terminate the Swaps at the reporting date. Mobile Energy terminated the Swaps on August 15, 1995, incurring a loss on termination of approximately $32,300,000. Such termination costs are accounted for as a discount on the related debt (Note 5)and are being amortized to interest expense using the effective interest rate method over the period of the related debt. Such amortization totaled approximately $446,000 for the year ended December 31, 1995. 8. SIGNIFICANT CUSTOMERS, SUPPLIERS, AND CONCENTRATION OF CREDIT RISK Mobile Energy derived approximately 80% and 82% of its revenues during the year ended December 31, 1995 and during the period from inception (December 16, 1994) to December 31, 1994, respectively, from Scott/Kimberly-Clark. The remainder of Mobile Energy's revenues were derived from S.D. Warren. Receivables outstanding from sales to Scott/Kimberly-Clark and S.D. Warren were approximately $10,531,000 and $3,263,000, respectively, at December 31, 1995 and were approximately $3,120,000 and $676,000, respectively, at December 31, 1994. In addition, as indicated in Note 1, the majority of the Energy Complex's fuel needs are met by the Mills. These concentrations expose Mobile Energy's operations to the risk of severe impact in the near term should any of the Mills cease operations. Substantially all of SEI's employees at the Energy Complex (Note 4) are subject to collective bargaining agreements, none of which expire during 1996. II-37 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS Omitted pursuant to General Instruction J. Item 11. EXECUTIVE COMPENSATION Omitted pursuant to General Instruction J. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Omitted pursuant to General Instruction J. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Omitted pursuant to General Instruction J. III-1 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report on this Form 10-K: (1) Financial Statements: Reports of Independent Public Accountants on the financial statements for Holdings and Mobile Energy are listed under Item 8 herein. The financial statements filed as a part of this report for Holdings and Mobile Energy are listed under Item 8 herein. (2) Financial Statement Schedules: None (3) Exhibits: Exhibits for Holdings and Mobile Energy are listed in the Exhibit Index beginning on page IV-3. (b) Reports on Form 8-K: Neither of the registrants has filed any reports on Form 8-K during the last quarter of the fiscal year ended December 31, 1995. IV-1 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: /s/ Thomas G. Boren Thomas G. Boren, President and Chief Executive Officer Date: March 29, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. /s/ Thomas G. Boren Thomas G. Boren President and Chief Executive Officer (Principal Executive Officer) /s/ Raymond D. Hill Raymond D. Hill Vice President and Chief Financial Officer (Principal Financial Officer) Members: Mobile Energy Services Holdings, Inc. /s/ Thomas G. Boren By: Thomas G. Boren President and Chief Executive Officer Southern Electric International, Inc. /s/Thomas G. Boren By: Thomas G. Boren President and Chief Executive Officer Date: March 29, 1996 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. MOBILE ENERGY SERVICES HOLDINGS, INC. By: /s/ Thomas G. Boren Thomas G. Boren, President and Chief Executive Officer Date: March 29, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. /s/ Thomas G. Boren Thomas G. Boren President and Chief Executive Officer and Director (Principal Executive Officer) /s/ Raymond D. Hill Raymond D. Hill Vice President and Chief Financial Officer and Director (Principal Financial Officer) Directors: /s/ K. E. Adams K .E. Adams /s/ J. B. Jones J. B. Jones /s/ S. M. Fuller S. M. Fuller J. B. Madden Date: March 29, 1996 IV-2 EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANTS Mobile Energy Services L.L.C., organized under the laws of Alabama, is the only subsidiary of Mobile Energy Services Holdings, Inc. Mobile Energy Services L.L.C. has no subsidiaries. Exhibit Index The following exhibits indicated by an asterisk preceding the exhibit number are filed herewith. The balance of the exhibits have heretofore been filed with the SEC, respectively, as the exhibits and in the file numbers indicated and are incorporated herein by reference. (3) Articles of Incorporation and By-Laws 3.1 - Articles of Organization of Mobile Energy. (Designated in Registration No. 33-92776 as Exhibit 3.1.) 3.2 - Operating Agreement of Mobile Energy. (Designated in Registration No. 33-92776 as Exhibit 3.2.) 3.3 - Amended and Restated Articles of Incorporation of Holdings. (Designated in Registration No. 33-92776 as Exhibit 3.3.1) 3.4 - By-Laws of Holdings. (Designated in Registration No.33-92776 as Exhibit 3.4.) (4) Instruments Describing Rights of Security Holders, Including Indentures *4.1 - Trust Indenture dated as of August 1, 1995 among First Union National Bank of Georgia, Mobile Energy and Holdings. *4.2 - First Supplemental Indenture dated as of August 1, 1995 among First Union National Bank of Georgia, Mobile Energy and Holdings. *4.3 - Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among Bankers Trust (Delaware), First Union National Bank of Georgia, Banque Paribas, The Industrial Development Board of the City of Mobile, Alabama, Mobile Energy and Holdings. *4.4 - Amended and Restated Trust Indenture dated as of August 1, 1995 between First Union National Bank of Georgia and The Industrial Development Board of the City of Mobile, Alabama. *4.5 - Amended and Restated Lease and Agreement dated as of August 1, 1995 among the Industrial Development Board of the City of Mobile, Alabama, Mobile Energy and Holdings. *4.6 - Revolving Credit Agreement dated as of August 1, 1995 among Mobile Energy, Holdings, and Banque Paribas. IV-3 *4.7 - Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 by Mobile Energy and the Industrial Development Board of the City of Mobile, Alabama in favor of Bankers Trust (Delaware). *4.8 - First Amendment to Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing dated as of December 9, 1995 among Mobile Energy, the Industrial Development Board of the City of Mobile, Alabama and Bankers Trust (Delaware). *4.9 - Assignment and Security Agreement dated as of August 1, 1995 among Mobile Energy, the Industrial Development Board of the City of Mobile, Alabama and Bankers Trust (Delaware). (10) Material Contracts 10.1 - Pulp Mill Energy Services Agreement dated as of December 12, 1994 and first amendment thereto, between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.1 and 10.2.) 10.2 - Paper Mill Energy Services Agreement dated as of December 12, 1994 and first amendment thereto, between S.D. Warren and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.3 and 10.4.) 10.3 - Tissue Mill Energy Services Agreement dated as of December 12, 1994 and first amendment thereto, Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibit 10.5 and 10.6.) 10.4 - Amended and Restated Master Operating Agreement dated as of July 13, 1994 among Scott Paper, S.D. Warren and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibit 10.7.) 10.5 - Asset Purchase Agreement between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibit 10.8.) 10.6 - Common Services Agreement dated as of December 12, 1994 and first amendment thereto, among Scott Paper, S.D. Warren and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.9 and 10.10.) 10.7 - Transition Agreement dated as of December 12, 1994 and first and second amendment thereto, between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.11, 10.11.1 and 10.11.2.) 10.8 - Lease Agreement dated as of December 12, 1994 and first amendment thereto, between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.12 and 10.13.) IV-4 10.9 - Supplementary Lease Agreement dated as of December 12, 1994 and first amendment thereto, between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibit 10.14 and 10.15) *10.10 - Second Amendment to Supplementary Lease Agreement dated as of August 1, 1995 between Scott Paper and Mobile Energy. *10.11 - Third Amendment to Supplementary Lease Agreement dated as of December 8, 1995 between Scott Paper and Mobile Energy. 10.12 - Easement Deeds dated as of December 12, 1994 between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.16 and 10.18.) 10.13 - Easement Deeds dated as of December 12, 1994 between Mobile Energy (as assignee of Holdings) and Scott Paper. (Designated in Registration No. 33-92776 as Exhibits 10.17 and 10.19.) 10.14 - Easement Deed dated as of December 12, 1994 between Mobile Energy (as assignee of Holdings) and S.D. Warren. (Designated in Registration No. 33-92776 as Exhibit 10.20.) 10.15 - Easement Deed dated as of December 12, 1994 between S.D. Warren and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibit 10.21.) *10.16 - Easement Deed dated as of December 8, 1995 between Scott Paper and Mobile Energy. 10.17 - Employee Transition Agreement dated as of December 12, 1994 and first amendment thereto, among Scott Paper, Mobile Energy (as assignee of Holdings) and SEI. (Designated in Registration No. 33-92776 as Exhibits 10.22 and 10.22.1.) 10.18 - Water Procurement and Effluent Service Agreement dated as of December 12, 1994 and first amendment thereto, among Scott Paper, S.D. Warren and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.23 and 10.24.) 10.19 - Boiler Ash Disposal Agreement dated as of December 12, 1994 and first amendment thereto between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.25 and 10.26.) 10.20 - Paper Mill Environmental Indemnity Agreement dated as of December 12, 1994 and first amendment thereto, between S.D. Warren and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.27 and 10.28.) 10.21 - Pulp Mill Environmental Indemnity Agreement dated as of December 12, 1994 and first amendment thereto, between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.29 and 10.30.) IV-5 10.22 - Tissue Mill Environmental Indemnity Agreement dated as of December 12, 1994 and first amendment thereto, between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.31 and 10.32.) 10.23 - Scott Environmental Indemnity Agreement dated as of December 12, 1994 and first amendment thereto, between Scott Paper and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibits 10.33 and 10.34.) 10.24 - Facility Operations and Maintenance Agreement dated as of December 12, 1994 between SEI and Mobile Energy (as assignee of Holdings). (Designated in Registration No. 33-92776 as Exhibit 10.35.) 10.25 - Independent Engineer Agreement between Stone & Webster and Mobile Energy. (Designated in Registration No. 33-92776 as Exhibit 10.38.) 10.26 - 1984 Tax-Exempt Lease and Agreement and amendments thereto. (Designated in Registration No. 33-92776 as Exhibit 10.39.) 10.27 - 1984 Tax-Exempt Lease Assignment and Assumption Agreement. (Designated in Registration No. 33-92776 as Exhibit 10.40.) 10.28 - 1973 Installment Sale Agreement and amendments thereto. (Designated in Registration No. 33-92776 as Exhibit 10.41.) 10.29 - 1973 Tax-Exempt Lease and Assignment Agreement. (Designated in Registration No. 33-92776 as Exhibit 10.42.) 10.30 - 1984-1985 Taxable Sublease Agreement and amendments thereto. (Designated in Registration No. 33-92776 as Exhibit 10.43.) 10.31 - 1984-1985 Taxable Sublease and Assignment Agreement. (Designated in Registration No. 33-92776 as Exhibit 10.44.) 10.32 - 1976 Installment Sale Agreement and amendments thereto. (Designated in Registration No. 33-92776 as Exhibit 10.45.) 10.33 - 1976 Tax-Exempt Lease and Assignment Agreement. (Designated in Registration No. 33-92776 as Exhibit 10.46.) 10.34 - 1994 Recovery Boiler Bonds Lease Agreement. (Designated in Registration No. 33-92776 as Exhibit 10.47.) 10.35 - 1994 Recovery Boiler Bonds Lease Assignment and Assumption Agreement. (Designated in Registration No. 33-92776 as Exhibit 10.48.) 10.36 - Estoppel and Nondisturbance Agreement, dated as of December 12, 1994, delivered by Three Rivers Timber Company. (Designated in Registration No. 33-92776 as Exhibit 10.49.) IV-6 10.37 - Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Holdings and Mobile Energy. (Designated in Registration No. 33-92776 as Exhibit 10.50.) 10.38 - Recognition, Cooperation and Consent Agreement among The Industrial Development Board of the City of Mobile, Alabama, Mobile Energy, Bankers Trust (Delaware), AmSouth Bank of Alabama and Three Rivers Timber Company. (Designated in Registration No. 33-92776 as Exhibit 10.51.) 10.39 - Recognition, Cooperation Consent Agreement among The Industrial Development Board of the City of Mobile, Alabama, Mobile Energy, Bankers Trust (Delaware) and First Union National Bank of Georgia. (Designated in Registration No. 33-92776 as Exhibit 10.52.) 10.40 - Mill Owner Maintenance Reserve Account Agreement among Scott Paper, S.D. Warren , Southern and Mobile Energy. (Designated in Registration No. 33-92776 as Exhibit 10.53.) 10.41 - SCS Agreement dated as of July 14, 1995 between SCS and Mobile Energy. (Designated in Registration No. 33-92776 as Exhibit 10.54.) *10.42 - Consent and Agreement dated as of August 1, 1995 among Scott Paper, Mobile Energy and Bankers Trust (Delaware) (re: the Amended and Restated Master Operating Agreement dated as of July 13, 1995 and certain other agreements). *10.43 - Consent and Agreement dated as of August 1, 1995 among Scott Paper, Mobile Energy and Bankers Trust (Delaware) (re: the Asset Purchase Agreement dated as of December 12, 1994 and certain other agreements). *10.44 - Consent and Agreement dated as of August 1, 1995 among S.D. Warren, Mobile Energy and Bankers Trust (Delaware). *10.45 - Consent and Agreement dated as of August 1, 1995 among the Pulp Mill Owner, Mobile Energy and Bankers Trust (Delaware). *10.46 - Consent and Agreement dated as of August 1, 1995 among the Tissue Mill Owner, Mobile Energy and Bankers Trust (Delaware). *10.47 - Consent and Agreement dated as of August 1, 1995 among E.J. Hodder & Associates, Inc., Mobile Energy and Bankers Trust (Delaware). *10.48 - Consent and Agreement dated as of August 1, 1995 among Ahlstrom Recovery, Inc., Mobile Energy and Bankers Trust (Delaware). *10.49 - Consent to Assignment dated as of August 1, 1995 among Southern Electric, Mobile Energy and Bankers Trust (Delaware). *10.50 - Consent to Assignment dated as of August 1, 1995 among Southern Company Services, Inc., Mobile Energy and Bankers Trust (Delaware). IV-7 *10.51 - Estoppel, Consent and Recognition Agreement among Scott Paper, Mobile Energy and Bankers Trust (Delaware) (re: Lease Agreement dated as of December 12, 1994). *10.52 - Estoppel, Consent and Recognition Agreement, among Scott Paper, Mobile Energy and Bankers Trust (Delaware) (re: Supplementary Lease Agreement dated as of December 12, 1994). *10.53 - Underwriting Agreement dated as of August 15, 1995 between Mobile Energy and Goldman, Sachs & Co., Bear, Stearns & Co., Inc. and Lehman Brothers Inc. (21) Subsidiaries of Registrant - Contained herein at page IV-3. *21. - Subsidiaries of Registrant. (27) Financial Data Schedules *27. - Financial Data Schedules. IV-8 EX-4.1 2 Exhibit 4.1 - ------------------------------------------------------------------------------ TRUST INDENTURE dated as of August 1, 1995 among MOBILE ENERGY SERVICES COMPANY, L.L.C., MOBILE ENERGY SERVICES HOLDINGS, INC. and FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee Providing for the Issuance from Time to Time of Securities in One or More Series - ------------------------------------------------------------------------------- CROSS-REFERENCE TABLE*/ TIA Section Indenture Section 310(a)(1) 9.9 (a)(2) 9.9 (a)(3) N.A. (a)(4) N.A. (a)(5) 9.8 (b) 9.8 (c) N.A. 311(a) 9.13 (b) 9.13 (c) N.A. 312(a) 10.1;10.2 (b) 10.2 (c) 10.2 313(a) 10.3 (b)(1) 10.3 (b)(2) 10.3 (c) 10.3 (d) 10.3 314(a) 5.3; 10.4 (b) N.A. (c)(1) 1.2 (c)(2) 1.2 (c)(3) N.A. (d) 1.7 (e) 1.2 (f) N.A. 315(a) 9.1(a) (b) 9.2 (c) 9.1(b) (d) 9.1(c) (e) 8.9 316(a)(1)(A) 8.6 (a)(1)(B) 8.7 (a)(2) N.A. (a) 1.1 (b) 8.10 316(c) N.A. 317(a)(1) 8.4 (a)(2) 8.4 (b) 9.14 318(a) 1.7 N.A. means not applicable. - ------------------- */ Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. TRUST INDENTURE, dated as of August 1, 1995, among MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), its principal office and mailing address being at 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338, MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation ("Mobile Energy"), its principal office and mailing address being at 900 Ashwood Parkway, Suite 450, Atlanta, Georgia 30338, and FIRST UNION NATIONAL BANK OF GEORGIA, as trustee (the "Trustee"), its corporate trust office and mailing address being at 999 Peachtree Street, N.E., Atlanta, Georgia 30309. W I T N E S S E T H : WHEREAS, the Company has duly authorized the creation of an issue of bonds, debentures, promissory notes or other evidences of indebtedness to be issued in one (1) or more series (the "Securities") up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture; the Company has duly authorized the execution, delivery and performance by it of this Indenture to secure the Securities and to provide for the authentication and delivery thereof by the Trustee; WHEREAS, the Company wishes to secure the payment of the principal of and premium, if any, and interest on all the Securities authenticated and delivered hereunder by the Trustee and issued hereunder by the Company and the covenants therein and herein contained and to mortgage, pledge and assign substantially all of its assets, including certain of the proceeds of the sale of the Securities; WHEREAS, Mobile Energy will benefit from the sale of the Securities of the Company and the use of the net proceeds therefrom as contemplated herein and has duly authorized the execution, delivery and performance by it of this Indenture; WHEREAS, Mobile Energy wishes to provide its guaranty to secure the Guaranteed Obligations (as defined below), including the payment of the principal of and premium, if any, and interest on all the Securities authenticated and delivered hereunder and issued by the Company and the covenants therein and herein contained; and WHEREAS, all acts necessary to make this Indenture a valid instrument for the security of the Securities, in accordance with its and their terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in consideration of the premises and of the purchase of the Securities by the Holders (as defined below) thereof, and in order to secure the payment of the principal of and premium, if any, and interest on all Securities from time to time outstanding and the performance of the covenants therein and herein contained and to declare the terms and conditions on which such Securities are secured, the Company hereby grants, bargains, mortgages, sells, releases, conveys, assigns, transfers, pledges, sets over and confirms to the Trustee, and grants to the Trustee a security interest in, (a) all right, title and interest of the Company in and to the Indenture Accounts (as defined below), including any and all monies contained therein or hereafter delivered to the Trustee for deposit therein and, in each case, all monies received and the right to receive monies thereunder, and (b) all right, title and interest of the Company in and to all monies and securities from time to time held under the terms of this Indenture, and in any and all other property of every type and nature from time to time hereafter by delivery or by writing of any kind given, granted, pledged and assigned as and for additional security hereunder, by the Company or by anyone on its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof; TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby given, granted, pledged and assigned, or agreed or intended so to be, unto the Trustee and its successors in said trust and to it and its assigns forever; IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of all Outstanding (as defined below) Securities without any priority of any such Security over any other such Security; PROVIDED, HOWEVER, that the right, title and interest of the Company in and to any Debt Service Reserve Account (as defined below), including any and all monies contained therein or hereafter delivered to the Trustee for deposit therein and, in each case, all monies received and the right to receive monies thereunder, shall be held in trust solely for the equal and proportionate benefit and security of the Holders from time to time of the Outstanding Securities for the benefit of whom such Debt Service Reserve Account was established; and PROVIDED FURTHER, HOWEVER, that if, after the right, title and interest of the Trustee in and to the Indenture Accounts shall have ceased, terminated and become void in accordance with Article XII, and the principal of and premium, if any, and interest on the Securities shall have been paid to the Holders thereof, then and in that case this Indenture and the estate and rights hereby granted shall cease, terminate and be void, and the Trustee shall cancel and discharge this Indenture and execute and deliver to the Company such instruments as the Company shall require to evidence the discharge hereof; otherwise this Indenture shall be and remain in full force and effect; and THE PARTIES HEREBY COVENANT AND AGREE AS FOLLOWS: ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions; Construction. (a) For all purposes of this Indenture, except as otherwise expressly provided in this Indenture or unless the context otherwise requires, all terms used herein shall have the meanings set forth in Appendix A to the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among the Trustee, First Union National Bank of Georgia, as the Tax-Exempt Indenture Trustee referred to therein, Banque Paribas, as the Working Capital Facility Provider referred to therein, The Industrial Development Board of the City of Mobile, Alabama, the Company, Mobile Energy and Bankers Trust (Delaware), as the Collateral Agent referred to therein. SECTION 1.2. Compliance Certificates and Opinions. Except as otherwise expressly provided by this Indenture, upon any application or request by either of the Mobile Energy Parties to the Trustee to take any action under any provision of this Indenture, the Trustee shall be entitled to receive, upon its request, an Officer's Certificate of such Mobile Energy Party stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: 2 (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; (d) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with; and (e) in the case of an Officer's Certificate, a statement as to whether or not any Event of Default under this Indenture has occurred and Is continuing. SECTION 1.3. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one (1) such Person, or that they be so certified or covered by only one (1) document, but one (1) such Person may certify or give an opinion with respect to some matters and one (1) or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one (1) or several documents. Any certificate or opinion of an officer of the Company or of Mobile Energy may be based, insofar as it relates to legal matters, upon an Opinion of Counsel or a certificate of counsel unless such officer knows or has reason to believe that such Opinion of Counsel or certificate with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of either of the Mobile Energy Parties stating that the information with respect to such factual matters is in the possession of such Mobile Energy Party, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two (2) or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one (1) instrument. SECTION 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one (1) or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Holders of Securities voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities duly called and held in accordance with the provisions of Article XIII, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record, or both are delivered to the Trustee and, when it is specifically required herein, to either of the Mobile Energy Parties. Such instrument or instruments and any such record (and the action embodied 3 therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments and so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 9.1) conclusive in favor of the Trustee and the Mobile Energy Parties, if made in the manner provided in this Section 1.4. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 13.6. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to such officer the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer, and where such execution is by an officer of a corporation or association or a member of a partnership or limited liability company, on behalf of such corporation, association, partnership or limited liability company, such certificate or affidavit shall also constitute sufficient proof of such Person's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient. (c) The principal amount and serial numbers of Securities held by any Person, and the date or dates of holding the same, shall be proven by the Security Register and the Trustee shall not be affected by notice to the contrary. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security, the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such action is made upon such Security. (e) Until such time as written instruments shall have been delivered with respect to the requisite percentage of principal amount of Securities for the action contemplated by such instruments, any such instrument executed and delivered by or on behalf of a Holder of Securities may be revoked with respect to any or all of such Securities by written notice by such Holder or any subsequent Holder, proven in the manner in which such instrument was proven. (f) Securities of any series authenticated and delivered after any Act of Holders may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any action taken by such Act of Holders. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to such action may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. (g) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the thirtieth (30th) day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 10.1) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. 4 SECTION 1.5. Notices, etc. to Trustee and Mobile Energy Parties. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder, by either of the Mobile Energy Parties or by an Authorized Agent shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to the Trustee at its Corporate Trust Office, or (b) the Company by the Trustee, by any Holder, by Mobile Energy or by an Authorized Agent shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture, together with a copy to it at P.O. Box 2747, 200 Bay Bridge Road, Mobile, Alabama 36652, or at any other address previously furnished in writing to the Trustee, each Holder and Mobile Energy by the Company for such purpose, or (c) Mobile Energy by the Trustee, by any Holder, by the Company or by an Authorized Agent shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to Mobile Energy addressed to it at the address of its principal office specified in the first paragraph of this Indenture, or at any other address previously furnished in writing to the Trustee, each Holder and the Company by Mobile Energy for such purpose. SECTION 1.6. Notices to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder, at its address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given. SECTION 1.7. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. SECTION 1.8. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.9. Successors and Assigns. All covenants, agreements, representations and warranties in this Indenture by the Trustee and the Mobile Energy Parties shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. SECTION 1.10. Severability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the 5 validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.12. Governing Law. THIS INDENTURE SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5-1401), EXCEPT THAT SUCH LAW SHALL NOT APPLY WITH RESPECT TO ANY COLLATERAL WHERE, AND TO THE EXTENT THAT, IT IS NECESSARY TO APPLY THE LAWS OF ANOTHER JURISDICTION TO PERFECT LIENS IN SUCH COLLATERAL RELATING TO DEBT ISSUED HEREUNDER. SECTION 1.13. Legal Holidays. In any case where any Redemption Date or Prepayment Date or the date of any Stated Maturity of any Security or of any installment of principal thereof or payment of interest thereon shall not be a Business Day, then (notwithstanding any other provision of this Indenture or such Security) payment of interest or principal, or premium, if any, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Redemption Date or Prepayment Date or the date of such Stated Maturity and, except as provided in the Series Supplemental Indenture establishing the terms of such Security, if such payment is timely made, no interest shall accrue for the period from and after such Redemption Date or Prepayment Date or the date of such Stated Maturity (as the case may be) to the date of such payment. SECTION 1.14. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one (1) and the same instrument. SECTION 1.15. Projections. All projections contemplated herein (including projections prepared in connection with the determination of any Revenue Sufficiency Certification, Senior Debt Service Coverage Ratio, Senior Debt Service Requirement or Total Debt Service Coverage Ratio for a period that includes, or consists entirely of, future periods) shall be prepared by the Company in good faith based upon assumptions reasonably believed by the Company to be consistent with the Project Documents and the historical operating results of the Energy Complex as adjusted by reasonable assumptions as to future operating results; provided, however, that all projections prepared by the Company in connection with the determination of Senior Debt Service Coverage Ratios pursuant to Section 5.19(b) shall assume that (a) the Company shall receive no revenues under the Tissue Mill Energy Services Agreement upon the occurrence and during the continuation of an ESA Blockage Event with respect to the Tissue Mill Owner, the Tissue Mill Energy Services Agreement or the Tissue Mill and (b) the Company shall receive no revenues under the Paper Mill Energy Services Agreement upon the occurrence and during the continuation of an ESA Blockage Event with respect to the Paper Mill Owner, the Paper Mill Energy Services Agreement or the Paper Mill. ARTICLE II. THE SECURITIES SECTION 2.1. Form of Security to be Established by Series Supplemental Indenture. The Securities of each series shall be substantially in the form (not inconsistent with this Indenture, including Section 2.5 hereof) established in the Series Supplemental Indenture relating to the Securities of such series. 6 SECTION 2.2. Form of Trustee's Authentication. The Trustee's certificate of authentication on all Securities shall be in substantially the following form: This Security is one of the Securities referred to in the within-mentioned Indenture. FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By________________________ Authorized Trust Officer SECTION 2.3. Amount Unlimited; Issuable in Series; Limitations on Issuance. The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited. The provisions of this Section 2.3 shall not be deemed in any way to supersede the restrictions contained in Sections 5.16 and 5.17. The Securities may be issued in one (1) or more series. There shall be established in one (1) or more Series Supplemental Indentures, prior to the issuance of Securities of any series: (a) the title of the Securities of such series (which shall distinguish the Securities of such series from all other Securities) and the form or forms of Securities of such series; (b) any limit upon the aggregate principal amount of the Securities of such series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 2.7, 2.8, 2.9, 6.6 or 11.7 and except for Securities that, pursuant to Section 2.4, are deemed never to have been authenticated and delivered hereunder); (c) the date or dates on which the principal of the Securities of such series is payable, the amounts of principal payable on such date or dates and the Regular Record Dates for the determination of Holders to whom principal is payable; and the date or dates on or as of which the Securities of such series shall be dated, if other than as provided in Section 2.13; (d) the rate or rates at which the Securities of such series shall bear interest, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Regular Record Dates for the determination of Holders to whom interest is payable and the basis of computation of interest, if other than as provided in Section 2.13(b); (e) if other than as provided in Section 9.14(a), the place or places where (i) the principal of and premium, if any, and interest on Securities of such series shall be payable, (ii) Securities of such series may be surrendered for registration of transfer or exchange and (iii) notices and demands to or upon the Trustee in respect of the Securities of such series and this Indenture may be served; (f) the price or prices at, the period or periods within, and the terms and conditions upon, which Securities of such series may be redeemed, in whole or in part, at the option of the Company; (g) the obligation, if any, of the Company to redeem, purchase or repay Securities of such series pursuant to any sinking fund or analogous 7 provisions or at the option of a Holder thereof and the price or prices at which, the period or periods within which and the terms and conditions upon which Securities of such series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligations; (h) if other than denominations of $100,000 and integral multiples of $5,000 in excess thereof, the denominations in which Securities of such series shall be issuable; (i) if the Securities are to be issued in whole or in part in the form of one (1) or more global securities registered in the name of a clearing corporation or clearing agency registered under the Exchange Act, as depositary for such Securities, or a nominee of such clearing corporation or clearing agency, (i) the name of such depositary and any such nominee, (ii) any limitations on the rights of beneficial holders thereof to transfer or exchange the same or to obtain the registration of transfer thereof, (iii) any limitations on the rights of beneficial holders thereof to obtain certificates therefor in definitive form and (iv) any and all other matters incidental to such Securities; (j) any other terms of such series (which terms shall not be inconsistent with the provisions of this Indenture); and (k) any trustees, authenticating or paying agents, warrant agents, transfer agents or registrars with respect to the Securities of such series. SECTION 2.4. Authentication and Delivery of Securities. Subject to Section 2.3, at any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Mobile Energy Parties to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee shall thereupon authenticate and make available for delivery such Securities in accordance with such Company Order, without any further action by the Company. No Security shall be secured by or entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication, in the form provided for herein, executed by the Trustee by the manual signature of any Authorized Trust Officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 9.1) shall be fully protected in relying upon: (a) an executed Series Supplemental Indenture with respect to the Securities of such series; (b) an Officer's Certificate of the Company certifying (i) as to resolutions of the Manager or Managers of the Company by or pursuant to which the terms of the Securities of such series were established, (ii) that all conditions precedent under this Indenture to the Trustee's authentication and delivery of such Securities have been complied with and (iii) as to the incumbency of the persons named in such Officer's Certificate; (c) an Officer's Certificate of Mobile Energy to the effect set forth in clause (b) above; (d) an Opinion of Counsel to the effect that (i) the form or forms and the terms of such Securities have been established by a Series Supplemental Indenture as permitted by Sections 2.1 and 2.3 in accordance 8 with the provisions of this Indenture, (ii) the Securities of such series, when authenticated and made available for delivery by the Trustee and issued by the Company and guaranteed by Mobile Energy in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute legal, valid and binding obligations of each of the Mobile Energy Parties, enforceable against such Mobile Energy Party in accordance with their terms, except as such enforceability (A) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights and remedies generally and (B) is subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law) and the discretion of the court before which proceedings may be brought and (iii) all laws of the State of Alabama and New York and the requirements of this Indenture, in each case in respect of the execution and delivery by the Mobile Energy Parties of such Securities, have been complied with; and (e) such other documents and evidence with respect to the Mobile Energy Parties as the Trustee may reasonably request. Prior to the authentication and delivery of a series of Securities, the Trustee shall also receive such other funds, accounts, documents, certificates, instruments or opinions as may be required by the related Series Supplemental Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 2.12 together with a written statement (which need not comply with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never have been or be entitled to the benefits hereof. SECTION 2.5. Form and Denominations. The Securities of each series shall be in registered form and may have such letters, numbers or other marks of identification and such legends or endorsements printed, lithographed, engraved, typewritten or photocopied thereon, as may be required to comply with any applicable law and the rules of any securities exchange (if any) upon which the Securities are to be listed or of any clearing corporation or clearing agency that is a Holder of such Securities in accordance with Section 2.3(i) or to conform to any usage in respect thereof, or as may, consistently herewith, be prescribed by the Manager or Managers of the Company or by the officers executing such Securities, such determination by said officers to be evidenced by their signing the Securities. The definitive Securities shall be printed, lithographed, engraved, typewritten, photocopied or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange upon which the Securities of such series are to be listed (if any) or of any clearing corporation or clearing agency that is a Holder of such Securities in accordance with Section 2.3(i), all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. All Securities of any one (1) series shall be substantially identical except as to denomination and except as may otherwise be provided herein or in the Series Supplemental Indenture setting forth the terms of the Securities of such series. All Securities in whole or in part in the form of one (1) or more global securities in accordance with Section 2.3(i) shall comply with the requirements 9 of the clearing corporation or clearing agency with whom the registered form of such Security will be deposited. SECTION 2.6. Execution of Securities. The Securities shall be executed on behalf of the Company by its president or any of its vice presidents and its secretary or assistant secretary and on behalf of Mobile Energy by its president or any of its vice presidents and its secretary or assistant secretary. The signature of any such officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at the time such signatures were affixed the proper officers of either of the Mobile Energy Parties shall bind such Mobile Energy Party notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. SECTION 2.7. Temporary Securities. Pending the preparation of definitive Securities of any series, the Mobile Energy Parties may execute, and upon receipt of a Company Order the Trustee shall authenticate and make available for delivery, temporary Securities of such series that are printed, lithographed, typewritten, photocopied or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the Corporate Trust Office or at the Place of Payment, without charge to the Holder. Upon surrender for cancellation of any one (1) or more temporary Securities of any series, the Mobile Energy Parties shall execute and the Trustee shall authenticate and make available for delivery, in exchange therefor, definitive Securities of such series of authorized denominations and of like tenor and aggregate principal amount. Until so exchanged such temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. SECTION 2.8. Registration, Transfer and Exchange. The Company shall cause to be kept a register that, subject to such reasonable regulations as the Company may prescribe, shall provide for the registration of Securities and for the registration of transfers and exchanges of Securities. This register and, if there shall be more than one (1) Security Registrar, the combined registers maintained by all such Security Registrars, are herein sometimes referred to as the "Security Register." The Trustee is hereby appointed as the initial "Security Registrar" for the purpose of registering Securities. If a Person other than the Trustee is appointed by the Company as Security Registrar, the Company will give the Trustee prompt notice of the appointment of the Security Registrar, and the Trustee shall have the right to inspect the Security Register at all reasonable times and to obtain copies thereof, and the Trustee shall have the right to rely upon an Officer's Certificate executed on behalf of the Security Registrar as to the names and addresses of the Holders of the Securities and the principal amounts and numbers of such Securities. At the option of any Holder, Securities of any series may be exchanged for other Securities of the same series to be registered in the name of such Holder, of authorized denominations and of like tenor, maturity and aggregate principal amount, upon surrender of the Securities to be exchanged at any office or agency maintained for such purpose pursuant to Section 9.14(a). Whenever any Securities 10 are so surrendered for exchange, the Mobile Energy Parties shall execute, and the Trustee shall authenticate and make available for delivery, the Securities that the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of each of the Mobile Energy Parties, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar or any transfer agent, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be required of any Holders participating in any transfer or exchange of Securities in respect of such transfer or exchange, but the Security Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities, other than exchanges pursuant to Section 2.7, 6.6 or 11.7 not involving any transfer. The Security Registrar shall not be required (a) to issue, register the transfer of or exchange any Security of any series during a period (i) beginning at the opening of business fifteen (15) days before the day of the mailing of a notice of redemption of Securities of such series selected for redemption under Section 6.2 or 7.2 and ending at the close of business on the day of such mailing and (ii) beginning on the Regular Record Date for the Stated Maturity of any installment of principal of or payment of interest on the Securities of such series and ending on the Stated Maturity of such installment of principal or payment of interest or (b) to issue, register the transfer of or exchange any Security selected pursuant to clause (i) above for redemption in whole or in part, except the unredeemed portion of any Security selected for redemption in part. Notwithstanding anything herein to the contrary, any transfer of the Securities of any series may be subject to restrictions, if any, set forth in the Series Supplemental Indenture relating to such series. SECTION 2.9. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee or either of the Mobile Energy Parties, or the Company, the Security Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and (b) there is delivered to the Company, the Security Registrar and the Trustee evidence to their satisfaction of the ownership and authenticity thereof, and such security or indemnity as may be required by them to save each of them harmless, the Company shall execute and upon the Company's request the Trustee shall authenticate and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount, bearing a number not then outstanding. Notwithstanding the foregoing, in case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company, upon satisfaction of the conditions set forth in clauses (a) and (b) of the immediately preceding paragraph, may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section 2.9, the Company may require the payment of a sum sufficient to cover any tax or other 11 governmental charge that may be imposed in relation thereto and any other expenses connected therewith. Every new Security issued pursuant to this Section 2.9 in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the security and benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder (except as otherwise specifically provided in this Indenture and in the other Security Documents). The provisions of this Section 2.9 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.10. Payment of Principal and Interest; Principal and Interest Rights Preserved. Principal of or interest on any Security that is payable, and is punctually paid or duly provided for, at any Stated Maturity shall be paid to the Person in whose name that Security (or one (1) or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such principal or interest. Payment of principal of and interest on the Securities of any series shall be made at the Corporate Trust Office or at the Place of Payment (or, if (i) and for so long as any Outstanding Securities are not issued in the form of one or more global securities registered in the name of a clearing corporation or clearing agency registered under the Exchange Act, as depositary for such Securities, or a nominee of such clearing corporation or clearing agency and (ii) such office is not in the Borough of Manhattan, the City of New York, at either such office or an office to be maintained in such Borough), or by check or in another manner or manners if so provided in the Series Supplemental Indenture creating the Securities of such series. Any principal of or interest on any Security of any series that is payable, but is not punctually paid or duly provided for, at any Stated Maturity of an installment of principal or payment of interest shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder to the extent that such defaulted principal or interest may be paid by the Company, at its election in each case, as provided in paragraph (a) or paragraph (b) below: (a) The Company may elect to make payment of all or any portion of such defaulted principal or interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) in respect of which principal or interest is in default are registered at the close of business on a Special Record Date for the payment of such defaulted principal or interest, which shall be fixed in the following manner. The Company shall notify the Trustee and the Paying Agent in writing of the amount of defaulted principal or interest proposed to be paid on each Security of such series and the date of the proposed payment, and concurrently there shall be deposited with the Trustee or the Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted principal or interest or there shall be made arrangements satisfactory to the Trustee or the Paying Agent for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted principal or interest as provided in this paragraph. Thereupon, the Trustee shall fix a Special Record Date for the payment of such defaulted principal or interest (together with other amounts payable with respect to such defaulted principal or interest) that shall not be more than fifteen (15) nor less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company and the Security Registrar of such Special 12 Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such defaulted principal or interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each Holder of a Security of such series at such Holder's address as it appears in the Security Register, not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such defaulted principal or interest and the Special Record Date therefor having been mailed as aforesaid, such defaulted principal or interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered on such Special Record Date. (b) The Company may make, or cause to be made, payment of any defaulted principal or interest (together with other amounts payable with respect to such defaulted interest) in any other lawful manner not inconsistent with the requirements of any securities exchange (if any) on which the Securities in respect of which principal or interest is in default may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this paragraph, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section 2.10, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security, and each such Security shall bear interest from whatever date shall be necessary so that neither gain nor loss in interest shall result from such registration of transfer, exchange or replacement. SECTION 2.11. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Person in whose name any Security is registered shall be deemed to be the owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Section 2.10) interest on such Security and (subject to Section 5.3) for all other purposes whatsoever, whether or not such Security be overdue, regardless of any notice to anyone to the contrary. SECTION 2.12. Cancellation. All Securities surrendered for payment, redemption, credit against any Sinking Fund payment or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee for cancellation. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 2.12, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed and certification of their destruction delivered to the Company unless, by Company Request, the Company otherwise directs. SECTION 2.13. Dating of Securities; Computation of Interest. (a) Except as otherwise provided in the Series Supplemental Indenture relating to the Securities of a series, each Security of such series shall be dated the date of its authentication. (b) Except as otherwise provided in the Series Supplemental Indenture relating to the Securities of a series, interest on the Securities of such series shall be computed on the basis of a 360-day year consisting of twelve 30-day months and, for any period shorter than a full calendar month, on the basis of the actual number of days elapsed in such period. 13 SECTION 2.14. Source of Payments Limited; Rights and Liabilities of the Mobile Energy Parties. Except as otherwise specifically provided in this Indenture and in the Guaranty, all payments of principal and premium, if any, and interest to be made in respect of the Securities and this Indenture shall be made only from, the Indenture Securities Collateral, the payments therefrom and the income and proceeds received by the Trustee or the Collateral Agent and allocable to the Trustee therefrom pursuant to the Security Documents. Each Holder, by its acceptance of a Security, agrees that (a) it will look solely to the Indenture Securities Collateral, the payments therefrom and the income and proceeds received by the Trustee or the Collateral Agent and allocable to the Trustee therefrom to the extent available for distribution to such Holder as herein provided or provided in the Security Documents and the Guaranty and (b) recourse shall be limited in accordance with Article XV. SECTION 2.15. Parity of Securities. (a) Except as otherwise specifically provided in this Indenture and the other Security Documents, all Securities of a series issued and Outstanding hereunder rank on a parity with each other Security of the same series and with all Securities of each other series and each Security of a series shall be secured equally and ratably by this Indenture and the Security Documents with each other Security of the same series and with all Securities of each other series, without preference, priority or distinction of any one (1) thereof over any other by reason of difference in time of issuance or otherwise, and each Security of a series shall be entitled to the same benefits and security in this Indenture and the Security Documents as each other Security of the same series and with all Securities of each other series. (b) Notwithstanding anything herein to the contrary, the right, title and interest of the Company in and to any Debt Service Reserve Account, including all monies contained therein or hereafter delivered to the Trustee for deposit therein and, in each case, all monies received and the right to receive monies thereunder, shall be held in a separate account in trust solely for the equal and proportionate benefit and security of the Holders from time to time of the Outstanding Securities for the benefit of whom such Debt Service Reserve Account was established. SECTION 2.16. Allocation of Principal and Interest. Each payment of principal of and premium, if any, and interest on each Security shall be applied, first, to the payment of accrued but unpaid interest on such Security (as well as any interest on overdue principal or, to the extent permitted by applicable Law, overdue interest) to the date of such payment, second, to the payment of the principal amount of and premium, if any, on such Security then due (including any overdue installment of principal) thereunder and, third, the balance, if any, to the payment of the principal amount of and premium, if any, on such Security remaining unpaid. ARTICLE III. REPRESENTATIONS AND WARRANTIES Each of the Mobile Energy Parties represents and warrants, as of the Closing Date, to the Trustee as follows: SECTION 3.1. Organization, Power and Status of Mobile Energy Parties. The Company (a) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Alabama and (b) is duly authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary. Mobile Energy (i) is a corporation duly formed, validly existing and in good standing under the laws of the State of Alabama and (ii) is duly authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such 14 qualification necessary. Each of the Mobile Energy Parties has all requisite limited liability company or corporate (as the case may be) power and authority to own and operate the property it purports to own and to carry on its business as now being conducted and as proposed to be conducted in respect of the Energy Complex. SECTION 3.2. Authorization; Enforceability; Execution and Delivery. (a) Each of the Mobile Energy Parties has all necessary limited liability company or corporate (as the case may be) power and authority to execute, deliver and perform its obligations under this Indenture, the Securities and each other Project Document to which it is a party. (b) All action on the part of each of the Mobile Energy Parties that is required for the authorization, execution, delivery and performance of this Indenture, the Securities and each other Project Document to which such Mobile Energy Party is a party has been duly and effectively taken, except (in the case of the Project Contracts) such actions the failure to take would not reasonably be expected to have a Material Adverse Effect; and the execution, delivery and performance by each of the Mobile Energy Parties of this Indenture, the Securities and each such other Project Document does not require the approval or consent of any holder or trustee of any Debt or other obligations of such Mobile Energy Party that has not been obtained. (c) This Indenture and each other Project Document to which either of the Mobile Energy Parties is a party has been duly executed and delivered by such Mobile Energy Party. Each of this Indenture, the Securities and each other Project Document to which either of the Mobile Energy Parties is a party constitutes a legal, valid and binding obligation of such Mobile Energy Party, enforceable against it in accordance with the terms thereof (other than with respect to step-in rights or arbitration provisions or to agreements to agree at future dates, as to which no representation or warranty is made), except as such enforceability (i) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws relating to or affecting the enforcement of creditors' rights and remedies generally and (ii) is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and the discretion of the court before which any proceeding therefor may be brought and to public policy or Federal or state laws that may limit rights to indemnification. SECTION 3.3. No Conflicts; Laws and Contracts; No Default. (a) Neither the execution and delivery of this Indenture, the Securities and each other Project Document to which either of the Mobile Energy Parties is a party nor the consummation of any of the transactions contemplated hereby or thereby nor performance of or compliance with the terms and conditions hereof or thereof (i) contravenes any Governmental Approvals or any provision of Law applicable to either of the Mobile Energy Parties or to any of the Collateral, (ii) conflicts or is inconsistent with or constitutes a default under or results in the violation of the provisions of the Articles of Organization of the Company or the Operating Agreement or the articles of incorporation or by-laws of Mobile Energy or, unless such conflict, inconsistency, default or violation would not reasonably be expected to have a Material Adverse Effect, of any other Project Document or any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which either of the Mobile Energy Parties is a party or by which either of the Mobile Energy Parties or any of its property or assets is bound or to which either may be subject or (iii) results in the creation or imposition of any Liens (other than Permitted Liens) on any of the property or assets of either of the Mobile Energy Parties, or results in the acceleration of any obligation of either of the Mobile Energy Parties, that would reasonably be expected to have a Material Adverse Effect. 15 (b) Each of the Mobile Energy Parties and the Energy Complex is in compliance with all Laws applicable to the Mobile Energy Parties or the Energy Complex (as the case may be), unless such non-compliance would not reasonably be expected to have a Material Adverse Effect. (c) Neither of the Mobile Energy Parties nor (to the knowledge of the Mobile Energy Parties) any other party to a Project Document is in material default in the performance of any term, covenant or obligation under any Project Document; no event has occurred that with lapse of time, notice or both could result in a default under a Project Document by either of the Mobile Energy Parties or (to the knowledge of the Mobile Energy Parties) any other party thereto that would reasonably be expected to have a Material Adverse Effect; no material force majeure event has occurred and is continuing under any Project Document; and (to the knowledge of the Mobile Energy Parties) each Project Document is in full force and effect. SECTION 3.4. Governmental Approvals. All material Governmental Approvals that are required to be obtained as of the date hereof by or on behalf of either of the Mobile Energy Parties in connection with (a) the capital improvements contemplated by the Capital Budget, and operation and maintenance of the Energy Complex (including the provision of Processing Services pursuant to the Energy Services Agreements and the Master Operating Agreement) and (b) the issuance of the Securities and the Guaranty and the execution, delivery and performance by the Mobile Energy Parties of the Project Documents to which they are parties are in effect on the date hereof. Each of the material Governmental Approvals required to be obtained as of the date hereof by either of the Mobile Energy Parties has been duly obtained, was (to the knowledge of the Mobile Energy Parties) validly issued and is in full force and effect. The Mobile Energy Parties are in compliance with all material Governmental Approvals required to be obtained as of the Closing Date unless such noncompliance would not reasonably be expected to result in a Material Adverse Effect. Neither of the Mobile Energy Parties has any reason to believe that it will be unable to obtain the Governmental Approvals that are not required to be obtained prior to the Closing Date in the ordinary course of business, without substantial expense, and at such time or times as may be necessary to avoid any delay in, or material impairment to, the consummation and performance of the transactions as contemplated by this Indenture and the other Project Documents. SECTION 3.5. Litigation. There are no claims, actions, suits, investigations or proceedings at law or in equity by or before any arbitrator or any Governmental Authority now pending or (to the knowledge of the Mobile Energy Parties) threatened against either of the Mobile Energy Parties or (to the knowledge of the Mobile Energy Parties) now pending or threatened against any Affiliate thereof, or any property or other assets or rights of either of the Mobile Energy Parties or any Affiliate thereof with respect to this Indenture, any other Project Document or the Energy Complex, that would reasonably be expected to result in a Material Adverse Effect. SECTION 3.6. Utility Regulation. Neither the Trustee or the Collateral Agent nor any Holder will be as of the Closing Date (under applicable Law as of the date hereof and solely as a result of the ownership, operation and maintenance of the Energy Complex by either of the Mobile Energy Parties, the purchase and ownership of the Securities or any other transaction contemplated by the Financing Documents) subject to regulation under the Federal Power Act of 1920 or by the State of Alabama Public Service Commission or otherwise be subject to rate regulation under Federal, state or local Law; neither of the Mobile Energy Parties is, nor as of the Closing Date will be, subject to rate regulation under Federal, state or local Law; and none of the execution, delivery or performance by each of the Mobile Energy Parties of all the provisions of the Project Documents as in effect on the Closing Date to which such Mobile Energy Party is a party will violate Chapter 14 of Title 37 of the Code of Alabama 16 (1975): Service Territories for Electric Suppliers as in effect on the Closing Date. SECTION 3.7. Collateral. (a) The Company has, or has valid and enforceable rights to acquire, good, valid title or valid leasehold rights in and to all of the Collateral purported to be covered by the Security Documents to which it is a party and is the owner and holder of a valid and subsisting leasehold estate to the interests in the Site and the tangible personal property forming a part of the Collateral purported to be covered by the Security Documents to which it is a party, subject only to Permitted Liens, and is lawfully possessed of, or has valid and enforceable rights to acquire, a valid and subsisting grant for a term in and of the Easements, subject only to Permitted Liens. (b) With respect to the personal property forming a part of the Collateral, all filings, recordings, registrations and other actions have been made, obtained and taken in all relevant jurisdictions that are necessary to create and perfect the Liens in all right, title, estate and interest of the Company in the Collateral covered thereby subject to no Liens other than Permitted Liens. (c) The Mobile Energy Parties have obtained and hold in full force and effect, or have the right to obtain (or are in the process of obtaining and expect to obtain in the ordinary course of business), all patents, trademarks, copyrights and other such rights or adequate licenses therein, free from restrictions that could reasonably be expected to result in a Material Adverse Effect, that are necessary for the ownership, construction, operation and maintenance of the Energy Complex. SECTION 3.8. Taxes. Each of the Mobile Energy Parties has filed, or caused to be filed, all tax and information returns that are required to have been filed by it in any jurisdiction and has paid (prior to their delinquency dates) all taxes shown to be due and payable on such returns and all other taxes and assessments payable by it, to the extent the same have become due and payable, except to the extent there is a Good Faith Contest thereof by either of the Mobile Energy Parties. SECTION 3.9. Environmental Matters. (a) To the knowledge of the Mobile Energy Parties, neither the Site nor the Energy Complex has been contaminated with Hazardous Materials that requires remediation under any applicable Environmental Requirement, except where such remediation would not have a Material Adverse Effect. (b) The Company, the Energy Complex and the Site are in compliance with all applicable Environmental Requirements affecting the Site and the Energy Complex, except where noncompliance would not reasonably be expected to have a Material Adverse Effect; and (to the knowledge of the Mobile Energy Parties) there are no environmental conditions that could reasonably be expected to materially interfere with the commercial operation of the Energy Complex. SECTION 3.10. Business; Mobile Energy Assets. (a) Neither of the Mobile Energy Parties has engaged in any business or activity other than in connection with the acquisition, development, ownership, operation and financing of the Energy Complex as contemplated by the Project Documents to which such Mobile Energy Party is a party (or, in the case of Mobile Energy, the ownership of the Company). (b) Mobile Energy's sole material non-cash assets consist of its ownership interest in the Company and its rights in respect of the Southern Master Tax Sharing Agreement. 17 SECTION 3.11. Employee Benefit Plans. Neither of the Mobile Energy Parties, nor any other Person who is a member of a controlled group of corporations or a group of trades or businesses under common control with the Mobile Energy Parties (within the meaning of Section 414 of the Code), has (a) failed to fulfill its obligations under or to comply in any material respect with the requirements of ERISA or the Code with respect to any employee benefit plans, (b) sought a waiver of the minimum funding standard of Section 412 of the Code, (c) failed to make any contribution or payment to or in respect of any employee benefit plan required to be made by law or by the terms of such plan, (d) made any amendment to any employee benefit plan that has resulted or should result in the imposition of a lien or the posting of a bond or other security under ERISA or the Code or (e) incurred any liability under Title IV of ERISA other than a liability to the Pension Benefit Guaranty Corporation for premiums under Section 4007 of ERISA, if such event or condition set forth in clauses (a) through (e) above, together with all such other events or conditions, causes either of the Mobile Energy Parties to incur or be reasonably likely to incur, or any other member of such controlled group to incur any liability for which such Mobile Energy Party would be subject to, a liability that is material in relation to the financial position of such Mobile Energy Party. ARTICLE IV. INDENTURE ACCOUNTS SECTION 4.1. Establishment of Indenture Securities Account. An account designated the "Indenture Securities Account" is hereby established and created with the Trustee. The following subaccounts of the Indenture Securities Account are hereby established and created with the Trustee: (a) "Indenture Securities Interest Subaccount"; (b) "Indenture Securities Principal Subaccount"; and (c) "Indenture Securities Redemption Subaccount." SECTION 4.2. Payments into Indenture Securities Account. The Indenture Securities Account shall be funded with (a) monies transferred by the Collateral Agent from the Revenue Account pursuant to Section 3.11(e)(ii) of the Intercreditor Agreement, (b) monies transferred by the Collateral Agent from the Maintenance Reserve Account pursuant to Section 3.5(c) of the Intercreditor Agreement, (c) monies transferred by the Collateral Agent from the Distribution Account pursuant to Section 3.8(b) of the Intercreditor Agreement, (d) monies transferred by the Collateral Agent from the Subordinated Fee Account pursuant to Section 3.7(b) of the Intercreditor Agreement, (e) monies transferred by the Collateral Agent from the Subordinated Debt Account pursuant to Section 3.6(b) of the Intercreditor Agreement, (f) Loss Proceeds transferred by the Collateral Agent from the Loss Proceeds Account pursuant to Section 3.10 of the Intercreditor Agreement and (g) monies on deposit in the Mill Owner Maintenance Reserve Account used pursuant to the proviso contained in Section 5.22. The Trustee shall deposit all monies received by it for (i) payment of interest on the Securities at Stated Maturity into the Indenture Securities Interest Subaccount, (ii) payment of principal of the Securities at Stated Maturity into the Indenture Securities Principal Subaccount and (iii) redemption of Securities other than at Stated Maturity into the Indenture Securities Redemption Subaccount, in each case as specified in the Officer's Certificate of the Company delivered pursuant to Section 3.11 of the Intercreditor Agreement (which the Company shall deliver to the Trustee) and in each case for disbursement in accordance with Section 4.3. SECTION 4.3. Application of Funds in Indenture Securities Account. (a) The Trustee is hereby authorized and directed to disburse from (i) the Indenture Securities Interest Subaccount, the amount required to pay interest on Securities when due (whether on an Interest Payment Date or at any other Stated Maturity, but not on any Redemption Date or Prepayment Date), (ii) the Indenture Securities Principal Subaccount, the amount required to pay principal of the Securities when 18 due (whether on a Principal Payment Date or at any other Stated Maturity, but not on any Redemption Date or Prepayment Date) and (iii) the Indenture Securities Redemption Subaccount, the amount required to pay principal of and premium, if any, and interest on the Securities when due otherwise than at Stated Maturity (whether upon acceleration or on any Redemption Date or Prepayment Date); provided, however, that if there are insufficient monies in (A) the Indenture Securities Interest Subaccount to pay the interest then due on the Securities, then the Trustee shall, in the following order of priority: first, transfer monies on deposit in the Indenture Securities Redemption Subaccount and, second, transfer monies on deposit in the Indenture Securities Principal Subaccount to the Indenture Securities Interest Subaccount to be applied to make such payment, (B) the Indenture Securities Principal Subaccount to pay the principal then due on the Securities, then the Trustee shall transfer monies on deposit in the Indenture Securities Redemption Subaccount to the Indenture Securities Principal Subaccount to be applied to make such payment and (C) the Indenture Securities Redemption Subaccount to pay the principal of and premium, if any, and interest on the Securities then due upon acceleration or on any Redemption Date or Prepayment Date, then the Trustee shall transfer monies on deposit in the Indenture Securities Principal Subaccount and the Indenture Securities Interest Subaccount (but only, in each case, to the extent such monies are in excess of the amount necessary for the payment of principal of and interest on the Securities not being redeemed or prepaid) to be applied to make such payment. SECTION 4.4. Payments into Debt Service Reserve Accounts. Subject to Section 4.6, each Debt Service Reserve Account (if any) shall be funded (a) with monies to be deposited therein on the date of original issuance of any Securities for whose benefit any such Debt Service Reserve Account was established and created, in accordance with the Series Supplemental Indenture establishing such Securities, and (b) with monies to be transferred thereto by the Collateral Agent pursuant to Section 3.11(g)(i) of the Intercreditor Agreement, in the case of clauses (a) and (b) above, to the extent necessary so that the amount of monies, together with the Available Amount under any Reserve Account Security, then on deposit in such Debt Service Reserve Account shall be equal to the Debt Service Reserve Account Required Balance in respect of such Debt Service Reserve Account. SECTION 4.5. Application of Funds in Debt Service Reserve Accounts. If, following the application of monies on deposit in the Indenture Securities Account in accordance with Section 4.3, amounts are due and owing in respect of principal of or premium, if any, or interest on any Securities for whose benefit a Debt Service Reserve Account was established and created, in accordance with the Series Supplemental Indenture establishing such Securities, the Trustee shall, in the following order of priority: first, apply monies then on deposit in such Debt Service Reserve Account; second, draw upon any Reserve Account Letter of Credit on deposit in such Debt Service Reserve Account pursuant to Section 4.6(d) in an amount up to the Available Amount thereunder and apply the monies in respect thereof; and third, call upon any Southern Guaranty on deposit in such Debt Service Reserve Account pursuant to Section 4.6(d) in an amount up to the Available Amount thereunder and apply the monies in respect thereof, in each case, directly to the payment (to the extent necessary) of such amounts due and owing in respect of such Securities; provided, however, that, prior to a Trigger Event, if an Event of Default has occurred and is then continuing, the Trustee shall provide notice thereof to the Collateral Agent, and the Collateral Agent shall (to the extent necessary), in the following order of priority, transfer monies on deposit in the Distribution Account, the Subordinated Fee Account and the Subordinated Debt Account (including then Available Amounts under any Reserve Account Security on deposit therein) in accordance with and subject to Sections 3.8, 3.7 and 3.6, respectively, of the Intercreditor Agreement, to the Trustee for application to the payment of such amounts due and payable in respect of such Securities, prior to the application of monies pursuant to clauses first, second and third above. 19 SECTION 4.6. Reserve Account Security. (a) Subject to Section 4.6(c), the Company shall not be required at any time to deposit any monies into any Debt Service Reserve Account, and the Company shall be entitled from time to time to withdraw monies on deposit in such Debt Service Reserve Account, provided that and for so long as Reserve Account Security having an Available Amount thereunder equal to the amount of such monies otherwise required to be and not so deposited or the amount of such monies so withdrawn (as the case may be) shall have been delivered to the Trustee, at or prior to such time, for deposit into such Debt Service Reserve Account. At the time of any such deposit, the Trustee shall be entitled to receive, and (subject to Section 9.1) shall be fully protected in relying upon, an Opinion of Counsel to the effect that such Reserve Account Security (i) is permitted by this Section 4.6 and has been delivered in accordance with the provisions hereof, (ii) has been duly authorized, executed and delivered by the provider thereof and (iii) constitutes a legal, valid and binding obligation of such provider, enforceable against such provider in accordance with its terms, except as such enforceability (A) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights and remedies generally as such laws would apply in the event of a bankruptcy, insolvency or reorganization of, or other similar occurrence with respect to, such provider and (B) is subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law) or other customary qualifications and limitations. The Company may from time to time, at its discretion, replace or reduce the Available Amount (in whole or in part) under any Reserve Account Security on deposit in any Debt Service Reserve Account with other Reserve Account Security having an Available Amount thereunder, or with monies in an amount, equal to the Available Amount so replaced or reduced. (b) Each Reserve Account Security on deposit in any Debt Service Reserve Account shall provide that not less than forty-five (45) days prior to the occurrence of a Termination Event with respect to such Reserve Account Security, the provider thereof shall deliver written notice to the Trustee and the Company of such occurrence. The Company shall provide notice to the Trustee of the occurrence of any Credit Standard Event or Default Event within three (3) Business Days of its actual or constructive knowledge of the event giving rise to such occurrence. (c) If (in lieu of any monies required to be deposited into, or in replacement of monies or other Reserve Account Security on deposit in, any Debt Service Reserve Account) any Reserve Account Security is on deposit in such Debt Service Reserve Account pursuant to Section 4.6(a), then, immediately upon the occurrence of a Required Deposit Event with respect to such Reserve Account Security, the Company agrees to deposit into such Debt Service Reserve Account an amount of monies equal to the Required Deposit with respect to such Required Deposit Event. (d) If the Company fails to make any Required Deposit pursuant to Section 4.6(c) as and when due, then the Trustee shall, and is hereby authorized and directed to, draw or call upon such Reserve Account Security in an amount equal to the amount of such Required Deposit that the Company so failed to deposit; provided, however, that, if a Required Deposit Event occurs at a time when more than one (1) Reserve Account Letter of Credit or Southern Guaranty is on deposit in such Debt Service Reserve Account, the Trustee may elect, subject to Section 4.5, the order in which the Trustee shall draw upon such Reserve Account Letters of Credit or call upon such Southern Guaranties (as the case may be). Any amounts drawn or called upon by the Trustee under any Reserve Account Security on deposit in any Debt Serve Reserve Account shall be deposited into such Debt Service Reserve Account. The Company's obligations under Section 4.6(c) shall be satisfied to the extent of any such deposit. SECTION 4.7. Investment of Monies in the Indenture Accounts. (a) Amounts deposited in the Indenture Accounts, at the written request and direction 20 of the Company, shall be invested by the Trustee in Permitted Investments. Such Permitted Investments shall mature in such amounts and not later than such times as may be necessary to provide monies when needed to make payments from such monies as provided in this Indenture. Net interest or gain received from such Permitted Investments shall remain in the respective subaccounts of the Indenture Securities Account and in each Debt Service Reserve Account (if any) pending application as provided in this Indenture, provided that (i) to the extent that monies on deposit in any Debt Service Reserve Account (together with then Available Amounts under any Reserve Account Security deposited therein) exceed the Debt Service Reserve Account Required Balance therefor, such monies shall be transferred to the Collateral Agent for deposit into the Revenue Account and (ii) net interest on monies deposited into the Indenture Securities Account Principal Subaccount shall be transferred to the Indenture Securities Account Interest Subaccount immediately prior to each Monthly Transfer Date. In the event monies are required for payment of any amounts to be paid by the Trustee pursuant to Article VI in respect of any series of Securities and for any payment of the principal of or premium, if any, or interest on any series of Securities, the Trustee shall, at the written request and direction of the Company, sell such Permitted Investments as required to restore to cash such amounts as are needed for any such payments. Absent written instructions from the Company, the Trustee shall invest the amounts held in the Indenture Securities Account and each Debt Service Reserve Account (if any) in Permitted Investments described in clause (a) of the definition thereof. All such Permitted Investments shall be made in the name of the Trustee (it being understood and agreed that the Trustee shall not be responsible for losses in respect thereof) and shall be made in such manner as to preserve the Lien of this Indenture thereon. The Trustee shall maintain records reflecting the interest of each Indenture Account in such Permitted Investments. (b) In computing the amount in any Indenture Account (or any other separate account or fund created under the provisions of, and for any purpose provided in, this Indenture), each Permitted Investment on deposit therein shall be valued at the fair value thereof, including accrued interest thereon. On the Business Day immediately preceding each Monthly Transfer Date and the date of any withdrawal of monies on deposit in any Indenture Account, the Trustee shall so value each Permitted Investment on deposit in such Indenture Account and, promptly thereafter, shall notify the Company, the Collateral Agent and the Independent Engineer as to the amount of any deficiency or surplus in such Indenture Account as of such date based upon such valuation. (c) In addition to the records referenced above, the Trustee shall keep and retain or cause to be kept and retained, until at least six (6) years after the discharge and retirement of the Securities, whether at maturity, redemption or acceleration, the following records with respect to Permitted Investments: (i) purchase price, (ii) type of investment, (iii) accrued interest paid, (iv) interest rate (if applicable), (v) principal amount, (vi) maturity date, (vii) interest payment date (if applicable), (viii) date of liquidation and (ix) receipt upon liquidation. If any investment is retained following the date the last Security is retired, the records required to be kept by the Trustee shall include the fair value of such investment on the date the last Security is retired. Amounts shall be segregated wherever held in order to maintain the foregoing records. SECTION 4.8. Monies to be Held in Trust. All monies required to be deposited with or paid to the Trustee for the account of any Indenture Account under any provision of this Indenture and all investments made therewith, and all investments made therewith, and all monies withdrawn from any Indenture Account and held by the Trustee or any Paying Agent, shall be held by the Trustee or the Paying Agent in trust, and while so held shall be held in trust for the Holders of the Securities. 21 SECTION 4.9. Dominion and Control. The Company hereby transfers, assigns and sets over all of its right, title and interest in and to all amounts deposited or held in any Indenture Account and grants the Trustee (acting on behalf of the Holders of the Securities) sole dominion and control over such amounts. Neither of the Mobile Energy Parties shall have the right to withdraw monies from any Indenture Account hereunder. ARTICLE V. COVENANTS Each of the Mobile Energy Parties hereby covenants and agrees that so long as this Indenture is in effect and any Securities remain Outstanding: SECTION 5.1. Payment of Principal, Premium, if any, and Interest; Mobile Energy as Guarantor. (a) The Company shall duly and punctually pay, or cause to be paid, the principal of and premium, if any, and interest on, and all other amounts payable in respect of, the Securities of each series in accordance with their terms and the terms of this Indenture and of the related Series Supplemental Indenture. (b) Subject to Article XIV, Mobile Energy agrees to act as guarantor on the Securities, and agrees that the Trustee on behalf of the Holders of the Securities may enforce payment of the principal of and premium, if any, and interest on, and all other amounts payable in respect of, the Securities against Mobile Energy to the same extent as the Trustee may against the Company. SECTION 5.2. Maintenance of Insurance. The Company shall maintain or cause to be maintained on its behalf the required insurance policies in accordance with Schedule 5.2. All property and liability insurance policies shall name the Collateral Agent as an additional insured and the Collateral Agent as loss payee. If at any time any of the required insurance (other than lenders' policy title insurance) shall no longer be available on commercially reasonable terms and premiums, the Company shall procure substitute insurance coverage that is the most equivalent to the required coverage and that is available on commercially reasonable terms and premiums. SECTION 5.3. Reporting Requirements. The Mobile Energy Parties shall furnish to the Trustee, and to any Holder of a Security or an owner of a beneficial interest therein requesting the same in writing (whether or not either of the Mobile Energy Parties is then required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act): (a) As soon as practicable and in any event within sixty (60) days after the end of the first, second and third Fiscal Quarters of each Fiscal Year of the Company (commencing with the Fiscal Quarter ending September 30, 1995) or, in the case of any such request made after such sixty (60) day period, promptly thereafter, an unaudited balance sheet of the Company as of the last day of such Fiscal Quarter and the related statements of income, cash flows and members' equity of the Company and (in the case of such second and third Fiscal Quarters) for the applicable portions of the Fiscal Year ending with the last day of such Fiscal Quarter, setting forth (except in the case of any such Fiscal Quarter ending prior to March 31, 1996) in each case in comparative form corresponding unaudited figures from the preceding Fiscal Year, all in accordance with GAAP, and accompanied by a written statement of an Authorized Officer of the Company to the effect that such financial statements fairly represent the Company's financial condition and results of operations at and as of their date in accordance with GAAP. 22 (b) As soon as practicable and in any event within one hundred twenty (120) days after the end of each Fiscal Year of the Company (commencing with the Fiscal Year ending December 31, 1995) or, in the case of any such request made after such period, promptly thereafter, (i) a balance sheet of the Company as of the end of such Fiscal Year and the related statements of income, cash flow and members' equity of the Company during such Fiscal Year setting forth (except in the case of the Fiscal Year ending December 31, 1995) in each case in comparative form corresponding figures from the preceding Fiscal Year, all in accordance with GAAP, accompanied by an audit report thereon of a firm of independent public accountants of recognized national standing, which opinion shall state that such financial statements fairly represent the Company's financial condition and results of operations at and as of their date in accordance with GAAP, (ii) a certification of such accountants stating that, in the course of making the examinations necessary for their opinion, they obtained no knowledge, except as specifically stated, of any event or condition that constitutes (or that, upon notice or lapse of time or both, would constitute) an Event of Default, (iii) management's discussion and analysis of financial condition and results of operations prepared in accordance with Item 303 of Regulation S-K under the Securities Act and (iv) such other matters as determined by the Mobile Energy Parties. (c) With each annual or quarterly financial statement furnished pursuant to Section 5.3(a) or 5.3(b), an Officer's Certificate of Mobile Energy or the Company (as applicable) certifying as to (i) the aggregate amount of all Restricted Payments made by the Company and (ii) the entering into by the Company of any additional Project Documents or of any amendments, replacements or modifications of, or any notices of termination received by either of the Mobile Energy Parties with respect to, any of the Project Documents (together with copies of any such additional Project Documents or amendments, replacements, modifications or notices attached to such Officer's Certificate), in the case of clauses (i) and (ii) above, during the period covered by such financial statement. (d) Not less often than annually, a brief certificate (complying with the provisions of Section 314(a)(4) of the Trust Indenture Act) from the principal executive officer, principal financial officer or principal accounting officer of each of the Mobile Energy Parties as to such officer's knowledge of such Mobile Energy Party's compliance with all conditions and covenants under this Indenture (or, if either of the Mobile Energy Parties is not so in compliance, a description of any such non-compliance). For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. (e) Each of the following items: (i) promptly after any Authorized Officer of either of the Mobile Energy Parties learns or shall become aware of the occurrence thereof, written notice of the occurrence of any event or condition that constitutes (or that, upon notice or lapse of time or both, would constitute) an Event of Default, specifically stating that such event or condition has occurred and describing it and the action being or proposed to be taken with respect thereto; (ii) written notice of the occurrence of any Event of Eminent Domain or any Event of Loss and an Officer's Certificate of the Company setting forth the details thereof and the action being or proposed to be taken with respect thereto; 23 (iii) written notice of the occurrence of any event giving rise, or reasonably expected to give rise, to a claim under any insurance policy maintained in respect of the Energy Complex in an amount greater than $5,000,000; (iv) promptly after any Authorized Officer of either of the Mobile Energy Parties learns or shall become aware of the occurrence thereof, written notice of the occurrence of any event or condition that constitutes a material violation by either of the Mobile Energy Parties of any Environmental Requirement; and (v) any other information required to be furnished by the Mobile Energy Parties to the Tax-Exempt Trustee pursuant to the Tax- Exempt Security Documents. (f) If the Company has deposited a Southern Guaranty into, and for so long as such Southern Guaranty remains on deposit in, any Reserve Account Security Account pursuant to the terms of this Indenture or the Intercreditor Agreement, the Company shall cause Southern to provide to the Trustee or the Collateral Agent (as the case may be) no later than forty-five (45) days after the end of each fiscal quarter of Southern, an Officer's Certificate of Southern certifying as to the determination of whether or not the Southern Credit Standard has been satisfied as of the end of such fiscal quarter. SECTION 5.4. Maintenance of Existence and Governmental Approvals; Rate Regulation. (a) Each of the Mobile Energy Parties shall at all times preserve and maintain in full force and effect (i) its existence and form as a limited liability company or corporation (as the case may be) and its good standing under the laws of its state of organization or incorporation (as the case may be) and (ii) its qualification to do business in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business as conducted or proposed to be conducted makes such qualification necessary. (b) Each of the Mobile Energy Parties shall obtain and maintain in full force and effect all Governmental Approvals (including maintaining compliance with Environmental Requirements) except where the failure to obtain and maintain in full force and effect such Governmental Approvals or the noncompliance with such Environmental Requirements would not have a Material Adverse Effect. (c) Each of the Mobile Energy Parties shall preserve and maintain good and marketable title to its properties and assets (subject to no liens other than Permitted Liens). (d) Each of the Mobile Energy Parties shall pay all taxes and other governmental charges except where such taxes or charges are being contested in a Good Faith Contest and where the failure to pay such taxes or charges does not affect the enforceability of the Project Documents. (e) If (i) either of the Mobile Energy Parties shall be subject to regulation as to rates with respect to the provision of Processing Services or (ii) the revenues or other amounts received or receivable by the Company under the Project Contracts for the use of Processing Services or other services and facilities of the Energy Complex shall be subject to regulation, in either case by any Governmental Authority having jurisdiction over either of the Mobile Energy Parties under Federal, state or local law, then the Mobile Energy Parties shall (A) prior to the issuance by such Governmental Authority of any order with respect to such regulation (whether or not final or subject to review on appeal), contest such regulation in a Good Faith Contest and (B) within fifteen (15) days following (1) the issuance by such Governmental Authority of a binding order (which shall be final and not be subject to review on appeal) to the effect that 24 either of the Mobile Energy Parties, or such revenues or other amounts, shall be subject to such regulation and (2) any amendment or other modification (adverse in any respect) of the provisions of such final and non-appealable order by, or the issuance of another binding order (which shall be final and not be subject to review on appeal and shall not constitute an amendment or other modification to an existing order) of, or the taking of other action relating to either such final and non-appealable order that would reasonably be expected to have a Material Adverse Effect by, such Governmental Authority (or another Governmental Authority having jurisdiction over either of the Mobile Energy Parties under Federal, state or local law) affecting such regulation, provide a Revenue Sufficiency Certification (based upon and after giving effect to such regulation) to the Trustee. SECTION 5.5. Nature of Business. Neither of the Mobile Energy Parties shall engage in any business other than the ownership, financing, operation, maintenance and improvement of the Energy Complex as contemplated by the Project Documents. If Mobile Energy acquires more than nominal assets (excluding (a) its ownership of member interests in the Company, (b) its rights under the Southern Master Tax Sharing Agreement and (c) any Contract providing for administrative services), Mobile Energy shall immediately grant a first priority security interest therein to the Collateral Agent on behalf of the Senior Secured Parties on the same conditions as set forth in the Mortgage and the other Security Documents. SECTION 5.6. Operation and Maintenance. The Company shall, and shall cause the Operator to, use, maintain and operate the Energy Complex and the Site in compliance with Prudent Plant Operating Standards and the material provisions of all relevant Project Documents, except where noncompliance would not have a Material Adverse Effect. SECTION 5.7. Compliance with Law and Organizational Documents. (a) Each of the Mobile Energy Parties shall comply with, and the Company shall ensure that the Energy Complex is maintained and operated in compliance with, and shall make such alterations to the Energy Complex and the Site as may be required for compliance with, all applicable Governmental Approvals and all material applicable Laws, except where noncompliance would not have a Material Adverse Effect. (b) Each of the Mobile Energy Parties shall comply with all material provisions of the Articles of Organization or its articles of incorporation (as the case may be). SECTION 5.8. Prohibition on Fundamental Changes and Disposition of Assets. (a) Neither of the Mobile Energy Parties shall enter into any transaction of merger or consolidation, change its form of organization or liquidate or dissolve itself (or suffer any liquidation or dissolution). Neither of the Mobile Energy Parties shall purchase or otherwise acquire all or substantially all of the assets of any other Person. (b) Neither of the Mobile Energy Parties shall amend, modify or otherwise change the Articles of Organization or its articles of incorporation (as the case may be) in any manner that would reasonably be expected to have a Material Adverse Effect or that alters or supersedes any of the provisions of such organizational documents concerning (i) nature of business, (ii) the requirement of an independent director (with respect to Mobile Energy), (iii) the Manager of the Company, (iv) unanimous votes for certain matters, (v) commingling of funds and (vi) maintaining separateness and observing corporate or other entity formalities. (c) Except as contemplated by the Financing Documents, neither of the Mobile Energy Parties shall sell, lease (as lessor) or otherwise transfer (as transferor) any property or assets material to the operation of the Energy 25 Complex except in the ordinary course of business to the extent that such property is worn out or is no longer useful or necessary in connection with the operation of the Energy Complex; provided, however, that to the extent the aggregate fair market value of all sales, leases and other transfers (other than any such transfers from Mobile Energy to the Company) in any Fiscal Year exceeds $2,000,000 (multiplied by the GDPIPD Factor in effect at the time of such sale, lease or transfer), neither of the Mobile Energy Parties shall be permitted to sell, lease or otherwise transfer any of such property or assets during the remainder of such Fiscal Year unless the Company delivers an Officer's Certificate to the Trustee and the Collateral Agent (together with an Independent Engineer Confirmation) to the effect that such property is or such assets are worn out or no longer useful or necessary in connection with the operation of the Energy Complex; provided further, however, that notwithstanding anything in this Section 5.8 to the contrary, subject only to Section 8.1(k), Mobile Energy shall be permitted to transfer its ownership interests in the Company. SECTION 5.9. Transactions with Affiliates. Neither of the Mobile Energy Parties shall enter into or permit the Operator to enter into any Contract related to the Energy Complex with any of its Affiliates, other than (a) the Project Documents entered into as of the Closing Date and, in the case of Mobile Energy, the Southern Master Tax Sharing Agreement, (b) transactions in the ordinary course of business on fair and reasonable terms no less favorable to either of the Mobile Energy Parties or to the Operator (as the case may be) than either of the Mobile Energy Parties or the Operator (as the case may be) would obtain in an arm's length transaction with a Person that is not an Affiliate thereof (it being understood that transactions involving the provision of goods or services to either of the Mobile Energy Parties or the Operator in exchange for reimbursement of costs and expenses (including reasonably allocated overhead expenses) shall be deemed to be in compliance with this Section 5.9), (c) transactions or Contracts involving Affiliate Subordinated Debt and (d) transactions or Contracts involving the provision of goods or services to either of the Mobile Energy Parties in exchange for Subordinated Fees. SECTION 5.10. Amendments to Project Documents. (a) The Company shall not terminate, amend, replace or otherwise modify (other than any such amendments or modifications that are immaterial or any such replacement entered into in satisfaction of the Event of Default Alternative Agreement Requirements) any of the Project Contracts to which it is a party (other than any such Project Contracts that are immaterial), unless the Company delivers to the Trustee an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that (i) such termination, amendment, replacement, modification or addition would not reasonably be expected to have a Material Adverse Effect or (ii) such termination, amendment, replacement, modification or addition is reasonably required to comply with Law or any Governmental Approval and would not have a Material Adverse Effect in light of the consequences of not terminating, amending, replacing, modifying or adding such Project Contract. Promptly upon the execution of any replacement or additional Project Contract, the Company shall take all actions necessary to grant the Collateral Agent (A) an assignment of the Company's rights under such Project Contract (including causing each Project Participant (other than the Mobile Energy Parties) party thereto to execute and deliver to the Collateral Agent a Consent to Assignment having terms no less favorable to the Collateral Agent and the Holders than (1) in the case of a replacement Project Contract, the Consent to Assignment delivered to the Collateral Agent in respect of the Project Contract being replaced and (2) in the case of an additional Project Contract, the form of Consent to Assignment attached as Exhibit D to the Intercreditor Agreement) and (B) a Lien on all property interests acquired by the Company in connection therewith (perfected to the extent such Lien can be perfected by filing a mortgage or fixture filing under local law or a financing statement under the Uniform Commercial Code, provided that no such assignment or Lien shall be required with respect to equipment financed with purchase money obligations permitted under this Indenture if prohibited by the terms of such purchase money obligations). 26 (b) Without the consent of the Holders of a majority in aggregate principal amount of the Outstanding Securities, the Mobile Energy Parties shall not terminate, amend, replace or otherwise modify any of the Financing Documents to which neither the Collateral Agent nor the Trustee is a party (other than the Working Capital Facility) unless the Company delivers to the Trustee an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that such termination, amendment, replacement or modification would not reasonably be expected to reduce the likelihood of payment on the Outstanding Securities or otherwise materially and adversely affect the Holders of the Outstanding Securities. SECTION 5.11. Performance Under Project Contracts. The Company shall perform all covenants, undertakings, stipulations and provisions contained in each Project Contract to which neither the Trustee nor the Collateral Agent is a party, except to the extent that the failure to so perform would not reasonably be expected to have a Material Adverse Effect. SECTION 5.12. Annual Budget. The Company shall submit to the Independent Engineer, in draft form and detailed by month, an operating plan and budget with respect to the Energy Complex (a) on or prior to the Closing Date covering the period from the Closing Date through the end of the Fiscal Year in which the Closing Date occurs and (b) sixty (60) days prior to the commencement of each Fiscal Year commencing after the Closing Date covering such Fiscal Year (each such budget, an "Annual Budget"). Each Annual Budget shall specify the estimated project revenues, the estimated rates and revenues for each category of Processing Services, all Operation and Maintenance Costs and a maintenance plan covering all projected Maintenance Expenditures required during a period of seventeen (17) Fiscal Quarters commencing with the first Fiscal Quarter covered by such Annual Budget (the "Maintenance Plan"). Each Annual Budget shall also include, solely for informational purposes and based upon projections prepared by the Company in accordance with Section 1.15, the projected Senior Debt Service Coverage Ratio for the Fiscal Year then ending and the immediately succeeding Fiscal Year. The Independent Engineer shall provide its comments, if any, to the Company within thirty (30) days of its receipt of the proposed Annual Budget and the Company shall incorporate the Independent Engineer's reasonable suggestions into a final Annual Budget, which shall then be provided to the Collateral Agent. If, after reasonable efforts, the Company and the Independent Engineer cannot agree on a final Annual Budget, the Company may invoke the Third Party Engineer Dispute Resolution as set forth in Section 11.2 of the Intercreditor Agreement. If a final Annual Budget for a given Fiscal Year is not established by the process described above by the end of the prior Fiscal Year, the Annual Budget for such Fiscal Year shall, until a final Annual Budget is so established, be deemed to consist of the previous year's Annual Budget, escalated at the GDPIPD for the previous Fiscal Year; provided, however, that with respect to any Fiscal Year that a final Annual Budget has not been established, the Company may, with the Independent Engineer's reasonable approval, amend the prior Fiscal Year's Annual Budget to make reasonable and adequate provision for scheduled Maintenance Expenditures. The Company shall operate and maintain the Energy Complex, or cause the Energy Complex to be operated and maintained, in accordance with such final Annual Budget as approved by the Independent Engineer, other than deviations resulting from dispatch and other operating requirements, provided that any deviations that would reasonably be expected to result in a Material Adverse Effect shall be approved by the Independent Engineer as being reasonably necessary to comply with Project Contracts or for operation of the Energy Complex in compliance with Prudent Plant Operating Standards; provided further, however, that withdrawals of monies from the Operating Account (other than for any such monies (i) rebated to the United States government pursuant to Section 148 of the Code, (ii) applied to Maintenance Expenditures, (iii) applied to the payment of IDB Claims or (iv) applied to (or deemed to be applied to) the payment of the 1994 Bonds pursuant to Section 3.16 of the Intercreditor Agreement) and from the Mill Owner Maintenance Reserve Account (other than for any such monies deposited into the Working Capital Facility Account, the Indenture Securities Account or 27 the Tax-Exempt Indenture Securities Account) in any Fiscal Year, together with the amount of any Working Capital Facility O&M Loans during such Fiscal Year, not in excess of one hundred ten percent (110%) of the aggregate amount of Operation and Maintenance Costs (other than Maintenance Expenditures) set forth in the Annual Budget for such Fiscal Year shall be deemed not to reasonably be expected to have a Material Adverse Effect. Each Annual Budget and the Maintenance Plan may be amended, restated, supplemented or otherwise modified from time to time, at the request of the Company with the approval of the Independent Engineer. SECTION 5.13. Insurance Reports. Not later than thirty (30) days prior to the expiration of any insurance required to be maintained by the Company pursuant to the Project Documents, the Company shall submit to the Trustee an Officer's Certificate certifying that such insurance (a) has been renewed or replaced and will continue in full force and effect and all premiums for such renewal or replacement term have been fully paid, together with evidence of such renewal or replacement, or (b) will not be required to be maintained pursuant to the Project Documents following its expiration. Within thirty (30) days after the end of each Fiscal Year, the Company shall submit to the Trustee an Officer's Certificate (accompanied by a certificate signed by the Independent Insurance Advisor) (i) listing all insurance being carried by, or on behalf of, the Company pursuant to the Project Documents and (ii) certifying that all insurance required to be maintained by the Company pursuant to the Project Documents is in full force and effect and all premiums therefor have been fully paid. SECTION 5.14. Liens. Neither of the Mobile Energy Parties shall create or suffer to exist or permit any Lien upon or with respect to any of its properties other than Permitted Liens. SECTION 5.15. Investments. Neither of the Mobile Energy Parties shall make any investment other than Permitted Investments. SECTION 5.16. Indebtedness. Neither of the Mobile Energy Parties shall create or incur or suffer to exist any Debt or lease obligations of such Mobile Energy Party other than Permitted Indebtedness. SECTION 5.17. Debt for Modifications; Replacement Debt; Refunding Debt. The Company may incur Permitted Indebtedness to be used for Required Modifications, Optional Modifications, Replacement Debt and Refunding Debt provided that: (a) The Company shall not issue Senior Debt for Required Modifications or Optional Modifications unless (i) such Senior Debt is issued under the Indenture or the Tax-Exempt Indenture, (ii) the Company delivers to the Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) certifying that (A) based upon projections prepared by the Company in accordance with Section 1.15, the average of the annual Senior Debt Service Coverage Ratios after giving effect to the proposed issuance of such Senior Debt through the final maturity date of the Outstanding Securities is projected to be equal to or greater than the lesser of (1) the then projected average of the annual Senior Debt Service Coverage Ratios without giving effect to such proposed issuance through the final maturity date of the Outstanding Securities and (2) 1.25 to 1.0 in the case of Required Modifications and 1.5 to 1.0 in the case of Optional Modifications, (B) in the case of Optional Modifications, based upon projections prepared by the Company in accordance with Section 1.15, the minimum annual Senior Debt Service Coverage Ratio after giving effect to such proposed issuance in each Fiscal Year through the final maturity date of the Outstanding Securities is projected to be equal to or greater than the lesser of (1) the then projected minimum annual Senior Debt Service Coverage Ratio without giving effect to such proposed issuance in each Fiscal Year through the final maturity date of the Outstanding Securities and (2) 1.35 to 1.0 and (C) 28 (1) there will be no fundamental change in the use of the Energy Complex as a result of such proposed issuance, (2) the proceeds of such proposed issuance, together with proceeds of additional equity funds provided by the Company or of Subordinated Debt, will be sufficient for the proposed purpose of such proposed issuance and (3) in the case of Optional Modifications, the proposed purpose of such proposed issuance will not impair the operations or reliability of the Energy Complex, (iii) the assets to be financed with such proposed issuance (and, to the extent a Lien can be granted therein under applicable Law, all tangible and intangible rights related to the construction, operation or ownership of such assets) will be subject to the Lien of the Security Documents and (iv) in the case of Optional Modifications, the Company provides to the Trustee a letter from two (2) of the Rating Agencies (then currently rating the Outstanding Securities) confirming that the issuance of such Senior Debt and the obligations to be undertaken by the Company in connection with the facilities to be constructed with the proceeds of such proposed issuance will not, solely as a result thereof, result in any downgrading of the rating on the Outstanding Securities. (b) The Company shall not issue Senior Debt for Replacement Debt or Refunding Debt unless (i) such Senior Debt is issued under the Indenture or the Tax-Exempt Indenture, (ii) (A) monies in an amount sufficient to effect payment of the principal of and premium, if any, and interest on the Senior Debt to be redeemed are held in trust or (B) U.S. Government Obligations in an amount sufficient and having such terms and qualifications so as to defease the Senior Debt to be redeemed in accordance with the Indenture or the Tax-Exempt Indenture (as the case may be) are held in trust, (iii) in the case of Replacement Debt, the Company provides an Officer's Certificate to the Trustee stating that (A) based upon projections prepared by the Company in accordance with Section 1.15, the average of the annual Senior Debt Coverage Ratios after giving effect to such proposed issuance and the repayment or defeasance of any Tax- Exempt Indenture Securities occasioned thereby through the final maturity date of the Outstanding Securities is projected to be equal to or greater than the lesser of (1) the then projected average of the annual Senior Debt Service Coverage Ratios without giving effect to such proposed issuance through the final maturity date of the Outstanding Securities and (2) 1.25 to 1.0 and (iv) in the case of Refunding Debt, the Company delivers to the Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) certifying that, based upon projections prepared by the Company in accordance with Section 1.15, (A) the projected Senior Debt Service Requirement after giving effect to such proposed issuance will not exceed the projected Senior Debt Service Requirement without giving effect to such proposed issuance, in each case through the final maturity date of the Outstanding Securities, by more than ten percent (10%) for any Fiscal Year through the final maturity of the Outstanding Securities and (B) either (1) the projected average of the annual Senior Debt Service Requirements after giving effect to such proposed issuance will not exceed the projected average of the annual Senior Debt Service Requirements without giving effect to such proposed issuance, in each case through the final maturity date of the Outstanding Securities, or (2) the minimum annual Senior Debt Service Coverage Ratio after giving effect to such proposed issuance in each Fiscal Year through the final maturity date of the Outstanding Securities is projected to be equal to or greater than 1.35 to 1.0 and the average of the annual Senior Debt Service Coverage Ratios after giving effect to such proposed issuance through the final maturity date of the Outstanding Securities is projected to be equal to or greater than 1.5 to 1.0. (c) The Company shall not issue Subordinated Debt for Required Modifications unless (i) the Company delivers to the Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) 29 certifying that, based upon projections prepared by the Company in accordance with Section 1.15, the average of the annual Total Debt Service Coverage Ratios after giving effect to the proposed issuance of such Subordinated Debt through the final maturity of the Outstanding Securities is projected to be equal to or greater than (A) 1.15 to 1.0 or (B) 1.0 to 1.0, unless, in the case of this clause (B), the Trustee receives notice objecting to such proposed issuance from the Collateral Agent pursuant to Section 7.2(d) of the Intercreditor Agreement no later than eighty-five (85) days after the notice from the Company to the Senior Secured Parties described in Section 5.17(d) and (ii) the assets to be financed with such proposed issuance (and, to the extent a Lien can be granted therein under applicable Law, all tangible and intangible rights related to the construction, operation or ownership of such assets) will be subject to the Lien of the Security Documents; provided, however, that if the Company proposes to issue Subordinated Debt for Required Modifications other than as described in clause (i)(B) above, and such average of the annual Total Debt Service Coverage Ratios after giving effect to such proposed issuance is projected to be less than 1.25 to 1.0, such proposed Subordinated Debt shall not be issued unless the Company provides proceeds of additional equity funds or of Affiliate Subordinated Debt such that the ratio of such additional equity (including the Affiliate Subordinated Debt) to total funds used for such Required Modifications is equal to or greater than the ratio of the Company's equity to total capitalization on the Closing Date. (d) Upon notice from the Company to the Senior Secured Parties (i) stating that the Company proposes to issue Subordinated Debt for Required Modifications and that the average of the annual Total Debt Service Coverage Ratios after giving effect to such proposed issuance through the final maturity of the Outstanding Securities is projected to be equal to or greater than 1.0 to 1.0 (but less than 1.15 to 1.0), (ii) setting forth a description of such Required Modifications and (iii) directing the Trustee to give notice to the Holders of such proposed issuance, the Trustee shall, within fifteen (15) days of such notice from the Company, give notice to all of the Holders, in the manner provided in Section 1.6, specifying that, unless a majority in principal amount of the Combined Exposure gives notice to the Senior Secured Parties objecting to such proposed issuance within the period expiring on the date that is seventy-five (75) days after such notice from the Company, the Company may issue such Subordinated Debt. Upon the objection of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities on or prior to the expiration of such period, the Trustee shall promptly (but in no event later than five (5) days after such notice to the Trustee objecting to such issuance) furnish to the Collateral Agent a Senior Creditor Certificate directing the Collateral Agent, subject to receipt by the Collateral Agent of Senior Creditor Certificates from Senior Secured Parties holding or otherwise representing a majority in principal amount of the Combined Exposure, to deliver to the Trustee the notice pursuant to Section 7.2(d) of the Intercreditor Agreement objecting to such proposed issuance. (e) The Company shall not issue Subordinated Debt for Optional Modifications unless (i) the Company delivers to the Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) certifying that such proposed Optional Modifications (A) are not reasonably likely to result in a Material Adverse Effect, (B) are technically feasible and (C) are not reasonably expected to materially and adversely affect the operation or reliability of the Energy Complex, (ii) the assets to be financed with such proposed issuance (and, to the extent a Lien can be granted therein under applicable Law, all tangible and intangible rights related to the construction, operation or ownership of such assets) will be subject to the Lien of the Security Documents and 30 (iii) the Company provides to the Trustee a letter from two (2) Rating Agencies (then currently rating the Outstanding Securities) confirming that such proposed issuance and the obligations to be undertaken by the Company in connection with the facilities to be constructed with the proceeds thereof will not, solely as a result thereof, result in any downgrading on the Outstanding Securities. SECTION 5.18. Application of Proceeds from Sale of Securities. (a) Promptly upon receipt by the Company of the proceeds from the sale of the First Mortgage Bonds, the Company shall (i) apply $190,000,000 to repay to Southern a bridge loan in the principal amount of $190,000,000 and distribute to the Company's owners $10,523,620, which, in turn, will be dividended to Southern, (ii) repay to Southern Electric $200,000 representing certain costs incurred by Southern Electric associated with the offering of the First Mortgage Bonds and the Tax-Exempt Bonds, (iii) transfer $9,000,000 to the Collateral Agent for deposit into the Capital Budget Subaccount to finance Project Costs in accordance with the Capital Budget, (iv) apply $1,405,979 to pay outstanding attorneys' fees associated with the acquisition of the Energy Complex from Scott, (v) apply $9,552,623 to pay certain financing costs incurred in connection with the transactions contemplated by the Financing Documents, including certain financing costs incurred in connection with the offering of the First Mortgage Bonds and the Tax-Exempt Bonds, and (vi) apply $32,294,690 to pay breakage costs in connection with the termination of the interest hedging arrangements entered into in connection with the acquisition of the Energy Complex from Scott. (b) Promptly upon receipt by the Company of the proceeds from any sale of Senior Securities (other than the First Mortgage Bonds) of any series (net of any underwriting commission) for purposes of (i) financing Optional Modifications or Required Modifications, the Company shall deposit all such proceeds into the Optional Modifications Subaccount or the Required Modifications Subaccount (as the case may be) for application in accordance with the Intercreditor Agreement or (ii) Replacement Debt or Refunding Debt (as the case may be), the Company shall apply such proceeds for such purposes. SECTION 5.19. Restricted Payments. (a) The Company shall not make any Restricted Payments unless, in the case of any Restricted Payment proposed to be made on a Distribution Date, the Company delivers an Officer's Certificate to the Collateral Agent certifying that as of such Distribution Date (i) no Event of Default has occurred and is continuing, and no breach of this Section 5.19 then exists (whether or not such breach is a matured Event of Default), (ii) the Company is not insolvent and would not be rendered insolvent by the making of such proposed Restricted Payment and no Bankruptcy Event has occurred and is continuing in respect of either of the Mobile Energy Parties, (iii) no ESA Blockage Event with respect to the Pulp Mill Owner or its Energy Services Agreement or its Mill has occurred and is continuing, (iv) the provisions of the Indenture, the Intercreditor Agreement and the Tax-Exempt Indenture relating to the funding of the Accounts established thereunder have been complied with as of such Distribution Date, and amounts on deposit in the Debt Service Reserve Account are equal to the Debt Service Reserve Account Required Balance, amounts on deposit in the Tax-Exempt Debt Service Reserve Account are equal to the Tax- Exempt Debt Service Reserve Account Required Balance and amounts on deposit in each of the other Accounts are equal to the then required balances (including, in the case of the Maintenance Reserve Account, the Maintenance Reserve Account Required Deposit with respect to the most recently completed Fiscal Quarter has been made), (v) no Mill Owner is then exercising Mill Owner Step-In Rights and (vi) neither of the Mobile Energy Parties shall be subject to regulation as to rates with respect to the provision of Processing Services, nor shall the revenues or other amounts received or receivable by the Company under the Project Contracts for the use of Processing Services or other services and facilities of the Energy Complex be subject to regulation, in either case by any Governmental Authority having jurisdiction over either of the Mobile Energy Parties under Federal, state or local law, unless the Company has provided a Revenue 31 Sufficiency Certification (based upon and after giving effect to such regulation) to the Trustee upon the earlier of (A) the issuance of a binding order (which shall be final and not subject to review on appeal) of such Governmental Authority to the effect that either of the Mobile Energy Parties, or such revenues or other amounts, shall be subject to such regulation and (B) the application of regulation as to the rates, or revenues or other amounts, received or receivable by the Company under the Project Contracts, including the imposition of any order or other action by a Governmental Authority to the effect that such revenues and other amounts received or receivable by the Company shall be subject to refund. (b) The Company shall not make any Restricted Payments permitted pursuant to Section 5.19(a) on any Distribution Date unless the Company provides an Officer's Certificate to the Collateral Agent certifying that as of such Distribution Date (i) the Senior Debt Service Coverage Ratio for the period consisting of the two (2) semi-annual payment periods immediately preceding such Distribution Date was equal to at least 1.25 to 1 and (ii) based upon projections prepared by the Company in accordance with Section 1.15 (which projections shall, at the request of the Collateral Agent be reviewed by the Independent Engineer if the Senior Debt Service Coverage Ratio referred to below is less than 1.30 to 1), the Senior Debt Service Coverage Ratio for the period consisting of the current semi-annual payment period and the next succeeding semi-annual payment period is projected to be at least 1.25 to 1; provided, however, that notwithstanding the requirements of this Section 5.19(b), the Company shall be permitted to make Restricted Payments solely to fund an Income Tax Deficiency if the Company provides an Officer's Certificate to the Collateral Agent stating that (A) the Senior Debt Service Coverage Ratio for the period consisting of the two (2) semi-annual payment periods immediately prior to the Distribution Date was equal to at least 1.10 to 1 and (B) based upon projections prepared by the Company in accordance with Section 1.15, the Senior Debt Service Coverage Ratio for the period consisting of the current semi-annual payment period and the next succeeding semi-annual payment period is projected to be at least 1.10 to 1; provided further, however, that the historical tests set forth in clause (i) of this Section 5.19(b) and in clause (A) of the immediately preceding proviso (1) are not required to be satisfied on the first Distribution Date following the Closing Date and (2) are required to be satisfied only for the semi-annual payment period immediately preceding such Distribution Date on the second Distribution Date following the Closing Date. SECTION 5.20. Casualty Proceeds; Eminent Domain Proceeds. The Company shall cause all Casualty Proceeds and Eminent Domain Proceeds to be deposited into the Loss Proceeds Account and applied in accordance with the provisions of this Indenture and the Intercreditor Agreement. SECTION 5.21. Benefit Plan Liabilities. Neither of the Mobile Energy Parties shall, nor shall they permit any Person who is a member of a controlled group of corporations, or a group of trades or businesses under common control with the Company (within the meaning of Section 414 of the Code) to, (a) fail to fulfill its obligations under or to comply in any material respect with the requirements of ERISA or the Code with respect to any employee benefit plans, (b) seek a waiver of the minimum funding standard of Section 412 of the Code, (c) fail to make any contribution or payment to or in respect of any employee benefit plan required to be made by Law or by the terms of such plan, (d) make any amendment to any employee benefit plan that has resulted or should result in the imposition of a lien or the posting of a bond or other security under ERISA or the Code or (e) incur any liability under Title IV of ERISA other than a liability to the Pension Benefit Guaranty Corporation for premiums under Section 4007 of ERISA, if as a result of any such event or condition set forth in clauses (a) through (e) above, together with all such other events and conditions, either of the Mobile Energy Parties shall incur or be reasonably likely to incur, or any other member of such controlled group shall incur or be reasonably likely to incur any liability for which such Mobile Energy Party would be subject to, a 32 liability that is material in relation to the financial position of such Mobile Energy Party SECTION 5.22. Mill Owner Maintenance Reserve Account. The Company hereby agrees that monies on deposit in, or otherwise credited to (in accordance with the Mill Owner Maintenance Reserve Account Agreement) the Mill Owner Maintenance Reserve Account shall be used solely for Operation and Maintenance Costs or by the Mills as permitted by the Mill Owner Maintenance Reserve Account Agreement; provided, however, that, prior to a Trigger Event, such monies shall be used, as contemplated by the Mill Owner Maintenance Reserve Account Agreement, for payment to the Trustee for deposit into the Indenture Securities Account and to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account and to the Collateral Agent for deposit into the Working Capital Facility Account, ratably based upon the respective amounts owing to each such Account, on the Monthly Transfer Date immediately preceding each Interest Payment Date or Principal Payment Date therefor, whenever, and to the extent that, the amount of monies on deposit (after giving effect to any monies to be deposited from the Revenue Account into any Account on such Monthly Transfer Date) in the Working Capital Account, the Indenture Securities Account, the Tax- Exempt Indenture Securities Account, the Maintenance Reserve Account, each applicable Debt Service Reserve Account (if any), each applicable Tax-Exempt Debt Service Reserve Account (if any), the Distribution Account, the Subordinated Fee Account and the Subordinated Debt Account (including, in the case of the Maintenance Plan Funding Subaccount and the Distribution Account, the then Available Amount under any Reserve Account Security on deposit therein) are insufficient to make payments when due on the Senior Debt. ARTICLE VI. REDEMPTION AND PREPAYMENT OF SECURITIES SECTION 6.1. Applicability of Article. Securities of any series that are subject to redemption or prepayment before their Stated Maturity (or, if the principal of the Securities of any series is payable in installments, the Stated Maturity of the final installment of the principal thereof) shall be redeemed or prepaid in accordance with their terms and (except as otherwise specified in the Series Supplemental Indenture creating such series) in accordance with this Article VI. SECTION 6.2. Election to Redeem or Prepay; Notice to Trustee. The election or requirement of the Company to redeem or prepay any Securities otherwise than through a Sinking Fund shall be evidenced by a Company Order. If the Company determines or is required to redeem or prepay any Securities, the Company shall, at least fifteen (15) days prior to the date upon which notice of redemption or prepayment is required to be given to the Holders pursuant to Section 6.4 hereof (unless a shorter notice period shall be satisfactory to the Trustee), deliver to the Trustee a Company Order specifying the date on which such redemption or prepayment shall occur (a "Redemption Date" or "Prepayment Date," as the case may be) and the series and principal amount of Securities to be redeemed or prepaid. In the case of any redemption or prepayment of Securities (a) prior to the expiration of any restriction on such redemption or prepayment provided in the terms of such Securities, the Series Supplemental Indenture relating thereto or elsewhere in this Indenture or (b) pursuant to an election of the Company that is subject to a condition specified in the terms of such Securities or in the Series Supplemental Indenture relating thereto, the Company shall furnish the Trustee with an Officer's Certificate and Opinion of Counsel evidencing compliance with such restriction or condition. 33 SECTION 6.3. Optional Redemption; Extraordinary Redemption; Prepayment; Selection of Securities to Be Redeemed or Prepaid. (a) The Securities of any series shall be subject to redemption from time to time at the option of the Company only as provided in the Series Supplemental Indenture relating thereto. (b) Unless otherwise provided in a Series Supplemental Indenture, all Outstanding Securities shall be redeemed prior to maturity, as a whole, at a redemption price equal to the principal amount thereof, together with any interest on the principal amount of the Securities accrued to the Redemption Date, upon an Event of Loss or an Event of Eminent Domain if (i) the determination is made in accordance with Section 3.10(c) of the Intercreditor Agreement that neither the Energy Complex nor any portion thereof can be rebuilt, repaired, restored or replaced with a Replacement Facility (subject to the conditions specified in the Intercreditor Agreement) or that the Loss Proceeds with respect thereto, together with Additional Available Proceeds, are not sufficient to permit such rebuilding, repair, restoration or replacement or (ii) if (A) the monies on deposit in the Loss Proceeds Account, including all Additional Available Proceeds, are sufficient to redeem all Senior Debt, (B) all or substantially all of the Energy Complex is destroyed or taken, (C) the Company elects not to rebuild, repair, restore or replace the Energy Complex and (D) the Company provides an Officer's Certificate to the Trustee and the Collateral Agent certifying that the Company is not otherwise required under the Master Operating Agreement or the Lease to rebuild, repair, restore or replace the Energy Complex, or to apply Loss Proceeds to the rebuilding, repairing, restoration or replacement or the Energy Complex (which certification shall be confirmed by an Opinion of Counsel to such effect). All Loss Proceeds received by the Trustee from the Collateral Agent pursuant to Section 6.2(a) of the Intercreditor Agreement with respect to such Event of Loss or Event of Eminent Domain (as the case may be) shall be deposited into the Indenture Securities Redemption Subaccount and applied by the Trustee to the redemption of all Outstanding Securities pursuant to this Section 6.3(b). Any redemption pursuant to this Section 6.3(b) shall be made within ninety (90) days after the receipt by the Trustee of the Excess Loss Proceeds from the Collateral Agent. (c) The Outstanding Securities shall be partially redeemed, ratably among, and by lot within, all outstanding series and maturities, prior to maturity at a redemption price equal to the principal amount thereof, together with any interest on the principal amount of the Outstanding Securities accrued to the Redemption Date, upon completion of the rebuilding, repair, restoration or replacement of the Energy Complex following an Event of Loss or an Event of Eminent Domain where a determination is made that the Energy Complex or any portion thereof can be rebuilt, repaired, restored or replaced with a Replacement Facility and that the Company has sufficient monies available for such rebuilding, repair, restoration or replacement. The foregoing provisions of this Section 6.3(c) may be altered in a Series Supplemental Indenture, but such altered provisions shall not be effective while any Securities Outstanding as of the date of such Series Supplemental Indenture remain Outstanding. The aggregate amount of Securities to be redeemed shall be equal to the Indenture Distribution Amount transferred to the Trustee for such purpose pursuant to Section 6.2(b)(ii) of the Intercreditor Agreement. All Excess Loss Proceeds so transferred to the Trustee shall be deposited into the Indenture Securities Redemption Subaccount and applied by the Trustee to the redemption of such Securities pursuant to this Section 6.3(c); provided, however, that, to the extent that any of such Excess Loss Proceeds is transferred to the Trustee pursuant to clause (B) of the last sentence of Section 6.2(b) of the Intercreditor Agreement, the Trustee shall deposit such Excess Loss Proceeds into the Indenture Securities Principal Subaccount to be applied to the payment or redemption of Securities at the earliest date permitted by the terms thereof. 34 Any redemption pursuant to this Section 6.3(c) shall be made within ninety (90) days after the receipt by the Trustee of such Excess Loss Proceeds (other than any such Excess Loss Proceeds transferred to the Indenture Securities Principal Subaccount). (d) Except as otherwise specified herein or in the Series Supplemental Indenture relating to the Securities of a series, if less than all the Securities of such series are to be redeemed or prepaid pursuant to Section 6.3(a), the particular Securities of such series to be redeemed or prepaid shall be selected by the Trustee from the Outstanding Securities of such series not previously called for redemption or prepayment in whole, by such method (including by lot) as the Trustee shall deem fair and appropriate. (e) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption or prepayment and, in the case of any Securities to be redeemed or prepaid in part, the principal amount thereof to be redeemed or prepaid. (f) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption or prepayment of Securities shall relate, in the case of any Securities redeemed or prepaid or to be redeemed or prepaid only in part, to the portion of the principal amount of such Securities that has been or is to be redeemed or prepaid. SECTION 6.4. Notice of Redemption or Prepayment. Except as otherwise specified in the Series Supplemental Indenture relating to the Securities of a series to be redeemed or prepaid, notice of redemption or prepayment (including any Sinking Fund redemption pursuant to Article VII hereof) shall be given in the manner provided in Section 1.6 to the Holders of Securities of such series to be redeemed or prepaid at least thirty (30) days but not more than sixty (60) days prior to the Redemption Date or Prepayment Date (as the case may be). All notices of redemption or prepayment shall state: (a) The Redemption Date or Prepayment Date (as the case may be); (b) the premium payable on redemption or prepayment, if any; (c) if less than all the Outstanding Securities of any series are to be redeemed or prepaid in whole, (i) the particular Securities of such series to be redeemed or prepaid in whole, (ii) the portion of the principal amount of each Security of such series to be redeemed or prepaid in part and (iii) that, on and after the Redemption Date or Prepayment Date (as the case may be), upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the remaining unpaid principal amount thereof will be issued; (d) that on the Redemption Date or Prepayment Date (as the case may be), interest on the Securities of such series to be redeemed or prepaid will cease to accrue on and after such date; (e) the Place or Places of Payment where such Securities are to be surrendered for payment of the amount in respect of such redemption or prepayment; and (f) that such redemption is for a Sinking Fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. The Company shall provide the Trustee with a copy of the form of notice of redemption or prepayment of the 35 Securities at the time the Company delivers to the Trustee the Company Order relating to such redemption or prepayment pursuant to Section 6.2 hereof. SECTION 6.5. Securities Payable on Redemption Date or Prepayment Date. Notice of redemption or prepayment (as the case may be) having been given as aforesaid, and the conditions, if any, set forth in such notice having been satisfied, the Securities or portions thereof so to be redeemed or prepaid shall, on the Redemption Date or Prepayment Date (as the case may be), become due and payable, and from and after such date such Securities or portions thereof shall cease to bear interest. Upon surrender of any such Security for redemption or prepayment in accordance with such notice, an amount in respect of such Security or portion thereof shall be paid as provided therein; provided, however, that any payment of interest on any Security the Stated Maturity of which payment is on or prior to the Redemption Date or Prepayment Date (as the case may be) shall be payable to the Holder of such Security, or one (1) or more Predecessor Securities, registered as such at the close of business on the related Regular Record Date according to the terms of such Security and subject to the provisions of Section 2.10. If any Security called for redemption or prepayment shall not be so paid upon surrender thereof for redemption or repayment (as the case may be), the principal of and premium, if any, and interest on such Security shall, until paid, bear interest from the Redemption Date or the Prepayment Date (as the case may be) at the rate prescribed in the Security. SECTION 6.6. Securities Redeemed or Prepaid in Part. Any Security that is to be redeemed or prepaid only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Mobile Energy Parties shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities of the same series, of any authorized denomination requested by such Holder and of like tenor and in aggregate principal amount equal to and in exchange for the remaining unpaid principal amount of the Security so surrendered. ARTICLE VII. SINKING FUNDS SECTION 7.1. Applicability of Article. The provisions of this Article VII shall be applicable to any sinking fund for the retirement of the Securities of any series except as otherwise specified in the Series Supplemental Indenture creating the Securities of such series. SECTION 7.2. Sinking Funds for Securities. Any Series Supplemental Indenture may provide for a sinking fund for the retirement of the Securities of the series created thereby (hereinafter called a "Sinking Fund") in accordance with which the Company will be required to redeem on the dates set forth therein (hereinafter called "Sinking Fund Redemption Dates") Securities of principal amounts set forth therein (hereinafter called "Sinking Fund Requirements"). Except as otherwise specified in the Series Supplemental Indenture relating to the Securities of a series, the particular Securities of such series, if any, to be redeemed through a Sinking Fund shall be selected in the manner provided in Section 6.3(d), and notice of such redemption shall be given in the manner provided in Section 6.4. 36 ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES SECTION 8.1. Events of Default. The term "Event of Default," whenever used herein, shall mean any of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or come about or be affected by operation of law, or be pursuant to or in compliance with any applicable Law), and such event shall continue to be an Event of Default if and for so long as it shall not have been remedied: (a) either of the Mobile Energy Parties shall fail to pay any principal of or premium, if any, or interest on any Security when the same becomes due and payable, whether by scheduled maturity or required prepayment or by acceleration or otherwise, for fifteen (15) or more days; or (b) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in: (i) Section 5.4(e); (ii) Section 5.7(b) (insofar as such failure relates to matters specified in Section 5.8(b)(iv)); (iii) Section 5.8(b) (other than clause (v) thereof); (iv) Section 5.10; or (v) Section 5.19; or (c) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in: (i) Section 5.2; (ii) Section 5.4(a); (iii) Section 5.5; (iv) Section 5.7(a); (v) Section 5.7(b) (insofar as such failure would reasonably be expected to have a Material Adverse Effect or relates to matters specified in Section 5.8(b)(v)); (vi) Section 5.8(a), 5.8(b)(v) or 5.8(c); (vii) Section 5.13; (viii) Section 5.14; (ix) Section 5.15; (x) Section 5.16; (xi) Section 3(e), 3(f), 3(g), 3(h), 3(i) or 3(j) of the Security Agreement; or (xii) Section 8, 10, 13, 14 or 15 of the Mortgage; and, in the case of clauses (i) through (xii) above, such failure shall continue uncured for thirty (30) or more days after either of the Mobile Energy Parties has knowledge of such failure; or (d) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in: (i) Section 5.4(b); or (ii) Section 5.7(b) (insofar as such failure relates to matters specified in Section 5.8(b)(i) or 5.8(b)(iii)); and, in the case of clauses (i) and (ii) above, such failure continues for more than thirty (30) days after either of the Mobile Energy Parties has knowledge of such failure; provided, however, that if (and for so long as an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that) (A) such failure is capable of being remedied and either of the Mobile Energy Parties is diligently attempting to remedy such failure, (B) no other Event of Default has occurred and is continuing and (C) such failure would not have a Material Adverse Effect, then either of the Mobile Energy Parties may continue to effect such cure of the default for an additional sixty (60) days; or (e) either of the Mobile Energy Parties shall fail to perform or observe any material covenant or agreement to be performed or observed by it under the provisions of this Indenture, the Security Agreement or the Mortgage (other than those referred to in Sections 8.1(a), (b), (c) and (d)) and such failure shall continue uncured for thirty (30) or more days after either of the Mobile Energy Parties has knowledge of such failure; provided, however, that if (and for so long as an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that) (i) such failure is capable of being remedied and either of the Mobile Energy Parties is diligently attempting to remedy such failure and (ii) no other Event of Default has occurred and is continuing, 37 then either of the Mobile Energy Parties may continue to effect such cure of the default for an additional one hundred twenty (120) days; or (f) any representation or warranty made by either of the Mobile Energy Parties herein or in any other Financing Document or in any certificate, financial statement or other document furnished to the Trustee or the Collateral Agent hereunder or thereunder shall prove to have been false or misleading in any respect as of the time made, confirmed or furnished and the inaccuracy has resulted or would reasonably be expected to result in a Material Adverse Effect and (if capable of being cured) such misrepresentation shall continue uncured for thirty (30) or more days after either of the Mobile Energy Parties has knowledge thereof; provided, however, that if (and for so long as an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that) (i) such failure is capable of being remedied and either of the Mobile Energy Parties is diligently attempting to remedy such misrepresentation and (ii) no other Event of Default has occurred and is continuing, either of the Mobile Energy Parties may continue to effect such cure of the misrepresentation, and such misrepresentation shall not be deemed an Event of Default, for an additional sixty (60) days; provided further, however, that if (and for so long as) (A) an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that such misrepresentation will not have a Material Adverse Effect and (B) the Trustee consents thereto, then either of the Mobile Energy Parties may continue to effect such cure of the misrepresentation beyond such additional sixty (60) days; or (g) either of the Mobile Energy Parties shall fail to perform any obligation in respect of any Debt in an amount exceeding $5,000,000 and acceleration shall be declared with respect to such Debt; or (h) with respect to any Project Contract to which the Company is a party: (i) such Project Contract is declared unenforceable by a Governmental Authority; (ii) any other party thereto terminates such Project Contract prior to its stated expiration or denies it has an obligation and substantially ceases performance thereunder (other than, in either case, in connection with a Mill Closure with respect to the Tissue Mill or the Paper Mill, if the Company has provided the Revenue Sufficiency Certification to the Collateral Agent); or (iii) any other party thereto defaults in respect of its obligations under such Project Contract; and, in the case of any event described in clauses (i), (ii) and (iii) above (other than with respect to the Pulp Mill Energy Services Agreement), such event would result in a Material Adverse Effect; provided, however, that none of such events shall be an Event of Default hereunder if within one hundred eighty (180) days from the occurrence of such an event, the Company shall have provided an Officer's Certificate certifying, together with an Independent Engineer Confirmation, to the Trustee that (A) such Project Contract and (if such Project Contract is an Energy Service Agreement) the applicable Mill Owner's obligations under the Master Operating Agreement have been reinstated on identical terms pursuant to the provisions of the Master Operating Agreement, provided that if the obligor thereunder is different from the obligor prior to such reinstatement, such obligor is reasonably capable of performing its obligations under such Project Contract or (B) the Company has satisfied the Event of Default Alternative Agreement Requirements with respect to such Project Contract; or (i) (i) an Event of Default under any Working Capital Facility shall have occurred and be continuing and shall not have been waived by the Working Capital Facility Provider; (ii) an Event of Default under the Tax-Exempt Indenture shall have occurred and be continuing and shall not have been waived by the Tax-Exempt Trustee; or (iii) an Event of Default 38 under any Security Document shall have occurred and be continuing and shall not have been waived; or (j) a final and non-appealable judgment or judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against either of the Mobile Energy Parties, and the same shall not be stayed or discharged within thirty (30) days from the date of entry thereof; or (k) at any time Southern shall fail to (i) continue to control, directly or indirectly, the management and operations of the Company (except if necessary to comply with applicable regulatory restrictions, including (if the Company elects, or the Members elect, to qualify the Energy Complex as a Qualifying Facility under PURPA) those imposed on Qualifying Facilities under PURPA and the rules promulgated thereunder) or (ii) maintain ownership, directly or indirectly, of at least fifty percent (50%) of the ownership interests in the Company; or (l) at any time the Company shall fail to maintain Southern Electric or an Affiliate thereof as Operator, unless the Company provides a letter from any two (2) Rating Agencies (then currently rating the Outstanding Securities) confirming that the rating of such Securities will not be adversely affected by such failure; or (m) any grant of a Lien contained in the Security Documents shall cease to be effective to grant a perfected Lien to the Collateral Agent, the Trustee or the Tax-Exempt Trustee (as the case may be) on the Collateral described therein with the priority purported to be created thereby; provided, however, that the Company shall have ten (10) days from actual knowledge or constructive knowledge thereof to cure any such cessation; or (n) a Bankruptcy Event in respect of either of the Mobile Energy Parties shall have occurred and be continuing; or (o) if any Southern Guaranty is in effect with respect to any Reserve Account Security Account, a Bankruptcy Event in respect of Southern shall have occurred and be continuing, unless a Reserve Account Letter of Credit or cash in the amount of the then Available Amount under such Southern Guaranty is provided within fifteen (15) days of such Bankruptcy Event; or (p) the failure by Southern to perform any of the "Guaranteed Obligations" under any Southern Guaranty and such failure shall continue for fifteen (15) or more days. SECTION 8.2. Enforcement of Remedies. (a) If one (1) or more Events of Default shall have occurred and be continuing, then: (i) in the case of an Event of Default described in Section 8.1(n) (an "Automatic Acceleration Default"), the entire principal amounts of the Securities Outstanding, all interest accrued and unpaid thereon, and all premium and other amounts payable under the Securities and this Indenture, if any, shall automatically become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived; or (ii) (A) in the case of an Event of Default described in Section 8.1(a), upon the direction of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Outstanding Securities or (B) in the case of an Event of Default described in Sections 8.1(b) through (m), (o) or (p), upon the direction of the Holders of not less than thirty-three and one-third percent (331/3%) in aggregate principal 39 amount of the Outstanding Securities, the Trustee shall, by notice to the Company (with a copy to Mobile Energy), declare the entire principal amounts of the Securities Outstanding, all interest accrued and unpaid thereon, and all premium and other amounts payable under the Securities and this Indenture, if any, to be due and payable, whereupon the same shall become due and payable without presentment, demand, protest or further notice of any kind, all of which are, to the extent permitted by law, hereby waived. (b) If an Event of Default occurs and is continuing and is known to a Responsible Officer of the Trustee, the Trustee shall mail to each Holder a notice of such Event of Default within thirty (30) days after the occurrence thereof. Except in the case of an Event of Default in payment of principal of or interest on any Security, the Trustee may withhold the notice to the Holders if and for as long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interest of the Holders. In addition, if the Event of Default described in Section 8.1(a) shall have occurred and be continuing, the Trustee may accelerate the maturity of the Securities as provided in Section 8.2(a)(ii) notwithstanding the absence of direction from the Holders if in the judgment of the Trustee such action is necessary to protect the interests of the Holders. (c) At any time after the principal of the Securities shall have become due and payable upon an acceleration as provided herein, and before any judgment or decree for the payment of the money so due, or any portion thereof, shall be entered, such declaration and its consequences shall be deemed to be rescinded and annulled if: (i) there shall have been paid to or deposited with the Trustee a sum sufficient to pay (A) all overdue installments of interest on the Securities, (B) the principal of and premium, if any, on any Securities that have become due otherwise than by such declaration of acceleration and interest thereon at the respective rates provided in the Securities for late payments of principal or premium, (C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the respective rates provided in the Securities for late payments of interest, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and (ii) all Events of Default, other than the non-payment of the principal of the Securities that has become due solely by such acceleration, have been cured or waived as provided in Section 8.7. No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon. SECTION 8.3. Specific Remedies. If any Event of Default shall have occurred and be continuing and an acceleration shall have occurred pursuant to Section 8.2, subject to the provisions of Sections 8.2, 8.5, 8.6 and 8.15, the Trustee, by such officer or agent as it may appoint, may deliver notice to the Collateral Agent in accordance with the Intercreditor Agreement requesting that the Collateral Agent sell, without recourse, for cash, or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Collateral Agent in its discretion may determine, the Shared Collateral as an entirety, or in such portions as the Holders of a majority in 40 aggregate principal amount of the Securities then Outstanding shall request by an Act of Holders, or, in the absence of such request, as the Trustee in its discretion shall deem expedient in the interest of the Holders, at public or private sale. SECTION 8.4. Judicial Proceedings Instituted by Trustee. (a) Trustee May Bring Suit. If there shall exist an Event of Default, then the Trustee, in its own name, and as trustee of an express trust, subject to the provisions of Sections 2.14 and 8.2, shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on the Securities, and may prosecute any such claim or proceeding to judgment or final decree, and may enforce any such judgment or final decree and collect the monies adjudged or decreed to be payable in any manner provided by law, whether before or after or during the pendency of any proceedings for the enforcement of the Lien of this Indenture, or of any of the Trustee's rights or the rights of the Holders under this Indenture, and such power of the Trustee shall not be affected by any sale hereunder or by the exercise of any other right, power or remedy for the enforcement of the provisions of this Indenture or for the foreclosure of the Lien hereof. (b) Trustee May Recover Unpaid Indebtedness after Sale of Collateral. Subject to Section 2.14, in the case of a sale of the Indenture Securities Collateral and of the application of the proceeds of such sale to the payment of the indebtedness secured by this Indenture, the Trustee, in its own name, and as trustee of an express trust, shall be entitled and empowered, by any appropriate means, legal, equitable or otherwise, to enforce payment of, and to receive all amounts then remaining due and unpaid upon, all or any of the Securities, for the benefit of the Holders thereof, and upon any other portion of such indebtedness remaining unpaid, with interest at the rates specified in the respective Securities on the overdue principal of and premium, if any, and (to the extent that payment of such interest is legally enforceable) on the overdue installments of interest. (c) Recovery of Judgment Does Not Affect Lien of this Indenture or Other Rights. No recovery of any such judgment or final decree by the Trustee and no levy of any execution under any such judgment upon any of the Indenture Securities Collateral, or upon any other property, shall in any manner or to any extent affect the Lien of this Indenture upon any of the Indenture Securities Collateral, or any rights, powers or remedies of the Trustee, or any liens, rights, powers or remedies of the Holders, but all such liens, rights, powers or remedies shall continue unimpaired as before. (d) Trustee May File Proofs of Claim; Appointment of Trustee as Attorney-in-Fact in Judicial Proceedings. The Trustee in its own name, or as trustee of an express trust, or as attorney-in-fact for the Holders, or in any one (1) or more of such capacities (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand for the payment of overdue principal, premium, if any, or interest), shall be entitled and empowered to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Holders (whether such claims be based upon the provisions of the Securities or of this Indenture) allowed in any equity, receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization or any other judicial proceedings relating to either of the Mobile Energy Parties or any obligor on the Securities (within the meaning of the Trust Indenture Act), the creditors of either of the Mobile Energy Parties or any such obligor, the Indenture Securities Collateral or any other property of either of the Mobile Energy Parties or any such obligor and any receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to 41 pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. The Trustee is hereby irrevocably appointed (and the successive respective Holders of the Securities, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) the true and lawful attorney-in-fact of the respective Holders, with authority to (i) make and file in the respective names of the Holders (subject to deduction from any such claims of the amounts of any claims filed by any of the Holders themselves) any claim, proof of claim or amendment thereof, debt, proof of debt or amendment thereof, petition or other document in any such proceedings and to receive payment of any amounts distributable on account thereof, (ii) execute any such other papers and documents and to do and perform any and all such acts and things for and on behalf of such Holders, as may be necessary or advisable in order to have the respective claims of the Trustee and of the Holders against either of the Mobile Energy Parties or any such obligor, the Indenture Securities Collateral or any other property of the Mobile Energy Parties or any such obligor allowed in any such proceeding and (iii) receive payment of or on account of such claims and debt; provided, however, that nothing contained in this Indenture shall be deemed to give to the Trustee any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Holder. Any monies collected by the Trustee under this Section 8.4 shall be applied as provided in Section 8.11. (e) Trustee Need Not have Possession of Securities. All proofs of claim, rights of action and rights to assert claims under this Indenture or under any of the Securities may be enforced by the Trustee without the possession of the Securities or the production thereof at any trial or other proceedings instituted by the Trustee. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Securities and it shall not be necessary to make any such Holders parties to such proceedings. (f) Suit to Be Brought for Ratable Benefit of Holders. Any suit, action or other proceeding at law, in equity or otherwise that shall be instituted by the Trustee under any of the provisions of this Indenture shall be for the equal, ratable and common benefit of all the Holders, subject to the provisions of this Indenture. (g) Trustee May Be Restored to Former Position and Rights in Certain Circumstances. In case the Trustee shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee, then and in every such case the Mobile Energy Parties and the Trustee shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of the Trustee shall continue as if no such proceedings had been taken. SECTION 8.5. Holders May Demand Enforcement of Rights by Trustee. If an Event of Default shall have occurred and shall be continuing, the Trustee shall, upon the written request of the Holders of a majority in aggregate principal amount of the Securities then Outstanding and upon the offering of indemnity as provided in Section 9.3(e), but subject in all cases to the provisions of Section 8.3, proceed to institute one (1) or more suits, actions or proceedings at law, in equity or otherwise, or take any other appropriate remedy, to enforce payment of the principal of or premium, if any, or interest on the Securities, to foreclose the Lien of this Indenture or to deliver notice to the Collateral Agent in accordance with the Intercreditor Agreement requesting that the Collateral Agent foreclose the Lien of the other Security Documents or to sell the Shared Collateral under a judgment or decree of a court or courts of competent jurisdiction or under the power of sale herein granted, or take such other appropriate legal, equitable or other remedy, as the Trustee, being advised 42 by counsel, shall deem most effectual to protect and enforce any of the rights or powers of the Trustee or the Holders, or, in case such Holders shall have requested a specific method of enforcement permitted hereunder, in the manner requested, provided that such action shall not be otherwise than in accordance with law and the provisions of this Indenture, and the Trustee, subject to such indemnity provisions, shall have the right to decline to follow any such request if the Trustee in good faith shall determine that the suit, proceeding or exercise of the remedy so requested would involve the Trustee in personal liability or expense. SECTION 8.6. Control by Holders. Subject to the Intercreditor Agreement, the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any Law or with this Indenture and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. SECTION 8.7. Waiver of Past Events of Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may on behalf of the Holders of all Securities waive any past Event of Default and its consequences, except that only the Holders of all Securities affected thereby may waive an Event of Default (a) in the payment of the principal of or premium, if any, or interest on, or other amounts due under, any Security then Outstanding or (b) in respect of a covenant or provision hereof that under Article XI cannot be modified or amended without the consent of the Holder of each Security Outstanding affected. Upon any such waiver such Event of Default shall cease to exist and shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. SECTION 8.8. Holder May Not Bring Suit Except Under Certain Conditions. A Holder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise for the foreclosure of the Lien of this Indenture, for the appointment of a receiver or for the enforcement of any other remedy under or upon this Indenture, unless: (a) such Holder previously shall have given written notice to the Trustee of a continuing Event of Default; (b) the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Outstanding Securities shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 9.3(e); (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for sixty (60) days after receipt of such notice, request and offer of indemnity; and (d) no direction inconsistent with such written request has been given to the Trustee during such sixty (60)-day period by the Holders of a majority in principal amount of Outstanding Securities. It is understood and intended that no one (1) or more of the Holders shall have any right in any manner whatever hereunder or under the Securities to (i) surrender, impair, waive, affect, disturb or prejudice the Lien of the Security Documents on any property subject thereto or the rights of the Holders of any other Securities, (ii) obtain or seek to obtain priority or preference over any other such Holder or (iii) enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all the Holders subject to the provisions of this Indenture. 43 SECTION 8.9. Undertaking to Pay Court Costs. All parties to this Indenture, and each Holder by such Holder's acceptance of a Security, shall be deemed to have agreed that any court may in its discretion require, in any suit, action or proceeding for the enforcement of any right or remedy under this Indenture, or in any suit, action or proceeding against the Trustee for any action taken or omitted by it as Trustee hereunder, the filing by any party litigant in such suit, action or proceeding of an undertaking to pay the costs of such suit, action or proceeding, and that such court may, in its discretion, assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, action or proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 8.9 regarding such agreement by the parties to this Indenture and each Holder shall not apply to (a) any suit, action or proceeding instituted by the Trustee, (b) any suit, action or proceeding instituted by any Holder or group of Holders holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities or (c) any suit, action or proceeding instituted by any Holder for the enforcement of the payment of the principal of or premium, if any, or interest on any of the Securities, on or after the respective due dates expressed therein. SECTION 8.10. Right of Holders to Receive Payment Not to Be Impaired. Anything in this Indenture or in the Intercreditor Agreement to the contrary notwithstanding, the right of any Holder to receive payment of the principal of and premium, if any, and interest on such Security, on or after the respective due dates expressed in such Security (or, in case of redemption, on the Redemption Date fixed for such Security), or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 8.11. Application of Monies Collected by Trustee. Any monies collected or to be applied by the Trustee pursuant to this Article VIII in respect of the Securities of a series, together with any other monies that may then be held by the Trustee under any of the provisions of this Indenture as security for the Securities of such series (other than as set forth in the Intercreditor Agreement and other than monies at the time required to be held for the payment of specific Securities of such series at their Stated Maturities or at a time fixed for the redemption thereof) shall be applied in the following order from time to time, on the date or dates fixed by the Trustee and, in the case of a distribution of such monies on account of principal, premium, if any, or interest, upon presentation of the Outstanding Securities of such series, and stamping thereon of payment, if only partially paid, and upon surrender thereof, if fully paid: FIRST: to the payment of all taxes, assessments or liens prior to the Lien of the Security Documents, except those subject to which any sale shall have been made, all reasonable costs and expenses of collection, including the reasonable costs and expenses of handling the Indenture Securities Collateral (other than the Shared Collateral) and of any sale thereof pursuant to the provisions of the Security Documents, and to the payment of all amounts due the Trustee or any predecessor Trustee under Section 9.7; SECOND: in case the unpaid principal amount of the Outstanding Securities of such series or any of them shall not have become due, to the payment of any interest in default, in the order of the maturity of the payments thereof, with interest at the rates specified in the respective Securities of such series in respect of overdue payments (to the extent that payment of such interest shall be legally enforceable) on the payments of interest then overdue; THIRD: in case the unpaid principal amount of any of but not all the Outstanding Securities of such series shall have become due, first to 44 the payment of accrued interest on all Outstanding Securities of such series in the order of the maturity of the payments thereof, with interest at the respective rates specified in the Securities of such series for overdue payments of principal, premium, if any, and (to the extent that payment of such interest shall be legally enforceable) interest then overdue, and next to the payment of the unpaid principal amount of all Securities then due; FOURTH: in case the unpaid principal amount of all the Outstanding Securities of such series shall have become due, to the payment of the whole amount then due and unpaid upon the Outstanding Securities of such series for principal, premium, if any, and interest, together with interest at the respective rates specified in the Securities of such series for overdue payments on principal, premium, if any, and (to the extent that payment of such interest shall be legally enforceable) interest then overdue; and FIFTH: in case the unpaid principal amount of all the Outstanding Securities of such series shall have become due, and all of the Outstanding Securities of such series shall have been fully paid, any surplus then remaining shall be paid to the Collateral Agent (to be applied pursuant to the terms and conditions of the Intercreditor Agreement), or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct; provided, however, that all payments in respect of the Securities of a series to be made pursuant to clauses "SECOND" through "FOURTH" of this Section 8.11 shall be made ratably to the Holders of Securities of such series entitled thereto, without discrimination or preference, based upon the ratio of the unpaid principal amount of the Securities of such series in respect of which such payments are to be made held by each such Holder to the unpaid principal amount of all Securities of such series. SECTION 8.12. Securities Held by Certain Persons Not to Share in Distribution. Any Securities known to a Responsible Officer of the Trustee to be owned or held by, or for the account or benefit of, either of the Mobile Energy Parties or an Affiliate thereof, shall not be entitled to share in any payment or distribution provided for in this Article VIII until all Securities held by other Persons have been indefeasibly paid in full. SECTION 8.13. Waiver of Appraisement, Valuation, Stay, Right to Marshalling. To the full extent it may lawfully do so, each of the Mobile Energy Parties, for itself and for any other Person who may claim through or under it, hereby: (a) agrees that neither it nor any such Person will set up, plead, claim or in any manner whatsoever take advantage of any appraisal, valuation, stay, extension or redemption Laws, now or hereafter in force in any jurisdiction that may delay, prevent or otherwise hinder (i) the performance or enforcement or foreclosure of this Indenture and the other Security Documents, (ii) the sale of any of the Indenture Securities Collateral or (iii) the putting of the purchaser or purchasers thereof into possession of such Indenture Securities Collateral immediately after the sale thereof; (b) waives all benefit or advantage of any such laws; (c) consents and agrees that the Collateral may be sold by the Collateral Agent as an entirety or in parts; and 45 (d) waives and releases all rights to have the Indenture Securities Collateral marshalled upon any foreclosure, sale or other enforcement of this Indenture. SECTION 8.14. Remedies Cumulative; Delay or Omission Not a Waiver. To the extent permitted by law, each and every right, power and remedy herein specifically given to the Trustee shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Trustee and the exercise or the beginning of the exercise of any right, power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy, and no delay or omission by the Trustee in the exercise of any right, power or remedy or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of either of the Mobile Energy Parties or to be an acquiescence therein. SECTION 8.15. Intercreditor Agreement. Simultaneously with the execution and delivery of this Indenture, the Trustee shall enter into the Intercreditor Agreement on behalf of itself and all Holders of any of the Outstanding Securities and all future Holders of Securities. Notwithstanding any other provision of this Indenture to the contrary, all rights, powers and remedies available to the Holders of any of the Outstanding Securities, and all future Holders of any of the Securities or the Trustee, with respect to the Shared Collateral, or otherwise pursuant to the Security Documents, shall be subject to the Intercreditor Agreement, including, in all cases, the ability to enforce any remedy other than remedies specified in Section 8.2 and Section 8.10 of this Indenture. To the extent that the Collateral Agent has been authorized to exercise any such rights, powers and remedies under the Intercreditor Agreement, any right given to the Trustee hereunder to exercise any remedy with respect to the Shared Collateral shall, during such time as the Intercreditor Agreement is in effect, be a right of the Trustee to direct the Collateral Agent to take such action to the extent set forth in the Intercreditor Agreement. ARTICLE IX. THE TRUSTEE SECTION 9.1. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a 46 prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this Section 9.1(c) shall not be construed to limit the effect of Section 9.1(a); (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii)the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 9.1 and the requirements of the Trust Indenture Act. SECTION 9.2. Notice of Events of Defaults. In addition to its obligation to give notice to Holders as provided in Section 1.6, as promptly as practicable after, and in any event within thirty (30) days after, the occurrence of any Event of Default hereunder, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such Event of Default hereunder known to the Trustee, unless such Event of Default shall have been cured or waived; provided, however, that, except in the case of an Event of Default in the payment of the principal of or premium, if any, or interest on any Security, or in the payment of any Sinking Fund Requirement, the Trustee shall be protected in withholding such notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interest of the Holders. SECTION 9.3. Certain Rights of Trustee. Except as otherwise provided in Section 9.1 and Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the purported proper party or parties; (b) any request or direction of either of the Mobile Energy Parties mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or a Mobile Energy Request or Mobile Energy Order (as the case may be), and any resolution of the Board of Directors of 47 either of the Mobile Energy Parties may be sufficiently evidenced by a Board Resolution of such Mobile Energy Party; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of either of the Mobile Energy Parties; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of either of the Mobile Energy Parties personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be charged with knowledge of any Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of such Event of Default or (ii) written notice of such Event of Default shall have been given to the Trustee by either of the Mobile Energy Parties or by any Holder. SECTION 9.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, the Indenture Securities Collateral or the Securities, except that the Trustee hereby represents and warrants that this Indenture has been executed and delivered by one (1) of its officers who is duly authorized to execute and deliver such document on its behalf. The Trustee shall not be accountable for the use or application by either of the Mobile Energy Parties of the Securities or the proceeds thereof. SECTION 9.5. May Hold Securities. The Trustee, any Paying Agent, Security Registrar or Authenticating Agent, or any Affiliate thereof, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 9.8 and 9.13, may otherwise deal with the Mobile Energy Parties with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent. 48 SECTION 9.6. Funds May Be Held by Trustee or Paying Agent. Any monies received by the Trustee or any Paying Agent shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. Neither the Trustee nor the Paying Agent shall have any liability for interest upon any such monies. Amounts so received, at the written request and direction of the Company shall be invested by the Trustee in Permitted Investments. Such investments shall mature in such amounts and not later than such times as may be necessary to provide monies when needed to make payments from such monies as provided in the Indenture. SECTION 9.7. Compensation, Reimbursement and Indemnification. Each of the Mobile Energy Parties agrees: (a) to pay, or cause to be paid, to each of the Trustee and any Authorized Agent from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse, or cause to be reimbursed, each of the Trustee and any Authorized Agent upon its request for all expenses, disbursements and advances incurred or made by it in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable of its own negligence, willful misconduct or bad faith; and (c) to indemnify, or cause to be indemnified, each of the Trustee, any predecessor Trustee and any Authorized Agent for, and to hold it harmless against, any loss, liability or expense incurred without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. As security for the performance of the obligations of the Mobile Energy Parties under this Section 9.7, the Trustee shall have a Lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust under Section 12.3. SECTION 9.8. Disqualification; Conflicting Interests. (a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section 9.8, then, within ninety (90) days after ascertaining that it has such conflicting interest, and if the default (as such term is defined in the Trust Indenture Act) to which such conflicting interest relates has not been cured or duly waived or otherwise eliminated before the end of such ninety (90) day period, it shall either eliminate such conflicting interest or resign in the manner and with the effect hereinafter specified in this Article IX; provided, however, that except in the case of a default in the payment of the principal of, premium if any or interest on any Security, or in payment of any Sinking Fund redemption, the Trustee shall not be required to resign as provided by this Section 9.8 if the Trustee shall have sustained the burden of proving, on application to the SEC and after opportunity for hearing thereon, that (i) the default under the Indenture may be cured or waived during a reasonable period and under the procedures described in such application, and (ii) a stay of the Trustee's duty to resign will not be inconsistent with the interests of the Holders of the Securities. The 49 filing of such an application shall automatically stay the performance of the duty to resign until the SEC orders otherwise. (b) In the event that the Trustee shall fail to comply with the provisions of Section 9.8(a), the Trustee shall, within ten (10) days after the expiration of such ninety (90)-day period, transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such failure. (c) For the purposes of this Section 9.8, the Trustee shall be deemed to have a conflicting interest if the Securities are in default (as such term is defined in the Trust Indenture Act) and: (i) the Trustee is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of any obligor on the Securities are outstanding or is trustee for more than one (1) outstanding series of Securities, under a single indenture of any obligor, unless (A) the Securities are collateral trust notes under which the only collateral consists of securities issued under such other indenture, (B) such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture or (C) such obligor has no substantial unmortgaged assets and is engaged primarily in the business of owning, or of owning and developing or operating, real estate, and the Indenture and such other indenture are secured by wholly separate and distinct parcels of real estate, provided that there shall be excluded from the operation of this paragraph other series under this Indenture, and any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of such obligor are outstanding, if such obligor shall have sustained the burden of proving, on application to the SEC and after opportunity for hearing thereon, that trusteeship under this Indenture and such other indenture or indentures or under more than one (1) outstanding series under a single indenture is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under one (1) of such indentures or with respect to such series; (ii) the Trustee or any of its directors or executive officers is an underwriter for an obligor upon the Securities; (iii) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with an underwriter for an obligor upon the Securities; (iv) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee or representative of any obligor upon the Securities, or of an underwriter (other than the Trustee itself) for such obligor who is currently engaged in the business of underwriting, except that (A) one (1) individual may be a director or an executive officer, or both, of the Trustee and a director or an executive officer, or both, of an obligor on the Securities but may not be at the same time an executive officer of both the Trustee and such obligor; (B) if and so long as the number of directors of the Trustee in office is more than nine, one (1) additional individual may be director or an executive officer, or both, of the Trustee and a director of an obligor on the Securities; and (C) the Trustee may be designated by an obligor on the Securities or by any underwriter for such obligor to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depositary, or in any other similar capacity, or subject to the provisions of paragraph (i) of this Section 9.8(c), to act as trustee, whether under an indenture or otherwise; 50 (v) ten percent (10%) or more of the voting securities of the Trustee is beneficially owned either by any obligor on the Securities or by any director, partner, or executive officer thereof, or twenty percent (20%) or more of such voting securities is beneficially owned, collectively, by any two (2) or more of such persons; or ten percent (10%) or more of the voting securities of the Trustee is beneficially owned either by an underwriter for any obligor on the Securities or by any director, partner or executive officer thereof, or is beneficially owned collectively by any two (2) or more such persons; (vi) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this subsection defined), (A) five percent (5%) or more of the voting securities, or ten percent (10%) or more of any other class of security, of any obligor on the Securities not including the Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee or (B) ten percent (10%) or more of any class of security of an underwriter for any obligor on the Securities; (vii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this subsection defined), five percent (5%) or more of the voting securities of any person who, to the knowledge of the Trustee, owns ten percent (10%) or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, any obligor on the Securities; (viii) the Trustee is the beneficial owner of, or holds collateral security for an obligation that is in default (as hereinafter in this subsection defined), ten percent (10%) or more of any class of security of any person who, to the knowledge of the Trustee, owns fifty percent (50%) or more of the voting securities of any obligor on the Securities; (ix) the Trustee owns, on the date of default (as such term is defined in the Trust Indenture Act) upon the Securities or any anniversary of such default while such default upon the Securities remains outstanding, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of twenty-five percent (25%) or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraphs (vi), (vii) or (viii) of this Section 9.8(c). As to any such securities of which the Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate that included them, the provisions of the immediately preceding sentence shall not apply, for a period of not more than two (2) years from the date of such acquisition to the extent that such securities included in such estate do not exceed twenty-five percent (25%) of such voting securities or twenty-five percent (25%) of any such class of security. Promptly after the dates of any such default upon the Securities and annually in each succeeding year that the Securities remain in default, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such dates. If any obligor upon the Securities fails to make payment in full of the principal of or the premium, if any, or interest on any of the Securities when and as the same becomes due and payable and such failure continues for thirty (30) days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such thirty (30)-day period, and after such date, notwithstanding the foregoing provisions of 51 this paragraph, all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall be considered as though beneficially owned by the Trustee for the purposes of paragraphs (vi), (vii) and (viii) of this Section 9.8(c); or (x) except under the circumstances described in Section 9.13(b) (i), (iii), (iv), (v) or (vi), the Trustee shall be or shall become a creditor of the obligor. For the purposes of paragraph (i) of this Section 9.8(c), the term "series of securities" or "series" means a series, class or group of Securities issuable under the Indenture pursuant to whose terms Holders of one (1) such series may vote to direct the Trustee, or otherwise take action pursuant to a vote of such Holders, separately from Holders of another such series, provided that "series of securities" or "series" shall not include any series of Securities issuable under the Indenture if all such series rank equally and are wholly unsecured. The specification of percentages in paragraphs (v) to (ix), inclusive, of this Section 9.8(c), shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraph (iii) or (vii) of this Section 9.8(c). For the purposes of paragraphs (vi), (vii), (viii) and (ix) of this Section 9.8(c) only, (A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay monies loaned to a person by one (1) or more banks, trust companies or banking firms, or any certificate of interest or participation in any such note or evidence or indebtedness, (B) an obligation shall be deemed to be "in default" when a default in payment of principal shall have continued for thirty (30) days or more and shall not have been cured, and (C) the Trustee shall not be deemed to be the owner or holder of (1) any security that it holds as collateral security, as trustee or otherwise, for an obligation that is not in default as defined in clause (B) above or (2) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder or (3) any security that it holds as agent for collection, or as custodian, escrow agent or depositary, or in any similar representative capacity. Except as provided in the next preceding paragraph, the word "security" or "securities" as used in this Indenture shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for security, fractional undivided interest in oil, gas or other mineral rights, any put, call, straddle, option or privilege on any security, certificate of deposit, or group or index of securities (including, any interest therein or based on the value thereon) or any put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security," or any certificate or interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to purchase, any of the foregoing. (d) For the purposes of this Section 9.8: (i) The term "underwriter" when used with reference to any obligor on the Securities, means every person who, within one (1) year prior to the time as of which the determination is made, has purchased from such obligor with a view to, or has offered or sold for such obligor in connection with, the distribution of any security of such obligor outstanding at such time, or has participated or has had a direct or 52 indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. (ii) The term "director" means any director of a corporation, or any individual performing similar functions with respect to any organization whether incorporated or unincorporated. (iii) The term "person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof. As used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (iv) The term "voting security" means any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person. (v) The term "obligor" means any obligor upon the Securities within the meaning of the Trust Indenture Act. (vi) The term "executive officer" means the president, every vice president, every trust officer, the cashier, the secretary and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. (e) The percentage of the voting securities and other securities specified in this Section 9.8 shall be calculated in accordance with the following provisions: (i) A specified percentage of the voting securities of the Trustee, any obligor or any other person referred to in this Section 9.8 (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes that the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person. (ii) A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding. (iii) The term "amount," when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares and the number of units if relating to any other kind of security. (iv) The term "outstanding" as used in this Section 9.8 means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: 53 (A) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (B) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (C) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and (D) securities held in escrow if placed in escrow by the issuer thereof; provided, however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof. (v) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders substantially the same rights and privileges; provided, however, that in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes; provided further, however, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. SECTION 9.9. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder that shall be a bank or trust company that complies with the requirements of the Trust Indenture Act, organized and doing business under the laws of the United States of America or of any State thereof, authorized under such laws to exercise corporate trust powers, having (or whose obligations are unconditionally guaranteed by a corporation having) a combined capital and surplus of at least $500,000,000, which bank or trust company is subject to supervision or examination by Federal or state authority and does not provide credit or credit enhancement to either of the Mobile Energy Parties. If such bank or trust company publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.9, the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Article IX. SECTION 9.10. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article IX shall become effective until the acceptance of appointment by the successor Trustee as provided in Section 9.11. (b) The Trustee may resign at any time by giving written notice thereof to the Mobile Energy Parties and to the Holders of Securities in the manner provided in Section 1.6. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Mobile Energy Parties and the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Holder who has been a bona fide holder of a Security for at least six (6) months may, subject to Section 8.9, on behalf of such Holder 54 and all others similarly situated, petition any such court for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Securities, delivered to the Trustee and the Mobile Energy Parties. (d) If at any time: (i) the Trustee shall fail to comply with Section 9.8(a) after written request therefor by any Holder who has been a bona fide holder of a Security for at least six months, or (ii) the Trustee shall cease to be eligible under Section 9.9 and shall fail to resign after written request therefor by any such Holder or the Company, or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company may remove the Trustee by Board Resolution or (B) subject to Section 8.9, any Holder who has been a bona fide holder of a Security for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company shall promptly appoint by Board Resolution a successor Trustee. If no successor Trustee shall have been so appointed by the Company, or by the Holders, and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide holder of a Security for at least six months may, subject to Section 8.9, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Company fails to give such notice within ten (10) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. SECTION 9.11. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Mobile Energy Parties and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee but, on request of either of the Mobile Energy Parties or of the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument prepared by either of the Mobile Energy Parties transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its Lien, if any, provided for in Section 9.7. Upon request of any such successor Trustee, the Mobile Energy Parties shall 55 execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article IX. SECTION 9.12. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such successor Trustee shall be otherwise qualified and eligible under the Trust Indenture Act and under this Article IX, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 9.13. Preferential Collection of Claims Against any Obligor. (a) Subject to Section 9.13(b), if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of any obligor (as defined in Section 9.13(c)) on the Securities within three (3) months prior to a default (as defined in Section 9.13(c)) or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually and the Holders of the Securities: (i) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three (3) month period and valid as against any obligor on the Securities and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (ii) of this Section 9.13(a), or from the exercise of any right of set-off that the Trustee could have exercised if a petition in bankruptcy had been filed by or against any such obligor upon the date of such default; and (ii) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three (3) month period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of any obligor on the Securities and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: (A) to retain for its own account (1) payments made on account of any such claim by any Person (other than an obligor on the Securities) who is liable thereon, (2) the proceeds of the bona fide sale of any such claim by the Trustee to a third person and (3) distributions made in cash, securities or other property in respect of claims filed against such obligor in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law; (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three (3) month period; 56 (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three (3) month period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default (as defined in Section 9.13(c)) would occur within three (3) months; or (D) to receive payment on any claim referred to in paragraph (B) or (C) above, against the release of any property held as security for such claim as provided in paragraph (B) or (C) above (as the case may be), to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D) of the immediately preceding paragraph, property substituted after the beginning of such three (3) month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such clauses is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee and the Holders in such manner that the Trustee and the Holders realize, as a result of payments from such special account and payments of dividends on claims filed against the obligor on the Securities in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from such obligor of the funds and property in such special account and before crediting to the respective claims of the Trustee and the Holders dividends on claims filed against such obligor in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, whether such distribution is made in cash, securities or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceedings for reorganization is pending shall have jurisdiction (1) to apportion between the Trustee and the Holders in accordance with the provisions of this paragraph, the funds and property held in such special account and proceeds thereof, or (2) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee and the Holders with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee that has resigned or been removed after the beginning of such three (3) month period shall be subject to the provisions of this subsection as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three (3) month period, it shall be subject to the provisions of this Section 9(a) if and only if the following 57 conditions exist: (x) the receipt of property or reduction of claim, which would have given rise to the obligation to account if such Trustee had continued as Trustee, occurred after the beginning of such three (3) month period; and (y) such receipt of property or reduction of claim occurred within three (3) months after such resignation or removal. (b) There shall be excluded from the operation of Section 9.13(a) a creditor relationship arising from: (i) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one (1) year or more at the time of acquisition by the Trustee; (ii) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving the property that shall at any time be subject to the Lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advances and of the circumstances surrounding the making thereof is given to the Holders at the time and in the manner provided in this Indenture; (iii) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; (iv) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction (as defined in Section 9.13(c)); (v) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act that is directly or indirectly a creditor of an obligor upon the securities; or (vi) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations that fall within the classification of self-liquidating paper (as defined in Section 9.13(c)). (c) For the purposes of this Section 9.13 only: (i) The term "default" means any failure to make payment in full of the principal of or interest on any of the Securities when and as such principal or interest becomes due and payable; (ii) The term "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven (7) days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (iii) The term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation that is made, drawn, negotiated or incurred by any obligor on the Securities for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and that is secured by documents evidencing title to, possession of or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor 58 relationship with such obligor arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and (iv) The term "obligor" means any obligor upon the Securities within the meaning of the Trust Indenture Act. SECTION 9.14. Maintenance of Offices and Agencies. (a) There shall at all times be maintained an office or agency where Securities may be presented or surrendered for registration of transfer or exchange and for payment of principal, premium, if any, and interest, and where notices and demands to or upon the Trustee in respect of the Securities or this Indenture may be served (i) in the Borough of Manhattan, the City of New York, if, and for so long as, any Outstanding Securities are not issued in the form of one or more global Securities registered in the name of a clearing corporation or clearing agency registered under the Exchange Act, as depositary for such Securities, or a nominee of such clearing corporation or clearing agency and (ii) in such Place of Payment (which may be the office or agency maintained pursuant to 9.14(a)(i), if any), and such additional Places of Payment, if any, as shall be specified for the Securities of any series in the related Series Supplemental Indenture. Except as otherwise provided in the related Series Supplemental Indenture, such office or agency shall be initially at the office of the Trustee specified in the first paragraph of this Indenture. Written notice of the location of each of such other office or agency and of any change of location thereof shall be given by the Company to the Trustee and by the Trustee to the Holders in the manner specified in Section 1.6. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations, surrenders and demands may be made and notices may be served at the Corporate Trust Office. (b) There shall at all times be a Security Registrar and a Paying Agent (which may be the Trustee) appointed by the Company hereunder. In addition, at any time when any Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to the Securities of one (1) or more series that shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issuance, exchange, registration of transfer or partial redemption thereof or pursuant to Section 2.7 or 2.9, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder (it being understood that wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent). If an appointment of an Authenticating Agent with respect to the Securities of one (1) or more series shall be made pursuant to this Section 9.14(b), the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: 59 This Security is one of the Securities referred to in the within-mentioned Indenture. FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By_____________________________ Authenticating Agent By_____________________________ Authorized Signatory Any Authorized Agent shall be a bank or trust company, shall be a Person organized and doing business under the laws of the United States or any state thereof, having a combined capital and surplus of at least $500,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by Federal or state authorities. If such Authorized Agent publishes reports of its condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.14, the combined capital and surplus of such Authorized Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authorized Agent shall cease to be eligible in accordance with the provisions of this Section 9.14, such Authorized Agent shall resign immediately in the manner and with the effect specified in this Section 9.14. The Trustee at its office specified in the first paragraph of this Indenture, is hereby appointed as Paying Agent and Security Registrar hereunder. (c) Any Paying Agent (other than the Trustee) from time to time appointed hereunder shall execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 9.14, that such Paying Agent will: (i) hold all sums held by it for the payment of principal of and premium, if any, and interest on the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (ii) give the Trustee within five (5) days thereafter notice of any default by any obligor upon the Securities in the making of any such payment of principal, premium, if any, or interest; and (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Notwithstanding any other provision of this Indenture, any payment required to be made to or received or held by the Trustee may, to the extent authorized by written instructions of the Trustee, be made to or received or held by a Paying Agent in the Borough of Manhattan, the City of New York, for the account of the Trustee. (d) Any Person into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any Person succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor 60 corporation is otherwise eligible under this Section 9.14, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor Person. (e) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee and the Mobile Energy Parties. The Mobile Energy Parties may, and at the request of the Trustee shall, at any time, terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 9.14 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one (1) or more qualified successor Authorized Agents approved by the Trustee to perform the functions of the Authorized Agent that has resigned or whose agency has been terminated or that shall have ceased to be eligible under this Section 9.14. The Company shall give written notice of any such appointment to all Holders as their names and addresses appear on the Security Register. SECTION 9.15. Co-Trustee or Separate Trustee. (a) If at any time or times it shall be necessary, prudent or desirable in order to conform to any law of any jurisdiction in which property shall be held subject to the Lien of this Indenture or the other Security Documents, or the Trustee shall be advised by counsel satisfactory to it that it is so necessary or prudent in the interest of the Holders, or the Holders of a majority in principal amount of Outstanding Securities shall in writing so request, the Trustee and the Mobile Energy Parties shall execute and deliver all instruments and agreements necessary or proper to constitute another bank or trust company or one (1) or more Persons approved by the Trustee either to act as co-trustee or co-trustees of all or any part of the Indenture Securities Collateral (other than the Shared Collateral) jointly with the Trustee originally named herein or any successor or successors, or to act as separate trustee or trustees of all or any such property. In the event the Mobile Energy Parties shall have not joined in the execution of such instruments and agreements within ten (10) days after the receipt of a written request from the Trustee so to do, or in case an Event of Default with respect to the Securities of a series shall have occurred and be continuing, the Trustee may act under the foregoing provisions of this Section 9.15 without the concurrence of either of the Mobile Energy Parties; and the Mobile Energy Parties hereby appoint the Trustee as agent and attorney to act under the foregoing provisions of this Section 9.15 in either of such contingencies. (b) Every additional trustee hereunder shall, to the extent permitted by law, be appointed and act, and such additional trustee and its successors shall act, subject to the following provisions and conditions, namely: (i) the Securities shall be authenticated and delivered, and all powers, duties, obligations and rights conferred upon the Trustee in respect of the custody, control and management of monies, papers or securities, shall be exercised, solely by the Trustee (or, in the case of authentication and delivery of Securities, by any Authenticating Agent); (ii) all rights, powers, duties and obligations conferred or imposed upon the Trustee or the additional trustee or trustees shall be conferred or imposed upon and exercised or performed by the Trustee or the Trustee and such additional trustee or trustees jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee or trustees; 61 (iii) no power given hereby to, or which it is provided hereby may be exercised by, any such additional trustee or trustees, shall be exercised hereunder by such additional trustee or trustees, except jointly with, or with the consent in writing of, the Trustee, anything herein contained to the contrary notwithstanding; (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (v) the Mobile Energy Parties and the Trustee, at any time, by an instrument in writing, executed by them jointly, may remove any such additional trustee, and in that case, by an instrument in writing executed by them jointly, may appoint a successor or successors to such additional trustee or trustees (as the case may be), anything herein contained to the contrary notwithstanding. In the event that neither of the Mobile Energy Parties shall have joined in the execution of any such instrument within ten (10) days after the receipt of a written request from the Trustee to do so, the Trustee shall have the power to remove any such additional trustee and to appoint a successor additional trustee without the concurrence of the Mobile Energy Parties, each hereby appointing the Trustee its agent and attorney to act for it in such connection in such contingency. In the event that the Trustee alone shall have appointed an additional trustee or trustees or co-trustee or co-trustees as above provided, it may at any time, by an instrument in writing, remove any such additional trustee or co-trustee, the successor to any such trustee or co-trustee so removed to be appointed by the Mobile Energy Parties and the Trustee, or by the Trustee alone, as hereinbefore in this Section 9.15 provided. SECTION 9.16. Taxes. Any United States withholding taxes imposed with respect to payments made to a Holder of a Security shall be the sole responsibility of such Holder and therefore no Holder shall have the right to have any payment to it "grossed-up" for, or paid free of, any such withholding taxes. ARTICLE X. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND MOBILE ENERGY PARTIES SECTION 10.1. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee semiannually, between April 1 and April 15 and between October 1 and October 15, in each year, and at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders, in each case as of a date not more than fifteen (15) days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Security Registrar or is otherwise furnished a copy of the Security Register, no such list need be furnished. SECTION 10.2. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders (i) contained in the most recent list furnished to the Trustee as provided in Section 10.1 and (ii) received by the Trustee in its capacity as Security Registrar, if so acting. The Trustee may destroy any list furnished to it upon receipt of a new list so furnished. (b) If three (3) or more Holders (hereinafter referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of 62 at least six (6) months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication that such applicants propose to transmit, then the Trustee shall, within five (5) Business Days after the receipt of such application, at its election, either: (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 10.2(a), or (ii) inform such applicants as to the approximate number of Holders of Securities whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 10.2(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appears in the information preserved at the time by the Trustee in accordance with Section 10.2(a), a copy of the form of proxy or other communication that is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five (5) days after such tender, the Trustee shall mail to such applicants and file with the SEC, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the SEC, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one (1) or more of such objections, the SEC shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Mobile Energy Parties and the Trustee that none of the Mobile Energy Parties and the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 10.2 (b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing or filing with the SEC any material pursuant to a request made under Section 10.2(b). SECTION 10.3. Reports by Trustee. (a) Within sixty (60) days after May 1 in each year, commencing with May 1, 1996, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, a brief report dated as of such May 1 with respect to (but if no such event has occurred within the one (1) year period ending such May 1, no report need be transmitted): (i) any change to its eligibility under Section 9.9 and its qualifications under Section 9.8; (ii) the creation of or any material change to a relationship specified in paragraphs (i) through (x) of Section 9.8(c). 63 (iii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) that remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities, on the trust estate or any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than one-half of one percent (1/2 of 1%) of the principal amount of the Securities Outstanding on the date of such report; (iv) the amount, interest rate and maturity date of all other indebtedness owing by an obligor on the Securities within the meaning of the Trust Indenture Act to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in Section 9.13(b)(ii), (iii), (iv) or (vi); (v) any change to the property and funds physically in the possession of the Trustee (as such) on the date of such report; (vi) any release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) that the Trustee has not previously reported; (vii)any additional issue of Securities that the Trustee has not previously reported; and (viii) any action taken by the Trustee in the performance of its duties hereunder that it has not previously reported and that in its opinion materially affects the Securities of any series, except action in respect of an Event of Default, notice of which has been or is to be withheld by the Trustee in accordance with Section 9.2. (b) The Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, a brief report with respect to: (i) the release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) unless the fair value of such property is less than ten percent (10%) of the principal amount of Securities Outstanding at the time of such release, or such release and substitution, such report to be transmitted within ninety (90) days after such release or release and substitution; and (ii) the character and amount of any advances (and if the Trustee elects so to state the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to Section 10.3(a) (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities of any series, on property or funds held or collected by it as Trustee, and that it has not previously reported pursuant to this Section 9(b), except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate ten percent (10%) or less of the principal amount of Securities Outstanding at such time, such report to be transmitted within ninety (90) days after such advance. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which 64 the Securities are listed, and also with the SEC. Either of the Mobile Energy Parties will notify the Trustee when the Securities of any series are listed on any stock exchange. SECTION 10.4. Reports by Mobile Energy Parties. Each of the Mobile Energy Parties will: (a) file with the Trustee, within fifteen (15) days after it is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) that either of the Mobile Energy Parties may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act; (b) file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such additional information, documents and reports with respect to compliance by the Mobile Energy Parties with the conditions and covenants of this Indenture, as may be required by such rules and regulations; (c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within thirty (30) days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Mobile Energy Parties pursuant to Section 10.4 (a) and (b) as may be required by rules and regulations prescribed from time to time by the SEC. ARTICLE XI. SUPPLEMENTAL INDENTURES SECTION 11.1. Supplemental Indentures Without Consent of Holders. Without the consent of the Holders of any Securities, the Mobile Energy Parties, in each case when authorized by Board Resolutions, and the Trustee, at any time and from time to time, may enter into one (1) or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: (a) to establish the form and terms of Securities of any series permitted by Sections 2.1 and 2.3 and to provide for the sale, authentication and delivery of additional Securities and refunding Securities and the disposition of the proceeds from the sale thereof, in the manner and to the extent authorized by this Indenture; or (b) to grant to or confer upon the Holders or the Trustee for the benefit of the Holders any additional rights, remedies, powers or authorities or security that may lawfully be granted to or conferred upon the Holders or the Trustee; or (c) to evidence the succession of a new Trustee hereunder or a co-trustee or separate trustee pursuant to Section 9.15; or (d) to add to the covenants of either of the Mobile Energy Parties, for the benefit of the Holders, or to surrender any right or power herein conferred upon such Mobile Energy Party; or (e) to convey, transfer and assign to the Trustee, and to subject to the Lien of this Indenture, additional properties or assets, and to correct or amplify the description of any property at any time subject to the Lien of this Indenture or to assure, convey and confirm unto the 65 Trustee any property subject or required to be subject to the Lien of this Indenture; or (f) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to continue the qualification of this Indenture (including any supplemental indenture) under the Trust Indenture Act, or under any similar Federal statute hereafter enacted, or to permit the qualification of any Securities for sale under the securities laws of any of the States of the United States, and to add to this Indenture such other provisions as may be expressly permitted by the Trust Indenture Act, or under any similar Federal statute hereafter enacted, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (g) to permit or facilitate the issuance of Securities in uncertificated form or to provide for the cessation thereof; or (h) to cure any ambiguity, inconsistency or formal defect or omission, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not be inconsistent with this Indenture, shall not impair the security for the Securities and shall not adversely affect the interest of the Holders of any series; or (i) to secure or maintain the rating for any Securities from any Rating Agency. SECTION 11.2. Supplemental Indenture with Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding, considered as one (1) class, by Act of said Holders delivered to the Mobile Energy Parties and the Trustee, the Mobile Energy Parties, in each case, when authorized by Board Resolutions, may, and the Trustee, subject to Sections 11.3 and 11.4, shall, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture; provided, however, that if there shall be Securities of more than one (1) series Outstanding hereunder and if a proposed supplemental indenture shall directly affect the rights of the Holders of one (1) or more, but less than all, of such series, then the consent only of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one (1) class, shall be required; provided further, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security directly affected thereby: (a) change the Stated Maturity of any Security (or, if the principal thereof is payable in installments, the Stated Maturity of any such installment), or of any payment of interest thereon, or the dates or circumstances of payment of premium, if any, on any Security, or change the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any Security or the premium, if any, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment of principal or interest on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date) or such payment of premium, if any, on or after the date such premium becomes due and payable or change the dates or the amounts of payments to be made through the operation of the Sinking Fund in respect of such Securities, if any; or 66 (b) permit the creation of any Lien prior to or pari passu with the Lien of the Security Documents with respect to any of the Indenture Securities Collateral, or terminate the Lien of the Security Documents on any Indenture Securities Collateral or deprive any Holder of the security afforded by the Lien of the Security Documents, except to the extent expressly permitted by this Indenture or any of the Security Documents; or (c) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or reduce the requirements of Section 13.4 for quorum or voting; or (d) modify any of the provisions of Section 3.2 or Section 8.7 (except to increase the percentage of the principal amount of the Outstanding Securities required to waive past defaults) or of this Section 11.2 (except to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby). A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture that has expressly been included solely for the benefit of one (1) or more particular series of Securities, or that modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. Upon receipt by the Trustee of Board Resolutions of the Mobile Energy Parties and such other documentation as the Trustee may reasonably require and upon the filing with the Trustee of evidence of the Act of such Holders, the Trustee shall join in the execution of such supplemental indenture or other instrument (as the case may be), subject to the provisions of Sections 11.3 and 11.4. It shall not be necessary for any Act of Holders under this Section 11.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 11.3. Documents Affecting Immunity or Indemnity. If in the opinion of either of the Mobile Energy Parties or the Trustee any document required to be executed by it pursuant to the terms of Section 11.2 affects any interest, right, duty, immunity or indemnity in favor of the Mobile Energy Parties or the Trustee under this Indenture, either of the Mobile Energy Parties or the Trustee (as the case may be), may in its discretion decline to execute such document. SECTION 11.4. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any Series Supplemental Indenture or other supplemental indenture permitted by this Article XI or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to section 9.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. SECTION 11.5. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article XI, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 67 SECTION 11.6. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article XI shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 11.7. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article XI may, and if required by the Company shall, bear a notation in form approved by the Company and the Trustee as to any matter provided for in such supplemental indenture; and, in such case, suitable notation may be made upon Outstanding Securities after proper presentation and demand. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company and the Trustee, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE XII. SATISFACTION AND DISCHARGE SECTION 12.1. Satisfaction and Discharge of Securities. (a) Except as otherwise provided with respect to the Securities of any series in the Series Supplemental Indenture relating thereto, the Securities of such series shall, prior to the Stated Maturity thereof (or, if principal is payable in installments, the Stated Maturity of the final installment of principal thereof), on the ninety-first (91st) day after the date of the deposit referred to in paragraph (i) below, be deemed to have been paid for all purposes of this Indenture, and the entire indebtedness of the Mobile Energy Parties in respect thereof shall be deemed to have been satisfied and discharged, upon satisfaction of the following conditions: (i) the Company shall have irrevocably deposited with the Trustee, in trust, specifically pledged as security for and dedicated solely for the benefit of the Holders of Securities of such series (A) monies in an amount that shall be sufficient, (B) U.S. Government Obligations, the payment of interest and principal on which when due, without any regard to reinvestment thereof, will provide monies that shall be sufficient or (C) any combination of clause (A) and (B) above that shall be sufficient, in each case, in the opinion of a firm of independent certified public accountants of recognized national standing expressed in a written certification thereof delivered to the Trustee, to pay when due the principal of and premium, if any, and interest due and to become due on the Securities of such series, whether at Stated Maturity or upon redemption, acceleration or otherwise; (ii) if any such deposit of monies or U.S. Government Obligations shall have been made prior to the Stated Maturity (or, if principal is payable in installments, the Stated Maturity of the final installment of principal) or Redemption Date or Prepayment Date of such Securities, the Company shall have delivered to the Trustee a Company Order stating that such monies shall be held by the Trustee, in trust, as provided in Section 12.3; (iii) if the Company has deposited or caused to be deposited monies or U.S. Government Obligations (or a combination thereof) to pay or discharge the principal of and premium, if any, and interest on the Outstanding Securities of such series to and including a Redemption Date on which all of the Outstanding Securities of such series are eligible for optional redemption and on which all of the Outstanding Securities of such series are to be redeemed, such Redemption Date shall be irrevocably designated by a Board Resolution of the Company delivered to the Trustee on or prior to the date of such deposit of such monies or U.S. Government 68 Obligations, and such Board Resolution shall be accompanied by an irrevocable Company Request that the Trustee give notice of such redemption in the name and at the expense of the Company not less than thirty (30) nor more than sixty (60) days prior to such redemption in accordance with Section 6.4; (iv) the Mobile Energy Parties shall have delivered to the Trustee an Opinion of Counsel to the effect that (A) the trust resulting from such deposit does not constitute an investment company under the Investment Company Act of 1940 and (B) the Holders shall have a perfected security interest under applicable Law in the monies and U.S. Government Obligations so deposited; (v) no Event of Default, or event that with notice, lapse of time or both would become an Event of Default (including by reason of such deposit), in any case arising pursuant to Section 8.1(a) or (n) with respect to the Securities of such series shall have occurred and be continuing on the date of deposit or during the period ending on the ninety-first (91st) day after such date; (vi) the Mobile Energy Parties shall have delivered to the Trustee an Opinion of Counsel to the effect that based upon (A) a change in the applicable Federal income tax law since the date of this Indenture (or a change in the official interpretation thereof) or (B) the receipt by the Company from, or the publishing by, the Internal Revenue Service of a ruling on which such counsel is relying for the opinion contemplated herein, the Holders of Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of the deposit, defeasance and discharge pursuant to this Section 12.1(a) and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; and (vii) there shall have been delivered to the Trustee an Officer's Certificate of each of the Mobile Energy Parties and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the Securities of such series have been complied with; provided, however, that if each of the conditions set forth in this Section 12.1(a) shall have been satisfied with respect to the Outstanding Securities of any series, but the ninety-one (91) day period referenced above shall not have elapsed, the Securities of such series shall nevertheless be deemed to have been paid for all purposes of this Indenture on the date of the deposit referred to in paragraph (i) above if the Company shall have delivered, or caused to be delivered, to the Trustee an opinion of qualified nationally recognized bankruptcy counsel acceptable to the Trustee to the effect that the use by the Trustee of such monies in accordance with this Indenture would not constitute an avoidable preference or be subject to the provisions of Sections 544 and 547, would not be recoverable under Section 550 and would not be subject to the provisions of Section 362(a), in each case of the Bankruptcy Code or similar laws of the United States of America or the State of Alabama, if a Bankruptcy Event in respect of the Person making such deposit were to occur. Upon satisfaction of the aforesaid conditions with respect to the Securities of any series, the Trustee shall, upon receipt of a Company Request, acknowledge in writing that the Securities of such series are deemed to have been paid for all purposes of this Indenture and that the entire indebtedness of the Mobile Energy Parties in respect thereof is deemed to have been satisfied and discharged. In the event that Securities that shall be deemed to have been paid as provided in this Section 12.1(a) do not mature and are not to be redeemed within 69 the sixty (60) day period commencing on the date of the deposit with the Trustee of monies, the Mobile Energy Parties shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Securities, to the Holders of such Securities to the effect that such Securities are deemed to have been paid and the circumstances thereof. Notwithstanding the satisfaction and discharge of any Securities as aforesaid, (i) the rights of Holders of Securities of such series to receive, solely from the trust funds described in paragraph (i) of this Section 12.1(a), payment of the principal of and premium, if any, and interest on the Securities of such series on the Stated Maturity thereof (to and including the Redemption Date, if any, designated pursuant to paragraph (iii) of this Section 12.1(a)) and (ii) the rights and obligations of the Holders of the Securities of such series, the Mobile Energy Parties and the Trustee in respect of the Securities of such series under Sections 2.7, 2.8, 2.9, 2.10, 2.11, 2.12 and 2.15, Article VI (in the case of redemption as contemplated by paragraph (iii) of this Section 12.1(a), to the extent Article VI applies to the redemption to be made on such Redemption Date), Sections 9.3(e) and 9.7 and this Article XII shall survive. (b) If (i) each of the conditions set forth in paragraphs (i), (ii), (iii), (iv) and (v) of Section 12.1(a) shall have been satisfied with respect to the Outstanding Securities of any series, but the conditions set forth in paragraphs (vi) and (vii) thereof are not satisfied and (ii) the Mobile Energy Parties shall have delivered to the Trustee (A) an Opinion of Counsel to the effect that the Holders of such series will not recognize income, gain or loss for Federal income tax purposes as a result of the deposit, defeasance and discharge pursuant to this Section 12.1(b) and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred and (B) an Officer's Certificate of each of the Mobile Energy Parties and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance of the Securities of such series pursuant to this Section 12.1(b) have been complied with, then: (A) with respect to the Securities of such series, the Mobile Energy Parties shall be released from their covenants and other obligations contained in Articles V (other than Section 5.3) and XIV and Section 2.15 of this Indenture and all their obligations under the other Security Documents, and may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant or obligation whether directly or indirectly, by reason of any reference elsewhere herein to any other provision of this Indenture or any other document and any failure to comply with any such covenant shall not constitute an Event of Default with respect to the Securities of such series; (B) the occurrence of any event specified in any of paragraphs (b) through (m), (o) or (p) of Section 8.1 shall not constitute an Event of Default with respect to the Securities of such series; (C) the Securities of such series shall thereafter be deemed not to be "Outstanding" solely for purposes of determining whether or not the Holders of the requisite aggregate principal amount of Securities have concurred in any Act under this Indenture with respect to any covenant or obligation from which the Mobile Energy Parties have been released pursuant to paragraph (A) above, or with respect to any event that shall have ceased to be an Event of Default with respect to Securities of such series pursuant to paragraph (B) above (or the consequences thereof); and (D) the Securities of such series shall cease to be secured by or to be entitled to any benefit under the Security Documents or any other Lien upon any Collateral, including any monies, security or other property 70 held by the Trustee (other than monies and U.S. Obligations deposited with the Trustee pursuant to paragraph (i) of Section 12.1(a) in respect of Securities of such series and interest and other amounts earned and received thereon); provided, however, that the provisions of this Section 12.1(b) shall not be deemed to relieve the Company of its obligations with respect to the payment of the principal of and premium, if any, and interest on the Outstanding Securities of such series. In respect of the foregoing, it is understood and agreed that: (1) satisfaction by the Company of the conditions necessary to achieve the consequences specified in this Section 12.1(b) with respect to any series of Securities shall not be construed to preclude the Company from achieving the consequences specified in Section 12.1(a) with respect to such Securities at a later date upon satisfaction of the conditions set forth in Section 12.1(a); and (2) if at any time the only Outstanding Securities are Securities with respect to which the conditions described in this Section 12.1(b) have been satisfied, the Trustee shall, upon receipt of a Company Request, take the actions specified in the last paragraph of Section 12.2 notwithstanding the failure to satisfy and discharge the Indenture as provided in Section 12.2. (c) For purposes of this Section 12.1, if the Mobile Energy Parties, or either of them, shall incur any Debt and all or any portion of the proceeds thereof are concurrently applied to make a deposit pursuant to paragraph (i) of Section 12.1(a) in respect of any series of Securities (or to acquire U.S. Government Obligations that are concurrently so deposited), whether for purposes of Section 12.1(a) or 12.1(b), then any Event of Default that would arise as a result of such incurrence or as a result of any Lien granted to secure such Debt shall not constitute an Event of Default with respect to the Securities of such series; provided, however, that if, on or before the ninety-first (91st) day after the date of such deposit any of the applicable conditions under Section 12.1(a) or (b), as the case may be, required to be satisfied on such date or during the period ending on such date are not satisfied, then any such Event of Default shall be deemed to have occurred at the time and to the extent such Event of Default would have occurred without regard to this Section 12.1(c). (d) Notwithstanding anything herein to the contrary, if, at any time after a Security would be deemed to have been paid for purposes of this Indenture, and, if such is the case, the Company's indebtedness in respect thereof would be deemed to have been satisfied and discharged, pursuant to this Section 12.1 (without regard to provisions of this paragraph), the Trustee or any Paying Agent, as the case may be, shall be required to return the monies or U.S. Government Obligations, or combination thereof, deposited with it to either of the Mobile Energy Parties or any Affiliate thereof or its representatives under any applicable Federal or state bankruptcy, insolvency or other similar Law such Security shall thereupon be deemed retroactively not to have been paid and any satisfaction and discharge of the Company's indebtedness in respect thereof shall retroactively be deemed not have been effected, and such Security shall be deemed to remain Outstanding. SECTION 12.2. Satisfaction and Discharge of Indenture. This Indenture and the Guaranty shall upon a Company Request and a Mobile Energy Request cease to be of further effect (except as hereinafter expressly provided), and the Trustee, at the expense of the Company, shall execute proper instruments prepared by the Company acknowledging satisfaction and discharge of this Indenture and the Guaranty, when: (a) either 71 (i) all Securities theretofore authenticated and delivered (other than (A) Securities that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.9 and (B) Securities deemed to have been paid in accordance with Section 12.1) have been delivered to the Trustee for cancellation; or (ii) all Securities not theretofore delivered to the Trustee for cancellation shall be deemed to have been paid in accordance with Section 12.1; (b) all other sums due and payable hereunder have been paid; and (c) the Mobile Energy Parties have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Upon satisfaction of the aforesaid conditions, the Trustee shall, upon receipt of a Company Request and Mobile Energy Request, acknowledge in writing the satisfaction and discharge of this Indenture and the Guaranty. Notwithstanding the satisfaction and discharge of this Indenture and the Guaranty as aforesaid, if at the time of such satisfaction and discharge any Securities are deemed to have been paid in accordance with Section 12.1, but have not actually been fully paid, then the rights and obligations of the Mobile Energy Parties and the Trustee in respect of such Securities shall survive to the extent provided in Section 12.1 until all such Securities have actually been repaid in full. Upon satisfaction and discharge of this Indenture and the Guaranty as provided in this Section 12.2, the Trustee shall assign, transfer and turn over to or upon the order of the Company, any and all monies, securities and other property then held by the Trustee for the benefit of the Holders other than monies and U.S. Government Obligations deposited with the Trustee pursuant to Section 12.1 and interest and other amounts earned or received thereon. SECTION 12.3. Application of Trust Money. The monies deposited with the Trustee pursuant to Section 12.1 and all monies received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 12.1 shall not be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest on the Securities or portions of principal amount thereof in respect of which such deposit was made. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations deposited pursuant to Section 12.1 or the interest and principal received in respect of such obligations other than any such tax, fee or other charge payable by or on behalf of Holders. ARTICLE XIII. MEETINGS OF HOLDERS OF SECURITIES; ACTION WITHOUT MEETING SECTION 13.1. Purposes for Which Meetings May Be Called. A meeting of Holders of Securities of one (1) or more, or all, series, may be called at any time and from time to time pursuant to this Article XIII to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of such series. 72 SECTION 13.2. Call, Notice and Place of Meetings. (a) The Trustee may at any time call a meeting of Holders of one (1) or more, or all, series of Securities for any purposes specified in Section 13.1, to be held at such time and at such place in the Borough of Manhattan, The City of New York, or at such other place, as the Trustee shall determine. Notice of every such meeting, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 1.6, not less than twenty (20) nor more than sixty (60) days prior to the date fixed for the meeting. (b) If the Trustee shall have been requested to call a meeting of the Holders of Securities of one (1) or more, or all, series, by the Company, by Mobile Energy or by the Holders of ten percent (10%) in aggregate principal amount of the Outstanding Securities of such series (or, in the case of a meeting of the Holders of the Securities of all series, ten percent (10%) in aggregate principal amount of the Outstanding Securities of all series, considered as one (1) class), by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first mailing of the notice of such meeting within twenty-one (21) days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Mobile Energy Parties or such Holders (as the case may be) may determine the time and the place in the Borough of Manhattan, the City of New York, or in such other place as the Mobile Energy Parties or such Holders (as the case may be) shall determine, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in Section 13.2(a). (c) Any meeting of Holders of Securities of one (1) or more, or all, series shall be valid without notice if the Holders of all Outstanding Securities of such series are present in person or by proxy and the Trustee is present, or if notice is waived in writing before or after the meeting by the Holders of all Outstanding Securities of such series, or by such of them as are not present at the meeting in person or by proxy. SECTION 13.3. Persons Entitled to Vote at Meetings. To be entitled to vote at any meeting of Holders of Securities of one (1) or more, or all, series, a Person shall be (a) a Holder of one (1) or more Outstanding Securities of such series or (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one (1) or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to attend any meeting shall be the Holders described above and any proxies of such Holders and their respective counsel, any representatives of the Trustee and its counsel and any representatives of the Mobile Energy Parties and their respective counsels. SECTION 13.4. Quorum; Action. The Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of the series with respect to which a meeting shall have been called as hereinbefore provided, considered as one (1) class, shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting that this Indenture expressly provides may be taken by the Holders of a specified percentage that is less than a majority in principal amount of the Outstanding Securities of such series, considered as one (1) class, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series, considered as one (1) class, shall constitute a quorum. In the absence of a quorum, the meeting may be adjourned for a period of not less than ten (10) days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than ten (10) days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Except as provided in Section 13.5(e), notice of the reconvening of any adjourned meeting shall be given as provided in Section 13.2(a), except that such notice need be given only 73 once not less than five (5) days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series that shall constitute a quorum. Except as limited by Section 11.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Securities of the series with respect to which such meeting shall have been called, considered as one (1) class; provided, however, that, except as so limited, any resolution with respect to any action that this Indenture expressly provides may be taken by the Holders of a specified percentage that is less than a majority in principal amount of the Outstanding Securities of such series, considered as one (1) class, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of such series, considered as one (1) class. Any resolution passed or decision taken at any meeting of Holders of Securities duly held in accordance with this Section 13.4 shall be binding on all the Holders of Securities of the series with respect to which such meeting shall have been held, whether or not present or represented at the meeting. SECTION 13.5. Attendance at Meetings; Determination of Voting Rights; Conduct and Adjournment of Meetings. (a) Attendance at meetings of Holders of Securities may be in person or by proxy, and, to the extent permitted by law, any such proxy shall remain in effect and be binding upon any future Holder of the Securities with respect to which it was given, unless and until specifically revoked by the Holder or future Holder of such Securities before being voted. (b) Notwithstanding any other provision of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard to proof of the holding of such Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 1.4 and the appointment of any proxy shall be proved in the manner specified in Section 1.4. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 1.4 or other proof. (c) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by either of the Mobile Energy Parties or by Holders of Securities as provided in Section 13.2(b), in which case such Mobile Energy Party or the Holders of Securities of the series calling the meeting (as the case may be) shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series represented at the meeting, considered as one (1) class. (d) At any meeting each Holder of an Outstanding Security of any series or such Holder's proxy shall be entitled to one (1) vote for each $1,000 original principal amount of Securities of such series held or represented by such Holder, and each Holder of any such Security or such Holder's proxy shall be entitled to divide the votes carried by such Security, casting some for and some against a particular action, as such Holder sees fit; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not 74 Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security or proxy. (e) Any meeting duly called pursuant to Section 13.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series represented at the meeting, considered as one (1) class; and the meeting may be held as so adjourned without further notice. SECTION 13.6. Counting Votes and Recording Action of Meetings. The vote upon any resolution submitted to any meeting of Holders of Securities shall be by written ballots on which shall be subscribed the signatures of the Holders of Outstanding Securities or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities, of the series with respect to which the meeting shall have been called, held or represented by them. The permanent chairman of the meeting shall appoint two (2) inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in quadruplicate of all votes cast at the meeting. A record, at least in quadruplicate, of the proceedings of each meeting of Holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one (1) or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that such notice was given as provided in Section 13.2 and, if applicable, Section 13.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one (1) such copy shall be delivered to each of the Mobile Energy Parties, and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 13.7. Action Without Meeting. In lieu of the vote of Holders of Securities at a meeting as hereinbefore contemplated in this Article XIII, any request, demand, authorization, direction, notice, consent, waiver or other action may be made, given or taken by Holders of Securities by written instruments as provided in Section 1.4. ARTICLE XIV. GUARANTY SECTION 14.1. Guaranty of Payment and Performance. Mobile Energy hereby (a) guarantees to the Trustee for its own benefit and the benefit of the Holders from time to time the due and punctual payment, observance and performance of all of the Guaranteed Obligations in accordance with their respective terms and when and as due (whether at maturity, by reason of acceleration or otherwise), or deemed to be due pursuant to Section 14.2, and (b) agrees so to pay, observe or perform the same when so due, or deemed to be due, upon demand. SECTION 14.2. Continuance and Acceleration of Guaranteed Obligations upon Certain Events. If (a) any Event of Default described in Section 8.1(n) shall have occurred and be continuing, (b) any injunction, stay or the like that enjoins any acceleration, or demand for the payment, observance or performance, of any Guaranteed Obligations that would otherwise be required or permitted under the Security Documents shall become effective or (c) any Guaranteed Obligations shall be or be determined to be or become discharged, disallowed, invalid, illegal, void or otherwise unenforceable (whether by operation of any present or future law or by order of any Governmental Authority) against the Company then 75 (i) such Guaranteed Obligations shall, for all purposes of this Indenture, be deemed (A) in the case of clause (c) above, to continue to be outstanding and in full force and effect notwithstanding the unenforceability thereof against the Company, and (B) if such is not already the case, to have thereupon become immediately due and payable and to have commenced bearing interest at the rate equal to the then highest yield on any of the Outstanding Securities plus two percent (2%) and (ii) the Trustee may, with respect to such Guaranteed Obligations, exercise all of the rights and remedies hereunder that would be available to it during an Event of Default. SECTION 14.3. Recovered Payments. The Guaranteed Obligations shall be deemed not to have been paid, observed or performed, and Mobile Energy's obligations under this Guaranty in respect thereof shall continue and not be discharged, to the extent that any payment, observance or performance thereof by the Company or any other guarantor, or out of the proceeds of any collateral, is recovered from or paid over by or for the account of the Trustee for any reason, including as a preference or fraudulent transfer or by virtue of any subordination (whether present or future or contractual or otherwise) of the Guaranteed Obligations, whether such recovery or payment over is effected by any judgment, decree or order of any Governmental Authority, by any plan of reorganization or by settlement or compromise by the Trustee (whether or not consented to by either of the Mobile Energy Parties or any other guarantor) of any claim for any such recovery or payment over. Mobile Energy hereby expressly waives the benefit of any applicable statute of limitations and agrees that it shall be liable hereunder with respect to any Guaranteed Obligation whenever such a recovery or payment over thereof occurs. SECTION 14.4. Evidence of Guaranteed Obligations. The records of the Trustee shall be conclusive evidence (absent manifest error) of the Guaranteed Obligations and of all payments, observances and performances in respect thereof. SECTION 14.5. Binding Nature of Certain Adjudications. Mobile Energy shall be conclusively bound by the adjudication in any action or proceeding, legal or otherwise, involving any controversy arising under, in connection with, or in any way related to, any of the Guaranteed Obligations, and by a judgment, award or decree entered therein, if Mobile Energy shall have had the right, or shall have been given the opportunity, to participate in such action or proceeding and shall have been given notice of such action or proceeding in time to exercise such right or avail itself of such opportunity. SECTION 14.6. Nature of Mobile Energy's Obligations. Mobile Energy's obligations hereunder (a) are absolute and unconditional, (b) are unlimited in amount, (c) constitute a guaranty of payment and performance and not a guaranty of collection, (d) are as primary obligor and not as a surety only, (e) shall be a continuing guaranty of all present and future Guaranteed Obligations and all promissory notes and other documentation given in extension or renewal or substitution for any of the Guaranteed Obligations and (f) shall be irrevocable. SECTION 14.7. No Release of Mobile Energy. The obligations of Mobile Energy under this Guaranty shall not be reduced, limited or terminated, nor shall Mobile Energy be discharged from any thereof, for any reason whatsoever (other than, subject to Sections 14.3 and 14.12, the payment, observance and performance of the Guaranteed Obligations), including (and whether or not the same shall have occurred or failed to occur once or more than once and whether or not Mobile Energy shall have received notice thereof): (a) (i) any increase in the principal amount of, or interest rate applicable to, (ii) any extension of the time of payment, observance or performance of, (iii) any other amendment or modification of any of the other terms and provisions of, (iv) any release, composition or settlement (whether by way of acceptance of a plan of reorganization or otherwise) of, (v) any subordination (whether present or future or contractual or otherwise) of or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, in each case the Guaranteed 76 Obligations; (b) (i) any failure to obtain any release, composition or settlement of, (ii) any amendment or modification of any of the terms and provisions of, (iii) any subordination of or (iv) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, in each case any guaranties of the Guaranteed Obligations; (c) (i) any failure to obtain any release of, (ii) any failure to protect or preserve, (iii) any release, compromise, settlement or extension of the time of payment of any obligations constituting, (iv) any failure to perfect or maintain the perfection or priority of any Lien upon, (v) any subordination of any Lien upon or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of any Lien or intended Lien upon, in each case any collateral now or hereafter securing the Guaranteed Obligations or any other guaranties thereof; (d) any termination of or change in any relationship between Mobile Energy and the Company, including any such termination or change resulting from a change in the ownership of Mobile Energy or the Company or from the cessation of any commercial relationship between Mobile Energy and the Company; (e) any exercise of, or any election not or failure to exercise, delay in the exercise of, waiver of, or forbearance or other indulgence with respect to, any right, remedy or power available to the Trustee, including (i) any election not or failure to exercise any right of set off, recoupment or counterclaim, (ii) any election of remedies effected by the Trustee, including the foreclosure upon any real estate constituting collateral, whether or not such election affects the right to obtain a deficiency judgment and (iii) any election by the Trustee in any proceeding under the Bankruptcy Code of the application of Section 1111(b)(2) of such Code; and (f) any other act or failure to act or any other event or circumstance that (i) varies the risk of Mobile Energy under this Guaranty or (ii) but for the provisions hereof, would, as a matter of statute or rule of law or equity, operate to reduce, limit or terminate the obligations of Mobile Energy hereunder or discharge Mobile Energy from any thereof. SECTION 14.8. Certain Waivers. Mobile Energy waives (a) any requirement, and any right to require, that any right or power be exercised or any action be taken against the Company, any other guarantor or any collateral for the Guaranteed Obligations or any guaranty thereof, (b) all defenses to, and all set offs, counterclaims and claims of recoupment against, the Guaranteed Obligations that may at any time be available to the Company or any guarantor, (c) (i) notice of acceptance of and intention to rely on this Guaranty, (ii) notice of the issuance of any Securities under this Indenture and of the incurrence or renewal of any other Guaranteed Obligations, (iii) notice of any of the matters referred to in Section 14.7 and (iv) all other notices that may be required by Law or otherwise to preserve any rights against Mobile Energy under this Guaranty, including any notice of default, demand, dishonor, presentment and protest, (d) diligence, (e) any defense based upon, arising out of or in any way related to (i) any claim that any sale or other disposition of any collateral for the Guaranteed Obligations or any guaranty thereof was not conducted in a commercially reasonable fashion or that a public sale, should the Trustee or the Collateral Agent (as the case may be), have elected to so proceed, was, in and of itself, not a commercially reasonable method of sale, (ii) any claim that any election of remedies by the Trustee or the Collateral Agent (as the case may be), including the exercise by the Trustee or the Collateral Agent (as the case may be) of any rights against any collateral, impaired, reduced, released or otherwise extinguished any right that Mobile Energy might otherwise have had against the Company or any other guarantor or against any collateral, including any right of subrogation, exoneration, reimbursement or contribution or right to obtain a deficiency judgment, (iii) any claim based upon, arising out of or in any way related to any of the matters referred to in Section 14.7 and (iv) any claim that this Guaranty should be strictly construed against the Trustee and (f) ALL OTHER DEFENSES UNDER APPLICABLE LAW THAT WOULD, BUT FOR THIS CLAUSE (f), BE AVAILABLE TO MOBILE ENERGY AS A DEFENSE AGAINST OR A REDUCTION OR LIMITATION OF ITS OBLIGATIONS HEREUNDER. 77 SECTION 14.9. Independent Credit Evaluation. Mobile Energy has independently, and without reliance on any information supplied by the Trustee, taken, and will continue to take, whatever steps it deems necessary to evaluate the financial condition and affairs of the Company, and the Trustee shall have no duty to advise Mobile Energy of information at any time known to it regarding such financial condition or affairs. SECTION 14.10. Subordination of Rights Against Company, Other Guarantors and Collateral. All rights that Mobile Energy may at any time have against the Company, any other guarantor or any collateral for the Guaranteed Obligations or any guaranty thereof (including rights of subrogation, exoneration, reimbursement and contribution and whether arising under Law or otherwise), and all obligations that the Company or any other guarantor may at any time have to Mobile Energy, Mobile Energy's obligations hereunder or any payment made are hereby expressly subordinated to the prior payment, observance and performance in full of the Guaranteed Obligations and any other such guaranty. Mobile Energy shall not enforce any of the rights, or attempt to obtain payment or performance of any of the obligations, subordinated pursuant to this Section 14.10 until the Guaranteed Obligations have been paid, observed and performed in full, except that such prohibition shall not apply to routine acts, such as the giving of notices and the filing of continuation statements, necessary to preserve any such rights. If any amount shall be paid to or recovered by Mobile Energy (whether directly or by way of set off, recoupment or counterclaim) on account of any right or obligation subordinated pursuant to this Section 14.10, such amount shall be held in trust by Mobile Energy for the benefit of the Trustee, not commingled with any of Mobile Energy's other funds and forthwith paid over to the Trustee, in the exact form received, together with any necessary endorsements, to be applied and credited against, or held as security for, the Guaranteed Obligations and the obligations of Mobile Energy hereunder. Notwithstanding the foregoing, nothing herein shall restrict or otherwise limit the ability of Mobile Energy to receive monies distributed to it by the Collateral Agent pursuant to Section 3.11 of the Intercreditor Agreement, which monies need not be held in trust by Mobile Energy. SECTION 14.11. Payments by Mobile Energy. (a) All payments due to the Trustee hereunder shall be made to the Trustee at the Corporate Trust Office or at such other address the Trustee may designate by notice to Mobile Energy. A payment shall not be deemed to have been made on any day unless such payment has been received by the Trustee at the required place of payment, in lawful money of the United States of America in funds immediately available to the Trustee. (b) All payments due the Trustee under this Guaranty, and all of the other terms, conditions, covenants and agreements to be observed and performed by Mobile Energy under this Guaranty, shall be made, observed or performed by Mobile Energy without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim (whether, in any case, in respect of an obligation owed by the Trustee to Mobile Energy, the Company or any other guarantor and, in the case of a counterclaim, whether sounding in tort, contract or otherwise) or tax. (c) Mobile Energy hereby authorizes the Trustee, if and to the extent any amount payable by Mobile Energy under this Guaranty is not otherwise paid when due, to charge such amount against any or all of the accounts of Mobile Energy with the Trustee or any of its Affiliates (whether maintained at a branch or office located within or without the United States), with Mobile Energy remaining liable for any deficiency. (d) Whenever any payment to the Trustee under this Article XIV would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day. If the date any payment hereunder is due is extended (whether by operation of this Indenture, Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. 78 SECTION 14.12. Continuance of Guaranty; Survival. The obligations of Mobile Energy and the rights of the Trustee under this Article XIV shall continue in full force and effect until the payment, observance and performance in full of the Guaranteed Obligations. SECTION 14.13. Assignments and Participations. Assignments. Mobile Energy may not assign any of its rights or obligations under this Guaranty without the prior written consent of the Trustee, and no assignment of any such obligation shall release Mobile Energy therefrom unless the Trustee shall have consented to such release in a writing specifically referring to the obligation from which Mobile Energy is to be released. SECTION 14.14. Benefit and Enforcement. This Guaranty is given for the benefit of the Trustee and, subject to the terms and conditions set forth herein, the Holders from time to time of the Securities, all of whom shall be entitled in the same manner as set forth herein to enforce performance and observance of this Guaranty. ARTICLE XV. LIMITED RECOURSE Satisfaction of the obligations of the Mobile Energy Parties (including pursuant to the Guaranty) under this Indenture for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be had solely from the assets of the Mobile Energy Parties. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in Article XIV) or of the stockholders of Mobile Energy, other than their respective interests in the Indenture Securities Collateral, if any, (b) any Member (other than Mobile Energy as provided in Article XIV) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern) and in the event of any non-performance by either of the Mobile Energy Parties of its obligation to pay the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, no judgment for any deficiency upon the obligations of either of the Mobile Energy Parties under this Indenture, for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be obtainable by the Holders, the Trustee or the Collateral Agent against any Member (other than Mobile Energy as provided in Article XIV) or any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern). Notwithstanding anything in this Article XV to the contrary, (i) satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company, (ii) nothing contained herein or in the Securities shall limit or otherwise prejudice in any way the right of the Trustee, the Collateral Agent or any Holder to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party or to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Indenture Securities Collateral granted hereunder or under the Security Documents and (iii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud 79 or wilful misrepresentations, including those contained in Officer's Certificates issued from time to time. 80 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: Name: Christopher J. Kysar Title:...Vice President MOBILE ENERGY SERVICES HOLDINGS, INC. By: Name: Christopher J. Kysar Title:...Vice President FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By: Name: Doug Miher Title:...Assistant Vice President [Indenture] Schedule 5.2 INSURANCE POLICIES General Conditions: (a) All policies shall waive the rights of subrogation against the Collateral Agent. (b) All property and liability policies shall name the Collateral Agent as an additional insured. All policies protecting real and personal property or loss of income shall include a Lenders Loss Payable provision for the benefit of the Collateral Agent. (c) All policies shall be endorsed to provide a minimum of thirty (30) days notice of cancellation, nonrenewal, or material change (restricting coverage) (ten (10) days in the case of cancellation for non-payment of premiums) to the Collateral Agent and the Company. (d) Where commercially available, all policies shall stipulate by endorsement or equivalent policy language that the additional insured status of the Collateral Agent places no responsibility on the Collateral Agent for the payment of policy premiums, nor does the action or failure to take action by any other insured or additional insured invalidate coverages for the Collateral Agent under said policy. (e) A severability of interest clause or equivalent cross liability endorsement shall be included in each policy. (f) All policies shall be primary as respects coverage provided for the Energy Complex and the Site. (g) All policies shall be provided through insurance carriers rated A-IX or better by the Best's Insurance Guide (except for policies underwritten by Lloyd's of London, AEGIS and approved English companies) or other insurance companies reasonably acceptable to the Collateral Agent, in each case, which are authorized to do business in the State of Alabama. (h) All policies shall stipulate by endorsement or equivalent policy language that following a Wind-Up Event, the Collateral Agent shall have the right to make all claims made under said policy. (i) All policies (other than liability policies) shall stipulate by endorsement or equivalent policy language that following a Wind-Up Event, said policy can be assigned to the Collateral Agent. The following coverages shall be maintained in effect at all times until all obligations of the Mobile Energy Parties pursuant to this Indenture, the Securities, the Working Capital Facility, the Guaranty and the other Security Documents have been fully discharged: Required Insurance: (a) Workers' Compensation Insurance. Workers' compensation insurance, as required by state and Federal laws (including United States Longshoremen and Harbor Workers and Maritime Liability (Jones Act) Insurance), including employer's liability insurance for all employees of the Energy Complex in the minimum amount of $1,000,000 per occurrence and in the aggregate where applicable; provided; however, that the Company may satisfy such obligations, in whole or in part, through the self-insurance of the Operator against workers' compensation claims. (b) Comprehensive General Liability Insurance. Comprehensive general liability insurance against claims for personal injury (including bodily injury and death), and property damage. Such insurance shall provide coverage for Schedule 5.2-1 products-completed operations, premises/operations, blanket contractual, explosion, collapse and underground coverage, broad form property damage and personal injury insurance coverage to protect the Collateral Agent against claims arising out of operations performed by the Company and its subcontractors, with a $1,000,000 minimum limit per occurrence for combined bodily injury and property damage and with an aggregate of $2,000,000. The general liability insurance shall, at a minimum, be provided under a 1986 ISO Commercial General Liability form of policy or equivalent policy and shall be written on an occurrence basis, or the AEGIS claim-first-made policy form. (c) Comprehensive Automobile Liability. Comprehensive automobile liability insurance against claims of personal injury (including bodily injury and death) and property damage, including loss of use thereof, covering all owned, leased, non-owned and hired vehicles used by the Company in the operation of the Energy Complex, with a $1,000,000 minimum limit per occurrence for bodily injury and property damage and a $2,000,000 minimum limit per occurrence for combined bodily injury and property damage. (d) Aircraft and Watercraft Liability. Aircraft Liability insurance (if applicable), including Passengers and Crew Liability, and Watercraft Liability insurance (if applicable), each having a $25,000,000 minimum limit per occurrence for property damage and bodily injury, covering all aircraft or watercraft that is owned, leased or chartered by the Company or any of its subcontractors. If the performance of any obligations by a subcontractor in connection with services performed at the Energy Complex requires the use of any aircraft or watercraft that is owned, leased or chartered by such subcontractor or any of its subcontractors, such subcontractor shall obtain Aircraft Liability and Watercraft Liability insurance with a $25,000,000 minimum limit per occurrence for property damage and bodily injury. If a helicopter is used to lift materials or equipment, any Aircraft Liability insurance required hereunder shall not contain any exclusion of coverage for "slung-cargo." (e) Umbrella Liability or Excess Insurance. Excess Liability insurance on an "occurrence" basis, or the AEGIS claims-first-made policy form pursuant to an "Umbrella" policy covering claims in excess of and following the terms of the underlying insurance as set forth in (a), (b) and (c) with a $24,000,000 minimum limit per occurrence and a $24,000,000 annual aggregate limit; provided that, in the event that claims under such aggregate liability coverage would reduce the coverage to an amount less than or equal to $50,000,000, the Company shall provide prompt written notice thereof to the Collateral Agent and promptly after such claims are made, restore the coverage under such policy to the coverage amount maintained prior to the assertion of such claims. (f) Property Damage Insurance. Property Damage insurance on an "all risk" replacement cost basis including coverage against damage or loss caused by earth movement, flood and windstorm and providing (i) coverage for the Energy Complex in a minimum aggregate amount of the lesser of (A) the full replacement value of the Energy Complex and (B) the outstanding amount of Senior Debt (including the unutilized Working Capital Facility Commitment) of the Company (for which purpose there shall be included all steam, gas and electrical transmission lines along with related equipment for which the Company has an insurable interest) and (ii) Transit coverage, including Ocean marine coverage (if applicable), with sub-limits sufficient to insure the full replacement value of all property or equipment removed from the Energy Complex, provided that, for the perils of flood, earth movement, increased cost of construction, debris removal and loss to undamaged property, any sub-limit shall be not less than $100,000,000. For purposes of this paragraph (f), "replacement cost," including any improvements and equipment and supplies, shall be without deduction for physical depreciation. All such policies may have deductibles of not greater than $1,000,000, except for earth movement, flood and windstorm, which will have the lowest deductible available on commercially reasonable terms in the insurance marketplace. Such insurance shall include and "Agreed Amount" Clause or Waiver of Co-Insurance and shall provide for increased cost of construction, debris removal, and loss to undamaged property as the result of enforcement of building laws or ordinances. Schedule 5.2-2 (g) Boiler and Machinery Insurance. Boiler and Machinery insurance coverage to be written on a "comprehensive form" basis for all insurable objects including all production machinery, pressure vessels, electrical turbines and equipment, motors, air tanks, boilers, machinery, pressure piping or any other similar objects located on or adjacent to the Site in a minimum aggregate amount equal to the maximum foreseeable loss and expediting expenses in the amount of $2,500,000 (with losses to be adjusted on a replacement value) (subject to the limit set forth in paragraph (f) above). All such policies may have deductibles of not greater than $1,000,000. (h) Business Interruption and Extra Expense Insurance. Business Interruption insurance covering as a minimum amount all fixed expenses and debt service for a period of twelve (12) months arising from any loss insured by (f) and (g). The maximum deductible shall be no greater than thirty (30) days. There shall be either an Agreed Amount Clause or Waiver of Coinsurance. (i) Subcontractor Insurance. To the extent required by the Master Operating Agreement or any Energy Services Agreement, the Company shall require each of its subcontractors expected to perform work with a value in excess of $5,000,000 (including the Operator) to obtain, from an insurance company meeting the qualifications set forth above, on or before the effective date of any agreement between the Company and such subcontractor with respect to the Energy Complex, each of the insurance coverages set forth in paragraphs (a), (b) and (c). Each subcontractor shall furnish to the Company, and the Company shall furnish to the Collateral Agent, the Trustee and the Working Capital Facility Provider, a certificate of insurance verifying that the insurance to be provided as required hereunder has been secured. Schedule 5.2-3 Exhibit A FORM OF DEBT SERVICE RESERVE ACCOUNT SOUTHERN GUARANTY AGREEMENT Dated as of [_____] In consideration of the execution and delivery by First Union National Bank of Georgia, as trustee under the Indenture referred to below for the holders of the Indenture Securities referred to therein, of the Trust Indenture dated as of August 1, 1995 among Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), Mobile Energy Services Holdings, Inc., an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as such trustee (the "Guaranteed Party") (such Trust Indenture, as it may be amended, restated, supplemented, waived or otherwise modified, hereinafter the "Indenture") and of the rights of the Company under Section 4.6(a) thereof, and acknowledging that such execution and delivery and such rights of the Company constitute indirect benefit to the Guarantor at least equal to the Available Amount (as defined herein), The Southern Company, a Delaware corporation (the "Guarantor"), hereby agrees with the Guaranteed Party as follows (with terms not defined herein having the meanings ascribed to them in the Indenture): 15.1. Guaranty. The Guarantor hereby (a) guarantees to the Guaranteed Party the due and punctual payment, observance and performance of all indebtedness, liabilities, obligations, covenants and duties of, and all terms and conditions to be observed by, the Company due or owing under Section 4.6(c) of the Indenture, in each case (i) whether due or owing to, or in favor or for the benefit of, the Guaranteed Party for its own benefit and the benefit of the Holders from time to time and any other Person that becomes the Guaranteed Party by reason of any succession or assignment at any time thereafter and (ii) whether or not an allowable claim against the Company under the Bankruptcy Code, or otherwise enforceable against the Company, and including, in any event, interest accruing as provided in clause (D) below after the filing by or against the Company of a petition under the Bankruptcy Code (collectively, the "Guaranteed Obligations"), in accordance with their respective terms and when and as due, without regard to any counterclaim, set-off, deduction or defense of any kind that the Company may have or assert and (b) agrees so to pay, observe or perform the same when so due, or deemed to be due, upon demand; provided, however, that the amount of the payment obligations of the Guarantor in respect of the Guaranteed Obligations hereunder shall not at any time exceed the Available Amount. For purposes of this Agreement, "Available Amount" means (A) $[_____] minus (B) the aggregate amount of any monies (including interest) paid in respect of each call honored by the Guarantor under this Agreement minus (C) the amount of any other Reserve Account Security or any monies not then constituting Revenues deposited into the Debt Service Reserve Account in which this Agreement is deposited to the extent that, in the case of such Reserve Account Security, monies are not withdrawn from such Debt Service Reserve Account on account of the deposit of such Reserve Account Security plus (D) the amount of any interest from (and including) the Business Day following the date of any written demand on the Guarantor for payment of any of the Guaranteed Obligations to (but excluding) the date of such payment at the rate of interest equal to the then highest yield on any of the Outstanding Indenture Securities plus two percent (2%) (provided that no such interest shall be payable with respect to any amounts paid on the Business Day following the date of any such written demand)[; provided, however, that in no event shall the Available Amount exceed [_____] plus interest as provided in clause (D) above]. Upon the written request of the Guarantor, the Guaranteed Party shall provide the Guarantor with a statement of the Available Amount and a calculation thereof. Upon the written request of the Guaranteed Party, the Guarantor shall confirm such statement and calculation. 15.2. Guaranty Absolute. (a) The Guarantor guarantees that the Guaranteed Obligations will be paid and performed strictly in accordance with the Exhibit A-1 terms of the Indenture, regardless of any law or regulation now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Guaranteed Party with respect thereto. The obligations of the Guarantor under this Agreement are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Agreement, irrespective of whether or not any action is brought against the Company or whether or not the Company is joined in any such action or actions. The obligations of the Guarantor under this Agreement shall be irrevocable, absolute and unconditional, shall constitute a guaranty of payment and performance and not a guaranty of collection, shall be as primary obligor and not as surety only and shall be irrevocable, in each case irrespective of: (i) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of, or any consent to departure from, the Indenture, or any discharge, disallowance, invalidity, voidness or other unenforceability of the Guaranteed Obligations; (ii) the existence of any claim, set-off, defense or other right that the Company or the Guarantor may have at any time against the Guaranteed Party, whether in connection with this Agreement, the Indenture or any unrelated transaction; (iii) any change, restructuring or termination of the corporate structure or existence of the Company or the partial or total substitution of any other Person in the place of the Company under the Indenture whether by assignment, foreclosure or otherwise; or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Guaranteed Party upon the insolvency, bankruptcy or reorganization of the Company or the Guarantor or otherwise, all as though such payment had not been made. (b) This Agreement shall not confer upon the Guaranteed Party or any other Person any right of payment or enforcement with respect to the Company under the Indenture that is in any manner broader or more expansive than such Person's rights of payment and enforcement, if any, with respect to the Company under the Indenture. 15.3. Waiver. The Guarantor hereby waives promptness, diligence, presentment, demand of payment, notice of acceptance, notice of the incurrence or renewal of any of the Guaranteed Obligations and any other notice with respect to any of the Guaranteed Obligations and this Agreement and any requirement that the Guaranteed Party exhaust any right or take any action against the Company or any other Person or entity. 15.4. Subrogation. Notwithstanding any payment or payments made by the Guarantor hereunder, the Guarantor hereby irrevocably waives any and all rights of subrogation to the rights of the Guaranteed Party against the Company and any and all rights of reimbursement, assignment, indemnification or implied contract or any similar rights against the Company or against any endorser or other guarantor of all or any part of the Guaranteed Obligations until such time as the Guaranteed Obligations guaranteed hereby have been paid, performed and observed in full. If, notwithstanding the foregoing, any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of such Guaranteed Obligations shall not have been paid in full, such amount shall be held by the Guarantor in trust for the Guaranteed Party, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Guaranteed Party in the exact form received by the Guarantor, to be applied against such Guaranteed Obligations, whether matured or unmatured, in such order as the Guaranteed Party may determine. 15.5.Representations and Warranties.The Guarantor hereby represents and warrants as follows: (a) The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. (b) The execution and delivery by the Guarantor of this Agreement, and the performance by the Guarantor of its obligations hereunder (i) are Exhibit A-2 within the Guarantor's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene its articles of incorporation or bylaws or any law or regulation applicable to or binding on the Guarantor or any of its properties and (iv) do not require the consent or approval of any Person that has not already been obtained. (c) This Agreement constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 15.6. Continuing Guaranty; Assignment. This Agreement is a continuing guaranty and shall (a) apply to all Guaranteed Obligations whenever arising pursuant to the terms herein, (b) be binding upon the Guarantor and its successors and permitted assigns and (c) inure to the benefit of, and be enforceable by, the Guaranteed Party and its successors and permitted assigns. The Guarantor may not assign its obligations under this Agreement without the prior written consent of the Guaranteed Party, which consent may be withheld in the Guaranteed Party's sole discretion. The Guaranteed Party may not assign its rights under this Agreement without the prior written consent of the Guarantor, which consent may be withheld in the Guarantor's sole discretion. 15.7. Notices; Transfer of Funds. (a) The Guarantor shall provide the Guaranteed Party, no later than forty-five (45) days after the end of each fiscal quarter of the Guarantor, an Officer's Certificate of the Guarantor certifying as to the determination of whether or not the Southern Credit Standard has been satisfied as of the end of such fiscal quarter. (b) All notices, requests, demands and other communications that are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, electronic or digital transmission method, subject to the sender's facsimile machine receiving the correct answerback of the addressee and confirmation of uninterrupted transmission by a transmission report or the recipient confirming by telephone to sender that such recipient has received the facsimile message and subject to a copy being sent the same day for next day delivery by a reputable overnight delivery service; the day after it is sent, if sent for next day delivery to a domestic address by a reputable overnight delivery service; and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent (i) if to the Guaranteed Party, to its address set forth in Section 12.4 of the Indenture and (ii) if to the Guarantor, to: The Southern Company 64 Perimeter Center East Atlanta, Georgia 30364 Attention: Secretary Telecopy: 404-668-3559 with a copy of any demand for payment or notice of breach or default to: Troutman Sanders 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 Attention: John T.W. Mercer, Esq. Telecopy: 404-885-3525 or to such other place and with such other copies as the Guaranteed Party or the Guarantor may designate as to itself by written notice to the other pursuant to this Section 7(b). Exhibit A-3 (c) Payments to be made to the Guaranteed Party hereunder shall be made by wire transfer of funds to the Guaranteed Party, c/o Bankers Trust Company, for deposit into the Debt Service Reserve Account in which this Agreement is deposited established and created under the Indenture (ABA No.: 053000219; Account No. 3076231393), at Bankers Trust Company, Four Albany Street, New York, New York 10006 or such other account as the Guaranteed Party may designate by notice hereunder. 15.8. Delay and Waiver. No failure on the part of the Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 15.9. Entire Agreement; Amendments. This Agreement and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior writings with respect to the subject matter hereof. In the event of any conflict between the terms, conditions and provisions of this Agreement and any such agreement, document or instrument, the terms, conditions and provisions of this Agreement shall prevail. This Agreement may only be amended or modified by an instrument in writing signed by each of the Guarantor and the Guaranteed Party. 15.10. Headings. The headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. 15.11. Governing Law; Consent to Jurisdiction. (a) The rights and duties of the Guaranteed Party and the Guarantor under this Agreement shall, pursuant to Section 5-1401 of the New York General Obligations Law, be governed by the law of the State of New York, without reference to the choice of law provisions of New York law thereof (other than such Section 5-1401). (b) Each party hereto irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of this Agreement may be brought in the United States District Court for the Southern District of New York or, if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in New York, New York; (ii) consents to the jurisdiction of any such court in any such suit, action or proceeding; and (iii) waives any objection that such party may have to the laying of venue of any such suit, action or proceeding in any such court. 15.12. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND THE GUARANTEED PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER. 15.13. Severability. Any provision of this Agreement that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 15.14. No Recourse to Affiliates. Any obligations created herein shall be the sole obligations of the Guarantor, unless and to the extent that such obligations are assigned or delegated by the Guarantor pursuant to Section 6. The Guaranteed Party shall not have recourse to any subsidiary, partner, joint venturer, affiliate, director or officer of the Guarantor (or of any Person to whom the Guarantor's obligations hereunder are assigned or delegated pursuant to Section 6) for the performance of such obligations unless the obligations are assumed in writing by the Person against whom recourse is sought. 15.15. Termination. Subject to the last sentence of Section 2(a), this Agreement shall immediately terminate and be of no further force and effect upon Exhibit A-4 the earlier to occur of (a) the reduction of the Available Amount to zero in accordance with Section 1 (including the deposit of other Reserve Account Security or any monies not then constituting Revenues into the Debt Service Reserve Account in which this Agreement is deposited in an amount equal to the then Available Amount, to the extent that, in the case of such Reserve Account Security, monies are not withdrawn from such Debt Service Reserve Account on account of the deposit of such Reserve Account Security) or (b) the payment, observance and performance of the Guaranteed Obligations guaranteed hereby. Upon such termination, the Guaranteed Party shall deliver to the Guarantor written evidence in form and substance reasonably satisfactory to the Guarantor of such termination and of the release of the Guarantor from all of its obligations hereunder. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Exhibit A-5 IN WITNESS WHEREOF, the Guarantor and the Guaranteed Party have caused this Agreement to be duly executed by their duly authorized officers, all as of the date hereof. THE SOUTHERN COMPANY By: Name: Title: FIRST UNION NATIONAL BANK OF GEORGIA, as Indenture Trustee By: Name: Title: TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions; Construction.................................... 2 SECTION 1.2. Compliance Certificates and Opinions......................... 3 SECTION 1.3. Form of Documents Delivered to Trustee....................... 3 SECTION 1.4. Acts of Holders.............................................. 4 SECTION 1.5. Notices, etc. to Trustee and Mobile Energy Parties........... 5 SECTION 1.6. Notices to Holders; Waiver................................... 6 SECTION 1.7. Conflict with Trust Indenture Act............................ 6 SECTION 1.8. Effect of Headings and Table of Contents..................... 6 SECTION 1.9. Successors and Assigns....................................... 7 SECTION 1.10. Severability Clause.......................................... 7 SECTION 1.11. Benefits of Indenture........................................ 7 SECTION 1.12. Governing Law................................................ 7 SECTION 1.13. Legal Holidays............................................... 7 SECTION 1.14. Execution in Counterparts.................................... 7 SECTION 1.15. Projections.................................................. 7 ARTICLE II. THE SECURITIES SECTION 2.1. Form of Security to be Established by Series Supplemental Indenture.................................................... 8 SECTION 2.2. Form of Trustee's Authentication............................. 8 SECTION 2.3. Amount Unlimited; Issuable in Series; Limitations on Issuance..................................................... 8 SECTION 2.4. Authentication and Delivery of Securities.................... 10 SECTION 2.5. Form and Denominations....................................... 11 SECTION 2.6. Execution of Securities...................................... 12 SECTION 2.7. Temporary Securities......................................... 12 SECTION 2.8. Registration, Transfer and Exchange.......................... 12 SECTION 2.9. Mutilated, Destroyed, Lost and Stolen Securities............. 14 SECTION 2.10. Payment of Principal and Interest; Principal and Interest Rights Preserved............................................. 14 SECTION 2.11. Persons Deemed Owners........................................ 16 SECTION 2.12. Cancellation................................................. 16 SECTION 2.13. Dating of Securities; Computation of Interest................ 16 SECTION 2.14. Source of Payments Limited; Rights and Liabilities of the Mobile Energy Parties........................................ 16 SECTION 2.15. Parity of Securities......................................... 17 SECTION 2.16. Allocation of Principal and Interest......................... 17 ARTICLE III. REPRESENTATIONS AND WARRANTIES SECTION 3.1. Organization, Power and Status of Mobile Energy Parties...... 18 SECTION 3.2. Authorization; Enforceability; Execution and Delivery........ 18 SECTION 3.3. No Conflicts; Laws and Contracts; No Default................. 18 i SECTION 3.4. Governmental Approvals....................................... 19 SECTION 3.5. Litigation................................................... 20 SECTION 3.6. Utility Regulation........................................... 20 SECTION 3.7. Collateral................................................... 20 SECTION 3.8. Taxes........................................................ 21 SECTION 3.9. Environmental Matters........................................ 21 SECTION 3.10. Business; Mobile Energy Assets............................... 21 SECTION 3.11. Employee Benefit Plans....................................... 21 ARTICLE IV. INDENTURE ACCOUNTS SECTION 4.1. Establishment of Indenture Securities Account................ 22 SECTION 4.2. Payments into Indenture Securities Account................... 22 SECTION 4.3. Application of Funds in Indenture Securities Account......... 22 SECTION 4.4. Payments into Debt Service Reserve Accounts.................. 23 SECTION 4.5. Application of Funds in Debt Service Reserve Accounts........ 23 SECTION 4.6. Reserve Account Security..................................... 24 SECTION 4.7. Investment of Monies in the Indenture Accounts............... 25 SECTION 4.8. Monies to be Held in Trust................................... 26 SECTION 4.9. Dominion and Control......................................... 26 ARTICLE V. COVENANTS SECTION 5.1. Payment of Principal, Premium, if any, and Interest; Mobile Energy as Guarantor.......................................... 26 SECTION 5.2. Maintenance of Insurance..................................... 27 SECTION 5.3. Reporting Requirements....................................... 27 SECTION 5.4. Maintenance of Existence and Governmental Approvals; Rate Regulation................................................. 29 SECTION 5.5. Nature of Business........................................... 30 SECTION 5.6. Operation and Maintenance.................................... 30 SECTION 5.7. Compliance with Law and Organizational Documents............. 30 SECTION 5.8. Prohibition on Fundamental Changes and Disposition of Assets....................................................... 31 SECTION 5.9. Transactions with Affiliates................................. 31 SECTION 5.10. Amendments to Project Documents.............................. 32 SECTION 5.11. Performance Under Project Contracts.......................... 32 SECTION 5.12. Annual Budget................................................ 33 SECTION 5.13. Insurance Reports............................................ 34 SECTION 5.14. Liens........................................................ 34 SECTION 5.15. Investments.................................................. 34 SECTION 5.16. Indebtedness................................................. 34 SECTION 5.17. Debt for Modifications; Replacement Debt; Refunding Debt..... 34 SECTION 5.18. Application of Proceeds from Sale of Securities.............. 37 SECTION 5.19. Restricted Payments.......................................... 38 SECTION 5.20. Casualty Proceeds; Eminent Domain Proceeds................... 39 SECTION 5.21. Benefit Plan Liabilities..................................... 39 SECTION 5.22. Mill Owner Maintenance Reserve Account....................... 39 ARTICLE VI. REDEMPTION AND PREPAYMENT OF SECURITIES SECTION 6.1. Applicability of Article..................................... 40 SECTION 6.2. Election to Redeem or Prepay; Notice to Trustee.............. 40 SECTION 6.3. Optional Redemption; Extraordinary Redemption; Prepayment; Selection of Securities to Be Redeemed or Prepaid............ 41 ii SECTION 6.4. Notice of Redemption or Prepayment........................... 42 SECTION 6.5. Securities Payable on Redemption Date or Prepayment Date..... 43 SECTION 6.6. Securities Redeemed or Prepaid in Part....................... 43 ARTICLE VII. SINKING FUNDS SECTION 7.1. Applicability of Article..................................... 44 SECTION 7.2. Sinking Funds for Securities................................. 44 ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES SECTION 8.1. Events of Default............................................ 44 SECTION 8.2. Enforcement of Remedies...................................... 48 SECTION 8.3. Specific Remedies............................................ 49 SECTION 8.4. Judicial Proceedings Instituted by Trustee................... 49 SECTION 8.5. Holders May Demand Enforcement of Rights by Trustee.......... 51 SECTION 8.6. Control by Holders........................................... 52 SECTION 8.7. Waiver of Past Events of Defaults............................ 52 SECTION 8.8. Holder May Not Bring Suit Except Under Certain Conditions.... 52 SECTION 8.9. Undertaking to Pay Court Costs............................... 53 SECTION 8.10. Right of Holders to Receive Payment Not to Be Impaired....... 53 SECTION 8.11. Application of Monies Collected by Trustee................... 53 SECTION 8.12. Securities Held by Certain Persons Not to Share in Distribution................................................. 55 SECTION 8.13. Waiver of Appraisement, Valuation, Stay, Right to Marshalling.................................................. 55 SECTION 8.14. Remedies Cumulative; Delay or Omission Not a Waiver.......... 55 SECTION 8.15. Intercreditor Agreement...................................... 56 ARTICLE IX. THE TRUSTEE SECTION 9.1. Certain Duties and Responsibilities.......................... 56 SECTION 9.2. Notice of Events of Defaults................................. 57 SECTION 9.3. Certain Rights of Trustee.................................... 57 SECTION 9.4. Not Responsible for Recitals or Issuance of Securities....... 59 SECTION 9.5. May Hold Securities.......................................... 59 SECTION 9.6. Funds May Be Held by Trustee or Paying Agent................. 59 SECTION 9.7. Compensation, Reimbursement and Indemnification.............. 59 SECTION 9.8. Disqualification; Conflicting Interests...................... 60 SECTION 9.9. Corporate Trustee Required; Eligibility...................... 65 SECTION 9.10. Resignation and Removal; Appointment of Successor............ 66 SECTION 9.11. Acceptance of Appointment by Successor....................... 67 SECTION 9.12. Merger, Conversion, Consolidation or Succession to Business.. 67 SECTION 9.13. Preferential Collection of Claims Against any Obligor........ 68 SECTION 9.14. Maintenance of Offices and Agencies.......................... 71 SECTION 9.15. Co-Trustee or Separate Trustee............................... 73 SECTION 9.16. Taxes........................................................ 75 ARTICLE X. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND MOBILE ENERGY PARTIES SECTION 10.1. Company to Furnish Trustee Names and Addresses of Holders.... 75 SECTION 10.2. Preservation of Information; Communications to Holders....... 75 SECTION 10.3. Reports by Trustee........................................... 76 iii SECTION 10.4. Reports by Mobile Energy Parties............................. 78 ARTICLE XI. SUPPLEMENTAL INDENTURES SECTION 11.1. Supplemental Indentures Without Consent of Holders........... 79 SECTION 11.2. Supplemental Indenture with Consent of Holders............... 80 SECTION 11.3. Documents Affecting Immunity or Indemnity.................... 81 SECTION 11.4. Execution of Supplemental Indentures......................... 81 SECTION 11.5. Effect of Supplemental Indentures............................ 82 SECTION 11.6. Conformity with Trust Indenture Act.......................... 82 SECTION 11.7. Reference in Securities to Supplemental Indentures........... 82 ARTICLE XII. SATISFACTION AND DISCHARGE SECTION 12.1. Satisfaction and Discharge of Securities..................... 82 SECTION 12.2. Satisfaction and Discharge of Indenture...................... 87 SECTION 12.3. Application of Trust Money................................... 87 ARTICLE XIII. MEETINGS OF HOLDERS OF SECURITIES; ACTION WITHOUT MEETING SECTION 13.1. Purposes for Which Meetings May Be Called.................... 88 SECTION 13.2. Call, Notice and Place of Meetings........................... 88 SECTION 13.3. Persons Entitled to Vote at Meetings......................... 89 SECTION 13.4. Quorum; Action............................................... 89 SECTION 13.5. Attendance at Meetings; Determination of Voting Rights; Conduct and Adjournment of Meetings.......................... 90 SECTION 13.6. Counting Votes and Recording Action of Meetings.............. 91 SECTION 13.7. Action Without Meeting....................................... 91 ARTICLE XIV. GUARANTY SECTION 14.1. Guaranty of Payment and Performance.......................... 91 SECTION 14.2. Continuance and Acceleration of Guaranteed Obligations upon Certain Events............................................... 92 SECTION 14.3. Recovered Payments........................................... 92 SECTION 14.4. Evidence of Guaranteed Obligations........................... 92 SECTION 14.5. Binding Nature of Certain Adjudications...................... 92 SECTION 14.6. Nature of Mobile Energy's Obligations........................ 93 SECTION 14.7. No Release of Mobile Energy.................................. 93 SECTION 14.8. Certain Waivers.............................................. 94 SECTION 14.9. Independent Credit Evaluation................................ 94 SECTION 14.10.Subordination of Rights Against Company, Other Guarantors and Collateral................................................... 94 SECTION 14.11.Payments by Mobile Energy.................................... 95 SECTION 14.12.Continuance of Guaranty; Survival............................ 95 SECTION 14.13.Assignments and Participations............................... 96 SECTION 14.14.Benefit and Enforcement...................................... 96 iv ARTICLE XV. LIMITED RECOURSE SCHEDULE 5.2 - Insurance Policies EXHIBIT A - Form of Debt Service Reserve Account Southern Guaranty Agreement v EX-4.2 3 Exhibit 4.2 - -------------------------------------------------------------------------- FIRST SUPPLEMENTAL INDENTURE dated as of August 1, 1995 to TRUST INDENTURE dated as of August 1, 1995 among MOBILE ENERGY SERVICES COMPANY, L.L.C., MOBILE ENERGY SERVICES HOLDINGS, INC. and FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee Providing for the Issuance of $255,210,000 of First Mortgage Bonds with the Interest Rate and Stated Maturities Set Forth Herein - -------------------------------------------------------------------------- FIRST SUPPLEMENTAL INDENTURE, dated as of August 1, 1995, to the Trust Indenture, dated as of August 1, 1995 (the "Original Indenture"), among MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), its principal office and mailing address being at 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338, MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation ("Mobile Energy"), its principal office and mailing address being at 900 Ashwood Parkway, Suite 450, Atlanta, Georgia 30338, and FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee (the "Trustee"), its corporate trust office and mailing address being at 999 Peachtree Street, N.E., 11th Floor, Atlanta, Georgia 30309. WHEREAS, the Company, Mobile Energy and the Trustee have heretofore executed and delivered the Original Indenture to provide for the issuance from time to time of the Company's Securities (as defined in the Original Indenture) to be issued in one or more series; WHEREAS, Sections 2.1, 2.3 and 11.1 of the Original Indenture provide, among other things, that the Company, Mobile Energy and the Trustee may enter into indentures supplemental to the Original Indenture for, among other things, the purpose of establishing the designation, form, terms and provisions of Securities of any series as permitted by Sections 2.1, 2.3 and 11.1 of the Original Indenture; WHEREAS, the Company and Mobile Energy (i) desire the issuance of a series of Securities to be designated as hereinafter provided and (ii) have requested the Trustee to enter into this First Supplemental Indenture for the purpose of establishing the designation, form, terms and provisions of the Securities of such series; WHEREAS, all action on the part of the Company and Mobile Energy necessary to authorize the issuance of the Securities of such series under the Original Indenture and this First Supplemental Indenture (the Original Indenture, as supplemented by this First Supplemental Indenture, being hereinafter called the "Indenture") has been duly taken; and WHEREAS, all acts and things necessary to make the Securities of such series, when executed by the Company and Mobile Energy and authenticated and delivered by the Trustee as provided in the Original Indenture, the legal, valid and binding obligations of the Company and Mobile Energy, and to constitute these presents a valid and binding supplemental indenture according to its terms, have been done and performed, and the execution of this First Supplemental Indenture and the creation and issuance under the Indenture of the Securities of such series have in all respects been duly authorized, and the Company and Mobile Energy, in the exercise of the legal right and power vested in them, execute this First Supplemental Indenture and propose to create, execute, issue and deliver the Securities of such series. NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH, that, in order to establish the designation, form, terms and provisions of, and to authorize the authentication and delivery of, the Securities of such series, and in consideration of the acceptance of the Securities of such series by the holders thereof and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Capitalized terms not otherwise defined herein shall have the meanings set forth in the Original Indenture. ARTICLE II THE TERMS OF THE SECURITIES SECTION 2.1. Terms of First Mortgage Bonds. (a) There is hereby created a series of Securities designated "8.665% First Mortgage Bonds Due 2017" in the aggregate principal amount of $255,210,000. Upon delivery of a Company Order to the Trustee in accordance with the provisions of Section 2.4 of the Original Indenture, the Trustee shall authenticate and deliver the First Mortgage Bonds. Such Company Order shall specify the amount of the First Mortgage Bonds to be authenticated and the date on which such Securities are to be authenticated. (b) The First Mortgage Bonds shall be substantially in the form of Schedule A hereto and shall have and be subject to such other terms as provided in the Indenture. SECTION 2.2. Interest, Principal and Maturity Date. The First Mortgage Bonds shall bear interest on the unpaid principal amount thereof from time to time Outstanding from the date thereof until such amount is paid in full at the rate of interest set forth in the form thereof attached hereto. The principal amount of the First Mortgage Bonds shall be due and payable as set forth in the form thereof attached hereto. Payment of principal of and interest on the First Mortgage Bonds shall be made, if the Company so elects, by check mailed to the Holder at its registered address or otherwise as provided in Section 2.10 of the Original Indenture, except that the final payment of principal of the First Mortgage Bonds shall be made on the due date therefor to the accounts of the Holders thereof as such accounts shall appear in the Security Register, which shall be due and payable as set forth in the form thereof attached hereto. For so long as the First Mortgage Bonds are issued in the form of one or more global First Mortgage Bonds, payment of principal of and interest on the First Mortgage Bonds shall be made in immediately available funds by wire transfer to the clearing corporation or clearing agency acting as depositary for such global First Mortgage Bonds, or a nominee of such clearing corporation or clearing agency. Any Holder of $1,000,000 or more in aggregate principal amount of First Mortgage Bonds may, by delivery of a written notice to the Paying Agent, elect to have all such payments to such Holder made by wire transfer of immediately available funds to a designated account maintained in the United States (so long as the Paying Agent has received proper wire transfer instructions in writing by the Regular Record Date next preceding the date for such payment). The First Mortgage Bonds shall mature on the date set forth in the form thereof attached hereto. SECTION 2.3. Redemption. (a) Optional Redemption. The Securities are not subject to optional redemption. (b) Mandatory Redemption. In accordance with the provisions of Section 6.3 of the Original Indenture, the Securities are subject to extraordinary redemption under certain conditions, on the terms set forth in the Original Indenture. SECTION 2.4 Debt Service Reserve Account. (a) A Debt Service Reserve Account designated the "First Supplemental Indenture Debt Service Reserve Account" is hereby established and created with the Trustee for the benefit of the Holders of the First Mortgage Bonds. 2 (b) The Debt Service Reserve Account Required Balance in respect of the First Supplemental Indenture Debt Service Reserve Account shall be an amount equal to $21,936,000. The First Supplemental Indenture Debt Service Reserve Account shall be funded on the date of original issuance of the First Mortgage Bonds in an amount equal to such Debt Service Reserve Account Required Balance. ARTICLE III MISCELLANEOUS SECTION 3.1. Execution of Supplemental Indenture. This First Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Original Indenture and, as provided in the Original Indenture, this First Supplemental Indenture forms a part thereof. SECTION 3.2. Concerning the Trustee. The Trustee shall not be responsible in any manner for or with respect to the validity or sufficiency of this First Supplemental Indenture, or the due execution hereof by the Company or Mobile Energy, or for or with respect to the recitals and statements contained herein, all of which recitals and statements are made solely by the Company and Mobile Energy. SECTION 3.3. Counterparts. This First Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original; but all such counterparts shall together constitute but one and the same instrument. SECTION 3.4. GOVERNING LAW. THIS FIRST SUPPLEMENTAL INDENTURE AND THE FIRST MORTGAGE BONDS SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5-1401). SECTION 3.5. Limited Recourse. Satisfaction of the obligations of the Company and Mobile Energy (including pursuant to the Guaranty) under the Indenture for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be had solely from the assets of the Company or (except to the extent provided in the Guaranty) Mobile Energy. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in the Guaranty) or of the stockholders of Mobile Energy, other than their respective interests in the Collateral, if any, (b) any Member (other than Mobile Energy as provided in the Guaranty) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energies Parties and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern) and in the event of any non-performance by either of the Company or Mobile Energy of its obligation to pay the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, no judgment for any deficiency upon the obligations of either of the Company or Mobile Energy under the Indenture, for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be obtainable by the Holders, the Trustee or the Collateral Agent against any Member (other than Mobile Energy as provided in the Guaranty) or any 3 Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern) or of the Company (other than Mobile Energy as provided in Article XIV and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern). Notwithstanding anything in this Section 3.5 to the contrary, (i) satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company, (ii) nothing contained herein or in the Securities shall limit or otherwise prejudice in any way the right of the Trustee, the Collateral Agent or any Holder to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party or limit or otherwise prejudice in any way the right of the Holders, the Trustee or the Collateral Agent to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Indenture Securities Collateral granted hereunder or under the Security Documents and (iii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud or willful misrepresentations, including those contained in Officer's Certificates issued from time to time. 4 IN WITNESS WHEREOF, the parties have caused this First Supplemental Indenture to be duly executed by their respective officers thereunder duly authorized as of the date and year first above written. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: /s/ Name: Christopher J. Kysar Title: Vice President MOBILE ENERGY SERVICES HOLDINGS, INC. By: /s/ Name: Christopher J. Kysar Title: Vice President FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By: /s/ Name: Doug Milner Title: Assistant Vice President Schedule A [FORM OF BOND] [Unless this Security is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the issuer hereof or its agent for registration of transfer, exchange or payment, and any Security of this series issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] MOBILE ENERGY SERVICES COMPANY, L.L.C. 8.665% First Mortgage Bond Due 2017 unconditionally guaranteed by MOBILE ENERGY SERVICES HOLDINGS, INC. No. R- CUSIP No. 607358AA6 Final Principal Principal Amount Payment Date Issuance Date Interest Rate $255,210,000 January 1, 2017 August 24, 1995 8.665% MOBILE ENERGY SERVICES COMPANY, L.L.C., a limited liability company duly organized and in good standing under the laws of the State of Alabama (herein called the "Company," which term includes any permitted successor or assign under the Indenture referred to below), for value received, hereby promises to pay to [CEDE & CO.], or its registered assigns, the Principal Amount set forth above, such payment to be made in semi-annual installments on January 1 and July 1 of each year, commencing on January 1, 1996, and ending on the Final Principal Payment Date set forth above (subject to any right of redemption), each such installment to be in an amount equal to the Principal Amount set forth above multiplied by the percentage set forth opposite the date of such installment set forth under the caption "Principal Payment Date" on Annex A attached hereto (provided that the portion of the Principal Amount set forth above remaining unpaid on the Final Principal Payment Date set forth above, together with all interest accrued thereon, shall in any and all cases be due on the Final Principal Payment Date set forth above), and to pay interest on the unpaid portion of the Principal Amount set forth above at the Interest Rate set forth above from the most recent Interest Payment Date to which interest has been paid or duly provided for, or if no interest has been paid or duly provided for, from the Issuance Date set forth above, semi-annually on January 1 and July 1 in each year, commencing on January 1, 1996, until the Principal Amount set forth above is paid in full or payment therefor is duly provided for. Any payment of principal and, to the extent permitted by applicable Law, any payment of interest not punctually paid or duly provided for shall continue to bear interest at a rate equal to the Interest Rate set forth above plus two percent (2%). The principal and interest so payable on any payment date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered in the Security Register at the close of business on the Regular Record Date for such payment of principal or interest, which shall be the preceding December 15 and June 15, respectively, provided that interest payable on the Final Principal Payment Date set forth above shall be payable to the person to whom the principal hereof shall be payable. Any such principal or interest Schedule A-1 not so punctually paid or duly provided for shall forthwith cease to be payable to the person in whose name this Security (or one or more Predecessor Securities) was registered in the Security Register at the close of business on the Regular Record Date therefor, and may be paid to the Person in whose name this Security is registered at the close of business on a Special Record Date for the payment of such defaulted principal or interest to be fixed by the Trustee referred to below, notice of which shall be given to the Holder hereof to be mailed not less than ten (10) days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange (if any) on which this Security may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. All payments in respect of this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of debts, in immediately available funds. Interest on this Security shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period shorter than a full calendar month, on the basis of the actual number of days elapsed in such period. Principal of and interest on this Security payable on the Final Principal Payment Date set forth above shall be paid upon presentation and surrender of this Security at the office of the Paying Agent. Payments of principal of and interest on this Security shall be made, so long as this Security is issued in the form of a global security, in immediately available funds by wire transfer or, if this Security is not held in the form of a global Security, by check mailed on or prior to the date for such payment to the address of the Holder entitled thereto as such address appears on the Security Register; provided, however, that if this security is not held in the form of a global Security, any Holder of $1,000,000 or more in aggregate principal amount of Securities of this series may, by delivery of a written request to the Paying Agent, elect to have all such payments to such Holder made by wire transfer of immediately available funds to a designated account maintained in the United States (so long as the Paying Agent has received proper wire transfer instructions in writing by the Regular Record Date next preceding the date for such payment). The provisions of this Security are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. This Security shall not be entitled to any benefit under the Indenture, or be valid or become obligatory for any purpose, until FIRST UNION NATIONAL BANK OF GEORGIA, the Trustee under the Indenture, or its successor thereunder or an Authenticating Agent on behalf thereof, shall have authenticated the form of certificate endorsed hereon or an alternative certificate of authentication provided for in the Indenture. Schedule A-2 IN WITNESS WHEREOF, Mobile Energy Services Company, L.L.C. has caused this Security to be signed in its name by its President or Vice President, by the signature or a facsimile thereof, attested by its Assistant Secretary by the signature or a facsimile thereof. Dated: MOBILE ENERGY SERVICES COMPANY, L.L.C. By: Title: Attest: By: Assistant Secretary TRUSTEE'S AUTHENTICATION CERTIFICATE This Security is one of the Securities referred to in the within-mentioned Indenture. FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By Authorized Trust Officer Schedule A-3 [REVERSE] MOBILE ENERGY SERVICES COMPANY, L.L.C. 8.665% First Mortgage Bonds Due 2017 This Security is one of an authorized issue of Securities of the Company, known as its 8.665% First Mortgage Bonds Due 2017, to be issued under a Trust Indenture, dated as of August 1, 1995 (the "Original Indenture"), among the Company, Mobile Energy Services Holdings, Inc., an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (the "Trustee"). The Original Indenture, as supplemented by the First Supplemental Indenture dated as of August 1, 1995 (the "First Supplemental Indenture"), and as the same may be amended, modified and further supplemented, is hereinafter referred to as the "Indenture." Capitalized terms used herein, but not otherwise defined herein, shall have the meanings assigned thereto in the Indenture. As provided in the Indenture, the aggregate principal amount of Securities that may be issued thereunder is unlimited. The Securities of this series are limited in principal amount as provided in the First Supplemental Indenture. All Securities shall be secured equally and ratably with one another (except as to any Debt Service Reserve Account or Sinking Fund established in accordance with the Indenture for the benefit of any particular series). Reference is hereby made to the Indenture for a description of the nature of the Securities and the respective rights of the Holders of Securities and of the Trustee, the Company and Mobile Energy in respect of the Securities and the terms upon which the Securities are to be authenticated and delivered. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The principal of and interest on this Security are payable only from, and secured by, the Indenture Securities Collateral, and all payments of principal and interest shall be made in accordance with the terms of the Indenture. The Securities, and the rights of the Holders in respect of the Shared Collateral, are subject to the terms of an Intercreditor and Collateral Agency Agreement, dated as of August 1, 1995 (the "Intercreditor Agreement"), among Bankers Trust (Delaware), as collateral agent, the Trustee (on behalf of the Holders of the Securities), First Union National Bank of Georgia, as trustee (on behalf of the holders of the securities issued under an Amended and Restated Trust Indenture, dated as of August 1, 1995, with The Industrial Development Board of the City of Mobile, Alabama), Banque Paribas, as the Working Capital Provider, such Industrial Development Board, the Company and Mobile Energy, to which reference is hereby made. As provided in Section 6.3(b) of the Indenture, all Outstanding Securities shall be subject to redemption in whole prior to the Final Principal Payment Date set forth on the face of this Security at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest thereon, if any, to the Redemption Date, if an Event of Loss or an Event of Eminent Domain shall occur and, subject to the terms of the Intercreditor Agreement, the Energy Complex is not rebuilt, repaired, restored or replaced. Pursuant to Section 6.3(c) of the Indenture, the Outstanding Securities shall be subject to partial redemption, ratably among, and by lot within, all outstanding series and maturities, prior to the Final Principal Payment Date set forth on the face of this Security at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest Schedule A-4 thereon, if any, to the Redemption Date, if (i) an Event of Loss or an Event of Eminent Domain shall occur, to the extent of any Excess Loss Proceeds and provided, subject to certain exceptions, that such Excess Loss Proceeds exceed $3,000,000, and (ii) the Energy Complex or a portion thereof is rebuilt, repaired, restored or replaced. The aggregate amount of Securities to be so redeemed will equal, subject to certain exceptions, the amount made available to the Trustee for such purpose pursuant to the Intercreditor Agreement, which will equal the ratable share of the Securities of this series (based upon the principal amount of Securities and Tax-Exempt Indenture Securities then Outstanding and the Working Capital Facility Commitment under the Working Capital Facility, as further described in the Intercreditor Agreement) of the amount by which all of the Loss Proceeds in respect of such Event of Loss or Event of Eminent Domain exceeds the total cost of rebuilding, repairing, restoring or replacing the Energy Complex. Securities of this series are not subject to optional redemption prior to the Final Principal Payment Date set forth on the face of this Security. Notice of any redemption of Securities will be given at least thirty (30) but not more than sixty (60) days prior to the Redemption Date. The Indenture contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company and Mobile Energy with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver or direction shall be conclusive and binding upon the Holder, and all future Holders, of this Security and of any Security issued upon the transfer hereof whether or not citation of such consent or waiver is made upon this Security. As more fully described therein, the Indenture permits, with certain exceptions, the amendment thereof and the rights and obligations of the Company and Mobile Energy and the rights of the Holders of the Securities under the Indenture at any time by the Company and Mobile Energy with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding and, in certain cases, without any consent or other action by Holders of the Securities. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Indenture, upon the occurrence and during the continuance of an Event of Default as provided in the Indenture. The Securities of this series are issuable only as registered bonds without coupons in denominations having an original face amount of $100,000 and integral multiples of $5,000 in excess thereof. This Security is transferable as prescribed in the Indenture by the registered owner hereof, in person or by attorney duly authorized, at an office or agency of the Trustee, upon surrender and cancellation of this Security and thereupon a new registered Security or Securities of the same series for a like principal amount, in authorized denominations, will be issued to the transferee in exchange therefor, as provided in the Indenture. The Company and the Trustee shall deem and treat the Person in whose name this Security is registered as the absolute owner for the purpose of receiving payment of or on account of the principal due hereof and interest due hereon and for all other purposes. Registered Securities of this series shall be exchangeable at such offices or agencies of the Trustee for registered Securities of other authorized denominations having the same aggregate principal amount, in the manner and upon the conditions prescribed in the Indenture. No service charge shall be required of any Holder in connection with any transfer or exchange, but the Security Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Notwithstanding any provision of the Indenture, neither the Company nor the Trustee shall be required to register the transfer of or exchange of any Securities of this Schedule A-5 series during the period (i) beginning at the opening of business fifteen (15) days before the day of the mailing of a notice of redemption of Securities of this series under the Indenture and ending on the close of business on the day of such mailing and (ii) beginning on the Regular Record Date for the Stated Maturity of principal of or interest on the Securities of this series and ending on the Stated Maturity of such payment, or to register the transfer or exchange any Securities of this series so selected for redemption in whole or in part, except the unredeemed portion of any Security of this series selected for redemption in part. The Holder hereof, by the acceptance of this Security, agrees that each payment received by it hereunder shall be applied in the manner set forth in Section 2.16 of the Indenture. This Security is a global security within the meaning of the Indenture and is registered in the name of a depositary or its nominee with respect to the Securities of this series. This Security is exchangeable for other Securities of this series registered in the name of a Person other than such depositary or its nominee only if (i) the Company advises the Trustee in writing that such depositary is no longer willing or able to discharge properly its responsibilities as depositary with respect to the Securities of this series and is unable to locate a qualified successor, (ii) the Company, at its option elects to terminate the book-entry system through such depositary with respect to the Securities of this series and (iii) after the occurrence of an Event of Default, beneficial owners of the Securities of this series holding interests representing an aggregate principal amount of the Securities of this series of not less than a majority in principal amount of the Securities of this series represented by this global security advise the Trustee through such depositary in writing that the continuation of a book-entry system through such depositary (or any successor thereto) with respect to the Securities of this series is no longer in such beneficial owners' best interest. THIS SECURITY SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5- 1401). Satisfaction of the obligations of the Company and Mobile Energy (including pursuant to the Guaranty) under this Security for the payment of the principal of or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be had solely from the assets of the Company or (except to the extent provided in the Guaranty) Mobile Energy. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in the Guaranty) or of the stockholders of Mobile Energy, other than their respective interests in the Indenture Securities Collateral, if any, (b) any Member (other than Mobile Energy as provided in the Guaranty) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than Mobile Energy and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern) and in the event of any non-performance by either of the Company or Mobile Energy of its obligation to pay the principal of or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, no judgment for any deficiency upon the obligations of either of the Company or Mobile Energy under this Security, for the payment of the principal of or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be obtainable by the Holders, the Trustee or the Collateral Agent against any Member (other than Mobile Energy as provided in the Guaranty), or any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern). Notwithstanding anything in this Security to the contrary, (i) satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Schedule A-6 Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company, (ii) nothing contained herein or in the Securities shall limit or otherwise prejudice in any way the right of the Trustee, the Collateral Agent or any Holder to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such person is a party or limit or otherwise prejudice in any way the right of the Holders, the Trustee or the Collateral Agent to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Indenture Securities Collateral granted hereunder or under the Security Documents and (iii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud or willful misrepresentations, including those contained in Officer's Certificates issued from time to time. Schedule A-7 GUARANTY For value received, Mobile Energy hereby guarantees to the Holder of this Security upon which this Guaranty is endorsed and to the Trustee for its own benefit and the benefit of the Holders from time to time the due and punctual payment, observance and performance of all of the Guaranteed Obligations in accordance with their respective terms and when and as due (whether at maturity, by reason of acceleration or otherwise), or deemed to be due hereunder, and agrees so to pay, observe or perform the same when so due, or deemed to be due, upon demand. Mobile Energy's obligations above (i) are absolute and unconditional, (ii) are unlimited in amount (except as provided in Article XIV of the Indenture), (iii) constitute a guaranty of payment and performance and not a guaranty of collection, (iv) are as primary obligor and not as a surety only, (v) shall be a continuing guaranty of all present and future Guaranteed Obligations and all promissory notes and other documentation given in extension or renewal or substitution for any of the Guaranteed Obligations and (vi) shall be irrevocable. The obligations of Mobile Energy under this Guaranty shall continue in full force and effect until the payment, observance and performance in full of the Guaranteed Obligations. The rights and obligations of Mobile Energy and the Trustee shall survive the repayment in full of all principal of and interest on the Securities. This Guaranty is given for the benefit of the Trustee and, subject to the terms and conditions set forth herein, the Holders from time to time of the Securities of this series, all of whom shall be entitled in the same manner as set forth herein to enforce performance and observance of this Guaranty. Reference is made to Article XIV of the Indenture for further provisions with respect to this Guaranty. THIS GUARANTY SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5- 1401). Schedule A-8 IN WITNESS WHEREOF, Mobile Energy Services Holdings, Inc. has caused this Guaranty to be signed in its name by its President or Vice President, by the signature or a facsimile thereof, attested by its Secretary, by the signature or a facsimile thereof. Dated: MOBILE ENERGY SERVICES HOLDINGS, INC. By: Title: Attest: By: Schedule A-9 ABBREVIATIONS The following abbreviations when used in the inscription on the face of this instrument shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT___________________ (Cust) (Minor) under Uniform Gift to Minors Act --------------------------------------- (State) Additional abbreviations may also be used though not in the above list ----------------- Schedule A-10 FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto Social Security Number or Other Identifying Number of Assignee (Please print or typewrite name and address, including zip code of Assignee) the written Security and all rights thereunder, hereby irrevocably constituting and appointing ________________________ attorney to transfer such Security on the books of the Company, with full power of substitution in the premises. Dated: NOTICE: The signature to this assignment must correspond with the name as written upon the first page of the within instrument in every particular, without alteration or enlargement or any change whatsoever. Schedule A-11 Annex A Principal Payment Percentage of Principal Date Amount Payable January 1, 1996 0.93256533835% July 1, 1996 1.37729712785% January 1, 1997 1.37729712785% July 1, 1997 1.50268406410% January 1, 1998 1.50268406410% July 1, 1998 1.58692841189% January 1, 1999 1.58692841189% July 1, 1999 1.68096861408% January 1, 2000 1.68096861408% July 1, 2000 1.78284549978% January 1, 2001 1.78284549978% July 1, 2001 1.87492653109% January 1, 2002 1.87492653109% July 1, 2002 1.92390580306% January 1, 2003 1.92390580306% July 1, 2003 2.00619097997% January 1, 2004 2.00619097997% July 1, 2004 2.05321108107% January 1, 2005 2.05321108107% July 1, 2005 2.15312879589% January 1, 2006 2.15312879589% July 1, 2006 2.26480153598% January 1, 2007 2.26480153598% July 1, 2007 2.38627013048% January 1, 2008 2.38627013048% July 1, 2008 2.52341209200% January 1, 2009 2.52341209200% July 1, 2009 2.67230907879% January 1, 2010 2.67230907879% July 1, 2010 2.83883860350% January 1, 2011 2.83883860350% July 1, 2011 3.02104149523% January 1, 2012 3.02104149523% July 1, 2012 3.22087692488% January 1, 2013 3.22087692488% July 1, 2013 3.44030406332% January 1, 2014 3.44030406332% July 1, 2014 3.71458798636% January 1, 2015 3.71458798636% July 1, 2015 3.98103522589% January 1, 2016 3.98103522589% July 1, 2016 1.52815328552% January 1, 2017 1.52815328552% Schedule A-12 EX-4.3 4 Exhibit 4.3 - ----------------------------------------------------------------------------- INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT dated as of August 1, 1995 by and among FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee under the Trust Indenture dated as of August 1, 1995 (on behalf of the Holders of the Indenture Securities), FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee under the Amended and Restated Indenture of Trust dated as of August 1, 1995 (on behalf of the Holders of the Tax-Exempt Indenture Securities), BANQUE PARIBAS, as the Working Capital Facility Provider, THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA, MOBILE ENERGY SERVICES COMPANY, L.L.C., MOBILE ENERGY SERVICES HOLDINGS, INC. and BANKERS TRUST (DELAWARE), as Collateral Agent - ----------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF INTERPRETATION...................... 2 ARTICLE II APPOINTMENT OF COLLATERAL AGENT; ESTABLISHMENT OF ACCOUNTS SECTION 2.1 Appointment of Collateral Agent............................. 2 SECTION 2.2 Establishment of Intercreditor Agreement Accounts........... 3 ARTICLE III COLLECTION AND APPLICATION OF REVENUES SECTION 3.1 Collection and Application of Revenues...................... 3 SECTION 3.2 Mill Owner Reimbursement Account............................ 3 SECTION 3.3 Working Capital Facility Account............................ 4 SECTION 3.4 Operating Account........................................... 4 SECTION 3.5 Maintenance Reserve Account................................. 5 SECTION 3.6 Subordinated Debt Account................................... 6 SECTION 3.7 Subordinated Fee Account.................................... 7 SECTION 3.8 Distribution Account........................................ 8 SECTION 3.9 Completion Account.......................................... 9 SECTION 3.10 Loss Proceeds Account...................................... 10 SECTION 3.11 Revenue Account............................................ 13 SECTION 3.12 Investment of Monies in the Intercreditor Agreement Accounts................................................... 16 SECTION 3.13 Monies to Be Held in Trust................................. 17 SECTION 3.14 Dominion and Control....................................... 17 SECTION 3.15 Reserve Account Security................................... 17 SECTION 3.16 Payment of 1994 Bonds...................................... 18 -i- ARTICLE IV PRIORITIES; SUBORDINATION SECTION 4.1 Priority of Security Interests............................. 19 SECTION 4.2 Subordination............................................... 19 ARTICLE V EXERCISE OF RIGHTS....................... 21 ARTICLE VI DIVISION OF PROCEEDS SECTION 6.1 Division of Proceeds........................................ 24 SECTION 6.2 Application of Loss Proceeds................................ 25 SECTION 6.3 Specific Collateral......................................... 27 ARTICLE VII RIGHTS OF SENIOR SECURED PARTIES; RIGHTS AND DUTIES OF COLLATERAL AGENT SECTION 7.1 Rights of Senior Secured Parties............................ 27 SECTION 7.2 Duties of Collateral Agent. ............................... 28 SECTION 7.3 Rights of Collateral Agent.................................. 29 SECTION 7.4 Lack of Reliance on the Collateral Agent.................... 31 ARTICLE VIII INDEMNIFICATION......................... 32 ARTICLE IX ELIGIBILITY OF COLLATERAL AGENT; REMOVAL AND REPLACEMENT OF COLLATERAL AGENT SECTION 9.1 Corporate Collateral Agent Required; Eligibility............ 33 SECTION 9.2 Resignation, Removal and Replacement........................ 33 ARTICLE X REPRESENTATIONS........................ 34 -ii- ARTICLE XI INDEPENDENT ENGINEER SECTION 11.1 Removal of Independent Engineer; Payment of Independent Engineer.................................................. 38 SECTION 11.2 Third Party Engineer Dispute Resolution.................... 38 SECTION 11.3 Qualified Engineers........................................ 39 ARTICLE XII MISCELLANEOUS SECTION 12.1 Agreement for Benefit of Parties Hereto.................... 40 SECTION 12.2 No Warranties.............................................. 40 SECTION 12.3 Severability............................................... 40 SECTION 12.4 Notices.................................................... 40 SECTION 12.5 Successors and Assigns..................................... 42 SECTION 12.6 Counterparts............................................... 42 SECTION 12.7 GOVERNING LAW.............................................. 42 SECTION 12.8 No Impairments of Other Rights............................. 42 SECTION 12.9 Amendment; Waiver.......................................... 43 SECTION 12.10 Headings.................................................. 43 SECTION 12.11 Termination............................................... 43 SECTION 12.12 Entire Agreement.......................................... 43 SECTION 12.13 Limited Recourse.......................................... 43 SECTION 12.14 Submission to Jurisdiction................................ 44 APPENDIX A - Defined Terms SCHEDULE 1 - Third Party Engineers EXHIBIT A - Form of Requisition or Disbursement from Loss Proceeds Account EXHIBIT B - Form of Monthly Transfer Date Certificate EXHIBIT C-1 - Form of Maintenance Plan Funding Subaccount Southern Guaranty Agreement EXHIBIT C-2 - Form of Distribution Account Southern Guaranty Agreement EXHIBIT D - Form of Consent to Assignment -iii- INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT, dated as of August 1, 1995, by and among FIRST UNION NATIONAL BANK OF GEORGIA, a national banking association, as trustee under the Indenture referred to below (on behalf of the holders of the Indenture Securities referred to below) (the "Indenture Trustee"), FIRST UNION NATIONAL BANK OF GEORGIA, a national banking association, as trustee under the Tax-Exempt Indenture referred to below (on behalf of the holders of the Tax-Exempt Indenture Securities referred to below) (the "Tax-Exempt Indenture Trustee"), BANQUE PARIBAS, a French banking corporation, as the Working Capital Facility Provider referred to below, THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA, an Alabama public corporation (the "IDB"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation ("Mobile Energy"), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as collateral agent hereunder for the Senior Secured Parties referred to below (the "Collateral Agent"). W I T N E S S E T H: WHEREAS, the Company owns and operates an energy and black liquor recovery complex located at an integrated pulp, paper and tissue manufacturing facility in Mobile, Alabama (such complex, as more particularly defined in the Master Operating Agreement (as defined herein) and including additions thereto and replacements thereof, the "Energy Complex"); WHEREAS, 99% of the outstanding ownership interests of the Company are owned by Mobile Energy; WHEREAS, the Company intends to finance the acquisition, construction and equipping of the Energy Complex through, among other things, the issue and sale by the Company of the Indenture Securities, the proceeds of which, net of underwriting commissions, shall be received by the Company, and, in consideration for such proceeds, the Indenture Securities shall be secured by substantially all of the assets of the Company; WHEREAS, the Company has duly authorized the creation and issuance of the Indenture Securities pursuant to the Indenture; WHEREAS, in connection with the financing of certain portions of the Energy Complex, the IDB has duly authorized the creation and issuance of the Tax-Exempt Bonds (as defined herein) pursuant to the Tax-Exempt Indenture, the proceeds of which shall be used to refund certain existing tax-exempt securities relating to the Energy Complex, and the IDB may, from time to time, authorize the creation and issuance of additional Tax- Exempt Indenture Securities (as defined herein); WHEREAS, the Company intends to finance certain of its working capital requirements arising in connection with the operation of the Energy Complex pursuant to the Working Capital Facility (as defined herein); WHEREAS, the Company may, from time to time after the date of this Agreement, finance certain improvements and other modifications to the Energy Complex, and certain refundings, with the proceeds of Subordinated Debt (as defined herein); WHEREAS, all obligations of the Company and Mobile Energy under this Agreement, the Working Capital Facility, the Indenture, the Tax-Exempt Indenture and the other Financing Documents (as defined herein) will be secured as set forth in the Security Documents (as defined herein); and WHEREAS, the parties hereto desire to enter into this Agreement to set forth their mutual understanding with respect to (a) the exercise of certain rights, remedies and options by the respective parties hereto under the Financing Documents, (b) the priority of their respective security interests created by the Security Documents and (c) the appointment of the Collateral Agent. NOW, THEREFORE, for and in consideration of the premises and of the covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, covenant and agree as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF INTERPRETATION For all purposes of this Agreement, except as otherwise expressly provided in this Agreement or unless the context otherwise requires, all terms used herein shall have the meanings set forth in Appendix A. ARTICLE II APPOINTMENT OF COLLATERAL AGENT; ESTABLISHMENT OF ACCOUNTS SECTION 2.1 Appointment of Collateral Agent. The Senior Secured Parties hereby designate and appoint Bankers Trust (Delaware) to act on behalf of the Senior Secured Parties, as agent, fiduciary and trustee thereof in respect of the Shared Collateral, in the capacity of Collateral Agent hereunder and under the other Security Documents, and each of the Senior Secured Parties hereby authorizes Bankers Trust (Delaware) as the Collateral Agent to enter into the Mortgage, the Security Agreement and any other Security Documents to which the Collateral Agent is or is to be a party on behalf of the Senior Secured Parties, to purchase, maintain, execute, deliver and perform a surety bond (and any application for a surety bond) relating to any mortgage privilege or recording tax and enter into any and all agreements relating thereto, to take such actions on its behalf under the provisions of this Agreement and such other Security Documents and to exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by the terms of this Agreement and the other Security Documents to which it is a party, together with such other powers as are reasonably incidental thereto. Bankers Trust (Delaware) hereby accepts such appointment as Collateral Agent hereunder and agrees to administer the Intercreditor Agreement Accounts and to receive, deposit and disburse all Revenues and other amounts delivered to it pursuant to the terms of this Agreement. The Mobile Energy Parties, the IDB and each Subordinated Debt Provider hereby consent to such appointment. The Collateral Agent shall hold and safeguard the Intercreditor Agreement Accounts (and the Revenues, cash, payments, investments, insurance proceeds, securities and other amounts on deposit therein from time to time) in accordance with the terms hereof. SECTION 2.2 Establishment of Intercreditor Agreement Accounts. (a) The following Accounts are hereby established and created with the Collateral Agent: (i) "Mill Owner Reimbursement Account"; (ii) "Working Capital Facility Account"; (iii) "Revenue Account"; (iv) "Operating Account"; (v) "Maintenance Reserve Account"; (vi) "Subordinated Debt Account"; (vii) "Subordinated Fee Account"; (viii) "Distribution Account"; (ix) "Completion Account"; and (x) "Loss Proceeds Account." (b) The following subaccounts of the Maintenance Reserve Account are hereby established and created with the Collateral Agent: (i) "Maintenance Plan Funding Subaccount"; and (ii) "Maintenance Excess Funding Subaccount." (c) The following subaccounts of the Completion Account are hereby established and created with the Collateral Agent: (i) "Capital Budget 2 Subaccount"; (ii) "Optional Modifications Subaccount"; and (iii) "Required Modifications Subaccount." ARTICLE III COLLECTION AND APPLICATION OF REVENUES SECTION 3.1 Collection and Application of Revenues. The Company will arrange for the direct payment to the Collateral Agent of all Revenues and, to the extent any such Revenues are at any time received by either of the Mobile Energy Parties, the Mobile Energy Parties will hold such Revenues in trust for the Collateral Agent on behalf of the Senior Secured Parties and, unless otherwise expressly provided for in any other Financing Document, will transfer such Revenues to the Collateral Agent for deposit into the Revenue Account, in each case as soon as reasonably practical but no later than three (3) Business Days after receipt thereof (duly endorsed, if necessary, to the Collateral Agent). Without limiting the generality of the foregoing, the Company shall cause the Mill Owners to pay directly to the Collateral Agent for deposit into the Revenue Account all amounts payable by the Mill Owners to the Company under the Energy Services Agreements, the Master Operating Agreement or any other Project Contract (other than amounts not constituting Revenues that are to be paid to the Company by the Mill Owners in connection with the exercise by the Company of the Company Step-In Rights). SECTION 3.2 Mill Owner Reimbursement Account. The Mill Owner Reimbursement Account shall be funded by monies transferred from the Revenue Account as and when specified in Section 3.11(a). The Collateral Agent shall, upon receipt of an Officer's Certificate of the Company specifying (a) the amount due and payable to any Mill Owner in connection with the exercise of Mill Owner Step-In Rights (except as otherwise provided in the Consents to Assignment to which such Mill Owner is a party) and (b) the manner in and time at which, and the account for or address to which, the payment thereof to such Mill Owner shall be made, apply the monies on deposit in the Mill Owner Reimbursement Account to the payment of such amount no later than such time specified in such Officer's Certificate, provided the Collateral Agent receives such Officer's Certificate on or prior to the second Business Day prior to such time. SECTION 3.3 Working Capital Facility Account. The Working Capital Facility Account shall be funded with (a) monies transferred from the Revenue Account as and when specified in Section 3.11(b) and (b) monies on deposit in the Mill Owner Maintenance Reserve Account used pursuant to Section 5.22 of the Indenture or Section 4.29 of the IDB Lease Agreement, or any comparable provision of the Working Capital Facility. The Collateral Agent shall, upon receipt of an Officer's Certificate of the Company specifying (i) the aggregate amount due and payable or scheduled to be due and payable on account of principal of and interest on, and fees and other amounts with respect to, any Working Capital Facility Loans and (ii) the manner in which and due date for, and the account for or address to which, the payment thereof to the Working Capital Facility Provider shall be made, apply the monies on deposit in the Working Capital Facility Account to the payment of such aggregate amount no later than such time specified in such Officer's Certificate, provided the Collateral Agent receives such Officer's Certificate on or prior to the second Business Day prior to such time. SECTION 3.4 Operating Account. (a) The Operating Account shall be funded by monies transferred from the Revenue Account as and when specified in Section 3.11(c). Amounts in the Operating Account shall be applied to the payment of Operation and Maintenance Costs other than Subordinated Fees and Maintenance Expenditures; provided, however, that amounts in the Operating Account may be applied to pay Maintenance Expenditures if, and solely to the extent that, the amount of monies, together with the Available Amount under any Reserve Account Security, then on deposit in the Distribution Account, the Subordinated Fee Account, the Subordinated Debt Account and the Maintenance Reserve Account are insufficient therefor. 3 (b) The Collateral Agent shall, upon receipt of an Officer's Certificate of the Company specifying (i) the amount to be disbursed from the Operating Account, (ii) that such amount has been, or within the immediately succeeding thirty-one (31) days is expected to be, used for Operation and Maintenance Costs incurred or to be incurred in accordance with Prudent Plant Operating Standards and (iii) the manner in and time at which, and the account for or address to which, the payment thereof to the Company shall be made, apply the monies on deposit in the Operating Account to the payment of such amount no later than such time specified in such Officer's Certificate, provided the Collateral Agent receives such Officer's Certificate on or prior to the second Business Day prior to such time. (c) The Officer's Certificate of the Company delivered under Section 3.4(b) shall also specify (i) the aggregate monies withdrawn from (A) the Operating Account (other than any such monies (1) rebated to the United States government pursuant to Section 148 of the Code, (2) applied to Maintenance Expenditures, (3) paid in respect of IDB Claims or (4) applied to (or deemed to be applied to) the payment of the 1994 Bonds pursuant to Section 3.16) and (B) the Mill Owner Maintenance Reserve Account (other than for any such monies deposited into the Working Capital Facility Account, the Indenture Securities Account, or the Tax-Exempt Indenture Securities Account), in each case for use during the Fiscal Year in which such Officer's Certificate is delivered (without giving effect to the amount then to be disbursed from the Operating Account as specified in such Officer's Certificate pursuant to clause (i) of Section 3.4(b)) and (ii) the aggregate amount of Operation and Maintenance Costs (other than Maintenance Expenditures) set forth in the Annual Budget for such Fiscal Year (as such Annual Budget may have been amended at the time such Officer's Certificate is delivered in accordance with the provisions of the other Financing Documents). The amount of monies so previously withdrawn (as specified in such Officer's Certificate pursuant to clause (i) above), together with the amount of Working Capital Facility O&M Loans borrowed during such Fiscal Year and the amount to be disbursed from the Operating Account (as specified in such Officer's Certificate pursuant to clause (i) of Section 3.4(b)), shall not, unless such Officer's Certificate is accompanied by an Independent Engineer Confirmation, exceed one hundred ten percent (110%) of the aggregate amount of such Operation and Maintenance Costs (as specified in such Officer's Certificate pursuant to clause (ii) above). SECTION 3.5 Maintenance Reserve Account. (a) The Maintenance Reserve Account shall be funded by monies transferred from the Revenue Account as and when specified in Section 3.11(f). The Collateral Agent shall deposit all such monies into the Maintenance Plan Funding Subaccount; provided, however, to the extent such monies are in excess of the Maintenance Reserve Account Required Deposit at the time of the deposit thereof, such excess shall be deposited into the Maintenance Excess Funding Subaccount. The Company may, at its option and from time to time, deliver to the Collateral Agent monies not then constituting Revenues (solely to the extent such monies are not otherwise required to be deposited into any Account pursuant to the terms of any Financing Document), including monies drawn under any revolving credit facility or liquidity facility providing liquidity for Southern's obligations in respect of any Southern Guaranty, for deposit into the Maintenance Plan Funding Subaccount. (b) Subject to Section 3.5(c), the Collateral Agent shall, upon receipt of an Officer's Certificate of the Company specifying (i) the amount to be disbursed from the Maintenance Reserve Account, (ii) that such amount has been, or within the immediately succeeding thirty-one (31) days is expected to be, used for Maintenance Expenditures incurred or to be incurred in accordance with Prudent Plant Operating Standards and (iii) the manner in and time at which, and the account for or address to which, the payment thereof to the Company shall be made, apply the monies on deposit in the Maintenance Reserve Account to the payment of such amount no later than such time specified in such Officer's Certificate, provided the Collateral Agent receives such Officer's Certificate on or prior to the second Business Day prior to such time. Such payments shall be made in the following order of priority: first, from the Maintenance Excess 4 Funding Subaccount, to the extent available, and, second, from the Maintenance Plan Funding Subaccount. (c) Prior to a Trigger Event, monies on deposit in the Maintenance Reserve Account (including then Available Amounts under any Reserve Account Security on deposit in the Maintenance Plan Funding Subaccount) shall first be transferred by the Collateral Agent to the Indenture Trustee for deposit into the Indenture Securities Account and to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account, ratably based upon the respective amounts owing to each such Account, on the Monthly Transfer Date immediately preceding each Interest Payment Date or Principal Payment Date therefor, whenever, and to the extent that, the monies on deposit (after giving effect to any monies to be deposited from the Revenue Account into any Account on such Monthly Transfer Date) in the Indenture Securities Account, the Tax-Exempt Indenture Securities Account, each applicable Debt Service Reserve Account (if any), each applicable Tax-Exempt Debt Service Reserve Account (if any), the Distribution Account, the Subordinated Fee Account and the Subordinated Debt Account (including, in the case of any Debt Service Reserve Account, any Tax- Exempt Debt Service Reserve Account and the Distribution Account, then Available Amounts under any Reserve Account Security on deposit therein) are insufficient to make payments when due on the Senior Securities. Any such transfers shall be made by the Collateral Agent in the following order of priority: first, transfer monies then on deposit in the Maintenance Excess Funding Subaccount; second, transfer monies then on deposit in the Maintenance Plan Funding Subaccount; third, draw upon any Reserve Account Letter of Credit on deposit in the Maintenance Plan Funding Subaccount pursuant to Section 3.15(d) in an amount up to the Available Amount thereunder and transfer the monies in respect thereof; and fourth, call upon any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount pursuant to Section 3.15(d) in an amount up to the Available Amount thereunder and transfer the monies in respect thereof, in each case, directly to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) for payment (to the extent necessary) of such amounts due and owing in respect of such Senior Securities. SECTION 3.6 Subordinated Debt Account. (a) The Subordinated Debt Account shall be funded by monies transferred from the Revenue Account as and when specified in Section 3.11(i). Subject to Section 3.6(b), the Collateral Agent shall, upon receipt of an Officer's Certificate of the Company specifying (i) the aggregate amount due and payable or scheduled to be due and payable on account of principal of and interest on, and fees and other amounts with respect to, Non- Affiliate Subordinated Debt and (ii) the manner in which and due date for, and the account for or address to which, the payment thereof to the Subordinated Debt Provider of such Non-Affiliate Subordinated Debt shall be made, apply the monies on deposit in the Subordinated Debt Account to the payment of such aggregate amount no later than such time specified in such Officer's Certificate, provided the Collateral Agent receives such Officer's Certificate on or prior to the second Business Day prior to such time. (b) Prior to a Trigger Event, monies on deposit in the Subordinated Debt Account shall be first transferred by the Collateral Agent to the Indenture Trustee for deposit into the Indenture Securities Account and to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account, ratably based upon the respective amounts owing to each such Account, on the Monthly Transfer Date immediately preceding each Interest Payment Date or Principal Payment Date therefor, whenever, and to the extent that, the monies on deposit (after giving effect to any monies to be deposited from the Revenue Account into any Account on such Monthly Transfer Date) in the Indenture Securities Account, the Tax-Exempt Indenture Securities Account, each applicable Debt Service Reserve Account (if any), each applicable Tax-Exempt Debt Service Reserve Account (if any), the Distribution Account and the Subordinated Fee Account (including, in the case of any Debt Service Reserve Account, any Tax- Exempt Debt Service Reserve Account and the Distribution Account, then Available Amounts under any Reserve Account Security on deposit therein) are insufficient to make payments when due on the Senior Securities; provided, however, that, prior to a Trigger Event, if an Event of Default shall have occurred and then be 5 continuing, the Collateral Agent shall so transfer any amounts on deposit in the Subordinated Debt Account (after application of monies on deposit in the Subordinated Fee Account and the Distribution Account) to pay any deficiencies in the Indenture Securities Account and the Tax-Exempt Indenture Securities Account before so transferring any monies (including any then Available Amounts under any Reserve Account Security) on deposit in any Debt Service Reserve Account or any Tax-Exempt Debt Service Reserve Account for such purpose. SECTION 3.7 Subordinated Fee Account. (a) The Subordinated Fee Account shall be funded by monies transferred from the Revenue Account as and when specified in Section 3.11(j). Subject to Section 3.7(b), the Collateral Agent shall, upon receipt of an Officer's Certificate of the Company (i) certifying that the requirements of Section 5.19 of the Indenture and Section 4.19 of the IDB Lease Agreement, and of any comparable provision of the Working Capital Facility, are satisfied and (ii) specifying (A) the amount of Subordinated Fees due and payable or scheduled to be due and payable to either of the Mobile Energy Parties and (B) the manner in which and due date for, and the account for or address to which, the payment thereof to such Mobile Energy Party shall be made, apply the monies on deposit in the Subordinated Fee Account to the payment of such amount no later than such time specified in such Officer's Certificate, provided the Collateral Agent receives such Officer's Certificate on or prior to the second Business Day prior to such time. (b) Prior to a Trigger Event, monies on deposit in the Subordinated Fee Account shall first be transferred by the Collateral Agent to the Indenture Trustee for deposit into the Indenture Securities Account and to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account, ratably based upon the respective amounts owing to each such Account, on the Monthly Transfer Date immediately preceding each Interest Payment Date and Principal Payment Date therefor, whenever, and to the extent that, the monies on deposit (after giving effect to any monies to be deposited from the Revenue Account into any Account on such Monthly Transfer Date) in the Indenture Securities Account, the Tax-Exempt Indenture Securities Account, each applicable Debt Service Reserve Account (if any), each applicable Tax-Exempt Debt Service Reserve Account (if any) and the Distribution Account (including, in the case of any Debt Service Reserve Account, any Tax-Exempt Debt Service Reserve Account and the Distribution Account, then Available Amounts under any Reserve Account Security on deposit therein) are insufficient to make payments when due on the Senior Securities; provided, however, that, prior to a Trigger Event, if an Event of Default shall have occurred and be continuing, the Collateral Agent shall so transfer any amounts on deposit in the Subordinated Fee Account (after application of monies on deposit in the Distribution Account) to pay any deficiencies in the Indenture Securities Account and the Tax-Exempt Indenture Securities Account before so transferring any monies (including any then Available Amounts under any Reserve Account Security) on deposit in any Debt Service Reserve Account or any Tax-Exempt Debt Service Reserve Account for such purposes. SECTION 3.8 Distribution Account. (a) The Distribution Account shall be funded from monies transferred from the Revenue Account as and when specified in Section 3.11(k). Subject to Section 3.8(b), the Collateral Agent shall, upon receipt on or prior to the second Business Day prior to any Distribution Date of an Officer's Certificate of the Company (i) certifying that the requirements of Section 5.19 of the Indenture and Section 4.19 of the IDB Lease Agreement, and of any comparable provision of the Working Capital Facility, are satisfied as of such Distribution Date, (ii) specifying (A) the aggregate amount due and payable or scheduled to be due and payable on account of principal of and interest on, and fees and other amounts with respect to, Affiliate Subordinated Debt and (B) the manner in which and due date for, and the account for or address to which, the payment thereof to the Subordinated Debt Provider of such Affiliate Subordinated Debt shall be made and (iii) specifying (A) the aggregate of any other amounts to be distributed to any Person (or the Person to whom the balance of monies on deposit therein shall be distributed) and (B) the manner in and time at which, and the account for or address to which, the payment thereof to such Person shall be made, apply the monies on deposit in the Distribution Account on 6 such Distribution Date, first, to the payment specified in clause (ii) above and, second, to the payment specified in clause (iii) above. (b) Prior to a Trigger Event, monies on deposit in the Distribution Account (including then Available Amounts under any Reserve Account Security on deposit therein) shall first be transferred by the Collateral Agent to the Indenture Trustee for deposit into the Indenture Securities Account and to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account, ratably based upon the respective amounts owing to each such Account, on the Monthly Transfer Date immediately preceding each Interest Payment Date or Principal Payment Date therefor, whenever, and to the extent that, the monies on deposit (after giving effect to any monies to be deposited from the Revenue Account into any Account on such Monthly Transfer Date) in the Indenture Securities Account, the Tax-Exempt Indenture Securities Account, each applicable Debt Service Reserve Account (if any) and each applicable Tax-Exempt Debt Service Reserve Account (if any) (including, in the case of any Debt Service Reserve Account and any Tax-Exempt Debt Service Reserve Account, then Available Amounts under any Reserve Account Security on deposit therein) are insufficient to make payments when due on the Senior Securities; provided, however, that, prior to a Trigger Event, if an Event of Default shall have occurred and be continuing, the Collateral Agent shall so transfer any amounts on deposit in the Distribution Account to pay any deficiencies in the Indenture Securities Account and the Tax- Exempt Indenture Securities Account before so transferring any monies (including any then Available Amounts under any Reserve Account Security) on deposit in any Debt Service Reserve Account or any Tax-Exempt Debt Service Reserve Account for such purposes. Any such transfers shall be made by the Collateral Agent in the following order of priority: first, transfer monies then on deposit in the Distribution Account; second, draw upon any Reserve Account Letter of Credit on deposit in the Distribution Account pursuant to Section 3.15(d) in an amount up to the Available Amount thereunder and transfer the monies in respect thereof; and third, call upon any Southern Guaranty on deposit in the Distribution Account pursuant to Section 3.15(d) in an amount up to the Available Amount thereunder and transfer the monies in respect thereof, in each case, directly to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) for payment (to the extent necessary) of such amounts due and owing in respect of such Senior Securities. (c) Notwithstanding Section 3.8(a), if (i) at any time, the amount of monies on deposit in (without giving effect to amounts then available to be drawn or called upon under any Reserve Account Security on deposit in) the Distribution Account exceeds the lesser of (A) the amount of Senior Debt and (B) $34,000,000 or (ii) on a Distribution Date, the Company shall have provided an Officer's Certificate (together with an Independent Engineer Certification) certifying to the Collateral Agent that (A) the Senior Debt Service Coverage Ratio for the one-year period consisting of the two semi-annual payment periods immediately preceding such Distribution Date was equal to at least 1.2 to 1.0, (B) based upon projections prepared by the Company in accordance with Section 1.15 of the Indenture and Section 1.12 of the IDB Lease Agreement, and with any comparable provision of the Working Capital Facility, the Senior Debt Service Coverage Ratio for the one year period consisting of the current semi-annual payment period and the immediately succeeding semi-annual payment period is projected to be at least 1.2 to 1.0 and (C) the requirements of Section 5.19 of the Indenture and Section 4.19 of the IDB Lease Agreement, and of any comparable provision of the Working Capital Facility, have not been satisfied on such Distribution Date and each of the five (5) Distribution Dates immediately preceding such Distribution Date, then, in the case of clauses (i) and (ii) above, in replacement of monies on deposit in the Distribution Account, the Company may deliver to the Collateral Agent at such time Reserve Account Security having an Available Amount thereunder equal to the amount of such monies so replaced and otherwise in accordance with Section 3.15(a); provided, however, that, in the case of clause (i) above, the amount of monies so replaced shall not be greater than the amount of the excess described in such clause (i). Any such Reserve Account Security shall terminate, and be returned to the Company, on the first Distribution Date following the delivery to the Collateral Agent of such Reserve Account Security on which the requirements of Section 5.19 of the Indenture and Section 4.19 of the IDB Lease 7 Agreement, and of any comparable provision of the Working Capital Facility, have been satisfied. SECTION 3.9 Completion Account. (a) On the Closing Date, the Capital Budget Subaccount shall be funded with monies transferred pursuant to Section 5.18(a)(iii) of the Indenture. Such monies shall be applied to the payment, or reimbursement to the extent the same have been paid or satisfied by the Company, of Project Costs in accordance with the Capital Budget. (b) The Company shall deposit the proceeds of any Debt authorized by Section 5.17 of the Indenture and Section 4.17 of the IDB Lease Agreement, and by any comparable provision of the Working Capital Facility, for (i) Optional Modifications into the Optional Modifications Subaccount and (ii) Required Modifications into the Required Modifications Subaccount. Such monies shall be applied to the payment, or reimbursement to the extent the same have been paid or satisfied by the Company, of costs incurred in connection with Optional Modifications or Required Modifications (as the case may be) in accordance with a budget prepared by the Company and approved by the Independent Engineer and delivered to the Collateral Agent. Such budget shall identify all costs reasonably anticipated to be incurred in connection with the Optional Modifications or the Required Modifications (as the case may be) and shall include a progress payment schedule for the projected requisitions to be made from the Optional Modifications Subaccount with respect to such Optional Modifications or the Required Modifications Subaccount with respect to such Required Modifications (as the case may be). (c) The Collateral Agent shall transfer monies from the applicable subaccount of the Completion Account upon receipt of an Officer's Certificate of the Company (together with an Independent Engineer's Confirmation as to clauses (i) through (iv) below) specifying (i) the amount to be disbursed from such subaccount (including reasonable supporting documentation, if available), (ii) that such amounts have been, or within the immediately succeeding forty-five (45) days are expected to be, used for (A) in the case of Section 3.9(a), Project Costs, which do not exceed the aggregate amount of the Capital Budget, less any amounts that previously have been transferred pursuant to this clause (ii) and (B) in the case of Section 3.9(b), costs incurred in connection with Optional Modifications or Required Modifications (as the case may be), (iii) the item for which payment is requested has not been the basis for a prior requisition from any Account that has been paid or with respect to which a request for payment is still pending, (iv) the Person or Persons to whom such monies shall be transferred (including appropriate account information) and (v) no Event of Default under the Indenture, the Tax-Exempt Indenture or the Working Capital Facility has occurred and is continuing. The Company shall provide the Collateral Agent with written notice when full payment of the Project Costs or costs incurred in connection with Optional Modifications or Required Modifications (as the case may be) for which monies were held in the applicable subaccount of the Completion Account has occurred, whereupon the Collateral Agent shall, within seven (7) days of receipt of such notice, transfer any monies remaining in such subaccount to the Revenue Account. SECTION 3.10 Loss Proceeds Account. (a) All Loss Proceeds shall be deposited into the Loss Proceeds Account and, subject to the provisions of this Section 3.10, applied to the payment, or reimbursement to the extent the same have been paid or satisfied by the Company, of the costs of (i) rebuilding, repairing and restoring the Energy Complex or any part thereof that has been affected by an Event of Loss or Event of Eminent Domain or (ii) building a Replacement Facility. (b) The Collateral Agent is hereby authorized to disburse from the Loss Proceeds Account the amount required to be paid for the rebuilding, repair or restoration of the Energy Complex or any part thereof, or the building of a Replacement Facility, as specified in Section 3.10(a). The Collateral Agent is hereby authorized and directed to issue its checks or transfer funds electronically for each disbursement from the Loss Proceeds Account, upon receipt of a requisition in substantially the form of Exhibit A, submitted to the 8 Collateral Agent, signed by an Authorized Officer of the Company, together with an Independent Engineer Confirmation; provided, however, that such Independent Engineer Confirmation shall not be required if such requisition includes a certification that the amount requested pursuant to such requisition, together with the amounts requested or to be requested pursuant to all other such requisitions made or reasonably expected to be made (i) during the same Fiscal Year in which such requisition is so submitted to the Collateral Agent, does not exceed $5,000,000 in the aggregate or (ii) in respect of any Event of Loss or Event of Eminent Domain, does not exceed $7,500,000 in the aggregate. The Collateral Agent shall be entitled to rely on all certifications and statements in such requisitions. The Collateral Agent shall keep and maintain adequate records pertaining to the Loss Proceeds Account and all disbursements therefrom and shall file an accounting thereof with the Company, the Independent Engineer and the Mill Owners within three (3) months following the end of each Fiscal Year. (c) If an Event of Loss or an Event of Eminent Domain shall occur, as soon as reasonably practicable but no later than the date of receipt of Loss Proceeds with respect thereto, the Company shall make a reasonable good faith determination as to (i) (A) whether or not (1) the Energy Complex or any portion thereof can be rebuilt, repaired or restored to permit operation of the Energy Complex at substantially the same level of performance as the Energy Complex was capable of being operated immediately prior to such Event of Loss or Event of Eminent Domain (such determination to take into account the impact of such Event of Loss or Event of Eminent Domain on the Mills) and (2) such rebuilding, repair or restoration would be required by Section 10.7(b)(ii) of the Master Operating Agreement or (B) whether or not (1) a Replacement Facility can be built to provide services to some or all of the Mills (such determination to take into account the impact of such Event of Loss or Event of Eminent Domain on the Mills) and (2) such Replacement Facility would be required by Section 10.7(b)(ii) of the Master Operating Agreement, for which (based upon projections of the Company prepared in accordance with Section 1.15 of the Indenture and Section 1.12 of the IDB Lease Agreement and with any comparable provision of the Working Capital Facility) the minimum Senior Debt Service Coverage Ratio for each Fiscal Year commencing with such Replacement Facility's anticipated commercial operation date through the Fiscal Year in which the last maturity of Senior Debt is scheduled to mature is projected to equal or exceed the minimum Senior Debt Service Coverage Ratio projected for the Energy Complex for each such Fiscal Year based upon the circumstances existing immediately prior to such Event of Loss or Event of Eminent Domain and (ii) whether or not such Loss Proceeds, together with any Additional Available Proceeds with respect to such Event of Loss or Event of Eminent Domain, are sufficient to permit such rebuilding, repair or restoration of the Energy Complex or a portion thereof, or such building of a Replacement Facility (such determination of sufficiency in each instance in this Section 3.10 to take into account, among other things, funds required to pay principal of and interest on the Senior Debt becoming due during such period in which commercial operation of the Energy Complex is interrupted as a result of such Event of Loss or Event of Eminent Domain). The determination of the Company pursuant to this Section 3.10(c) shall be evidenced by an Officer's Certificate of the Company filed with the Collateral Agent, which (in the event the Company determines that the Energy Complex or a portion thereof can be rebuilt, repaired, restored or replaced subject to the conditions hereof and that such Loss Proceeds, together with such Additional Available Proceeds, are sufficient therefor) shall also set forth a reasonable good faith estimate by the Company of the total cost of such rebuilding, repair, restoration or replacement; provided, however, that if the Mill Owners are the prevailing party in a dispute the subject matter of which is, or includes, whether or not the Company is required under the terms of the Master Operating Agreement to rebuild the Energy Complex, then the Company shall deliver such Officer's Certificate to the Collateral Agent. The Company shall also deliver to the Collateral Agent, at the time it delivers such Officer's Certificate, an Independent Engineer Confirmation, dated the date of such Officer's Certificate, stating that, based upon reasonable investigation and review of the determinations made by the Company, the Independent Engineer believes that the determinations and the estimate of the total cost set forth in such Officer's Certificate are reasonable. 9 (d) (i) If a determination relating to an Event of Loss or Event of Eminent Domain is made pursuant to Section 3.10(c) that (A) neither the Energy Complex nor any portion thereof can be rebuilt, repaired, restored or replaced, subject to the conditions contained therein, or (B) the Loss Proceeds with respect thereto, together with any Additional Available Proceeds, are not sufficient to permit such rebuilding, repair, restoration or replacement, then all of such Loss Proceeds shall be distributed in accordance with Section 6.2(a). Any such Loss Proceeds that are distributed to the Senior Secured Parties shall, pursuant to Section 6.2(a), be applied to the redemption of all Senior Debt in accordance with the terms of the Financing Documents. Additional Available Proceeds shall be distributed by the Collateral Agent (upon receipt by the Collateral Agent of an Officer's Certificate of the Company to such effect) to the Company. (ii) Subject to paragraph (iv) of this Section 3.10(d), if a determination relating to an Event of Loss or Event of Eminent Domain is made pursuant to Section 3.10(c)(i)(A) that (A) the Energy Complex can be completely rebuilt, repaired or restored to permit operation on a commercially feasible basis as described therein and (B) the Loss Proceeds with respect thereto, together with any Additional Available Proceeds, are sufficient to permit such rebuilding, repair or restoration, then all of such Loss Proceeds and Additional Available Proceeds shall remain on deposit in the Loss Proceeds Account and shall be applied in accordance with Section 3.10(b). Upon completion of any such complete rebuilding, repair or restoration of the Energy Complex, any Excess Loss Proceeds with respect to such Event of Loss or Event of Eminent Domain shall be distributed in accordance with Section 6.2(b). Any monies remaining in the Loss Proceeds Account following such distribution shall be deposited into the Revenue Account; provided, however, that such monies shall, solely to the extent they constitute Additional Available Proceeds, be distributed by the Collateral Agent (upon receipt by the Collateral Agent of an Officer's Certificate of the Company to such effect) to the Company. (iii) Subject to paragraph (iv) of this Section 3.10(d), if a determination relating to an Event of Loss or Event of Eminent Domain is made pursuant to Section 3.10(c)(i)(A) or 3.10(c)(i)(B) that (A) a portion of the Energy Complex can be rebuilt, repaired or restored to permit operation on a commercially feasible basis as described in Section 3.10(c)(i)(A) or 3.10(c)(i)(B) or a Replacement Facility can be built, subject to the conditions contained therein, and (B) the Loss Proceeds with respect thereto, together with any Additional Available Proceeds, are sufficient to permit such rebuilding, repair, restoration or replacement, then all of such Loss Proceeds and Additional Available Proceeds shall remain on deposit in the Loss Proceeds Account and shall be applied in accordance with Section 3.10(b). Upon completion of any such rebuilding, repair, restoration or replacement of the Energy Complex, any Excess Loss Proceeds with respect to such Event of Loss or Event of Eminent Domain shall be distributed in accordance with Section 6.2(b). Any monies remaining in the Loss Proceeds Account following such distribution shall be deposited into the Revenue Account; provided, however, that such monies shall, solely to the extent they constitute Additional Available Proceeds, be distributed by the Collateral Agent (upon receipt by the Collateral Agent of an Officer's Certificate of the Company to such effect) to the Company. (iv) Notwithstanding paragraphs (ii) and (iii) of this Section 3.10(d), at the election of the Company, all of the Loss Proceeds, together with any Additional Available Proceeds, with respect to an Event of Loss or Event of Eminent Domain shall be distributed in accordance with Section 6.2(a), provided that, at the time of such election, (A) the Company is not otherwise required under the Master Operating Agreement or the Lease, as applicable, to rebuild, repair, restore or replace the Energy Complex or to apply Loss Proceeds to the rebuilding, repair, restoration or replacement of the Energy Complex and (B) the Company files 10 with the Collateral Agent an Officer's Certificate certifying (together with an Independent Engineer Confirmation) that (1) the monies on deposit (including any Additional Available Proceeds) in the Loss Proceeds Account are sufficient to redeem all Senior Debt, (2) all or substantially all of the Energy Complex has suffered loss or been destroyed or otherwise rendered unfit for normal use in connection with such Event of Loss or all or substantially all of the Energy Complex has been the subject of a compulsory transfer or taking, or transfer under threat of compulsory transfer or taking, in connection with such Event of Eminent Domain and (3) the Company is not otherwise required under the Master Operating Agreement or the Lease, as applicable, to rebuild, repair, restore or replace the Energy Complex, or to apply Loss Proceeds to the rebuilding, repair, restoration or replacement of the Energy Complex. Such Officer's Certificate shall be accompanied by an Opinion of Counsel to the effect set forth in clause (3) above; provided, however, that if any Dispute (as defined in the Master Operating Agreement) has arisen between the Mill Owners and the Company with respect to the compliance of such election with the applicable provisions of the Master Operating Agreement and the Lease, as applicable, the Company shall also deliver to the Collateral Agent satisfactory evidence of the conclusive resolution of such Dispute pursuant to the dispute resolution provisions of the Master Operating Agreement. Any such Loss Proceeds that are distributed to the Senior Secured Parties shall, pursuant to Section 6.2(a), be applied to the redemption of all Senior Debt in accordance with the terms of the Financing Documents. (e) Notwithstanding any other provision of this Section 3.10, (i) if the Loss Proceeds Account does not contain an amount at least equal to the estimate of the total cost of rebuilding, repair, restoration or replacement set forth in the Officer's Certificate filed with the Collateral Agent pursuant to Section 3.10(c), and such amounts have not otherwise been committed by the applicable insurers or condemning authority as certified in such Officer's Certificate, by the tenth (10th) Business Day following the determination contemplated by Section 3.10(d)(ii) or 3.10(d)(iii), then the Company shall be deemed to have made the determination contemplated by Section 3.10(d)(i) and (ii) if the Company receives Loss Proceeds from an Event of Loss or Event of Eminent Domain and the cost to rebuild, repair, restore or replace the Energy Complex does not, based upon a reasonable and good faith determination of the Company, exceed in the aggregate $7,500,000, then the Company shall not be required to comply with the provisions of Section 3.10(c) or 3.10(d) and such Loss Proceeds shall be deposited into the Loss Proceeds Account and, together with any Additional Available Proceeds, applied in accordance with Section 3.10(b) to rebuild, repair, restore or replace the Energy Complex to permit the operation thereof at substantially the same level of performance at which the Energy Complex was capable to being operated immediately prior to such Event of Loss or Event of Eminent Domain (as the case may be). SECTION 3.11 Revenue Account. Subject to Section 6.1, monies on deposit in the Revenue Account, upon receipt by the Collateral Agent, no later than the close of business on the Business Day prior to each Monthly Transfer Date, of an Officer's Certificate of the Company (substantially in the form of Exhibit B) certifying the amount of such monies to be withdrawn and the application thereof (including appropriate payment instructions in respect thereof), will be withdrawn on such Monthly Transfer Date to make the following transfers or deposits to the following Persons or into the following Accounts and in the following order of priority (but only to the extent such monies are then on deposit in the Revenue Account): (a) for deposit into the Mill Owner Reimbursement Account, an amount equal to the amount that is or will be reimbursable to the Mill Owners prior to the next succeeding Monthly Transfer Date in connection with the exercise of Mill Owner Step-In Rights (except as otherwise provided in the Consents to Assignment to which the Mill Owners are parties); 11 (b) for deposit into the Working Capital Facility Account, an amount that is equal to amounts that were scheduled to be due and payable, but remain unpaid, or are scheduled to become due and payable for principal of and interest on, and fees and other amounts with respect to, the Working Capital Facility prior to the next succeeding Monthly Transfer Date and, upon the occurrence and during the continuation of a Bankruptcy Event in respect of either of the Mobile Energy Parties, all other amounts due and payable in respect thereof (whether as a result of acceleration or otherwise); (c) for deposit into the Operating Account, an amount sufficient to cause the aggregate amount therein, after giving effect to monies deposited therein prior to such Monthly Transfer Date that have not yet been used for Operation and Maintenance Costs, to be equal to the amount of Operation and Maintenance Costs (other than (i) Subordinated Fees, (ii) Operation and Maintenance Costs that the Company expects to pay with Working Capital Facility O&M Loans and (iii) unless and to the extent that the monies on deposit in the Maintenance Reserve Account, the Subordinated Debt Account, the Subordinated Fee Account and the Distribution Account (including, in the case of the Maintenance Plan Funding Subaccount and the Distribution Account, the then Available Amounts under any Reserve Account Security on deposit therein) are insufficient therefor, Maintenance Expenditures) that are estimated by the Company to be due and payable prior to the next succeeding Monthly Transfer Date; (d) to each of the Collateral Agent, the Indenture Trustee and the Tax-Exempt Indenture Trustee, an amount that is equal to the amount due and payable immediately prior to such Monthly Transfer Date to each of such Persons in their capacities as the Collateral Agent under this Agreement, the Indenture Trustee under the Indenture and the Tax-Exempt Indenture Trustee under the Tax-Exempt Indenture, respectively; provided, however, that if monies on deposit in the Revenue Account are insufficient on such Monthly Transfer Date to make the transfers specified in this Section 3.11(d), distribution of monies will be made ratably to each specified Person based upon the respective amounts owing to each such Person; (e) (i) for deposit into the Working Capital Facility Account, an amount that is equal to, after giving effect to any deposits into the Working Capital Facility Account in accordance with Section 3.11(b), all amounts due and payable (whether as a result of acceleration or otherwise) for principal of and interest on, and fees and other amounts with respect to, the Working Capital Facility immediately prior to such Monthly Transfer Date; (ii) to the Indenture Trustee for deposit into (A) the Indenture Securities Interest Subaccount, an amount equal to the Required Interest Deposit with respect thereto, (B) the Indenture Securities Principal Subaccount, an amount equal to the Required Principal Deposit with respect thereto and (C) the Indenture Securities Redemption Subaccount, an amount equal to the sum of the Required Interest Deposit and the Required Principal Deposit, in each case with respect thereto; and (iii) to the Tax-Exempt Indenture Trustee for deposit into (A) the Tax-Exempt Indenture Securities Interest Subaccount, an amount equal to the Required Interest Deposit with respect thereto, (B) the Tax-Exempt Indenture Securities Principal Subaccount, an amount equal to the Required Principal Deposit with respect thereto and (C) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount equal to the sum of the Required Interest Deposit and the Required Principal Deposit, in each case with respect thereto; provided, however, that if monies in the Revenue Account are insufficient on such Monthly Transfer Date to make the transfers specified in this Section 3.11(e), distribution of monies shall be made ratably to each specified Account or Person based upon the respective amounts owing to each such Account or Person; (f) for deposit into the Maintenance Reserve Account, such amount as the Company may elect, but in no event less than (and, in the event 12 that the amount of monies that are then, or after giving effect to any monies to be deposited into the Mill Owner Maintenance Reserve Account on such Monthly Transfer Date will be, on deposit in or otherwise credited to (in accordance with the Mill Owner Maintenance Reserve Account Agreement) the Mill Owner Maintenance Reserve Account is less than $2,000,000, in no event more than) the excess of (i) the Maintenance Reserve Account Required Deposit with respect to the Fiscal Quarter in which such Monthly Transfer Date occurs over (ii) the amount of monies (including then Available Amounts under any Reserve Account Security), if any, deposited into the Maintenance Reserve Account (other than any such monies or Reserve Account Security used to replace other Reserve Account Security or monies on deposit therein) during the Fiscal Quarter in which such Monthly Transfer Date occurs; (g) to: (i) the Indenture Trustee, for deposit into each Debt Service Reserve Account (if any), an amount sufficient to cause the aggregate amount of monies, together with the then Available Amount under any Reserve Account Security, on deposit in such Debt Service Reserve Account to equal the Debt Service Reserve Account Required Balance immediately prior to such Monthly Transfer Date; and (ii) the Tax-Exempt Indenture Trustee, for deposit into each Tax-Exempt Debt Service Reserve Account (if any), an amount sufficient to cause the aggregate amount of monies, together with the then Available Amount under any Reserve Account Letter of Credit, on deposit in such Tax-Exempt Debt Service Reserve Account to equal the Tax-Exempt Debt Service Reserve Account Required Balance immediately prior to such Monthly Transfer Date; provided, however, that if monies in the Revenue Account are insufficient on such Monthly Transfer Date to make the transfers specified in this Section 3.11(g), distribution of monies will be made ratably to each specified Person based upon the respective amounts owing to each such Person; (h) to the Company for deposit into the Mill Owner Maintenance Reserve Account, an amount sufficient to cause the aggregate amount of monies on deposit in or otherwise credited to (in accordance with the Mill Owner Maintenance Reserve Account Agreement) the Mill Owner Maintenance Reserve Account to equal $2,000,000; (i) for deposit into the Subordinated Debt Account, an amount determined by the Company or otherwise required pursuant to the terms of any Subordinated Loan Agreement relating to Non-Affiliate Subordinated Debt to be deposited into the Subordinated Debt Account on such Monthly Transfer Date; (j) for deposit into the Subordinated Fee Account, an amount that, after giving effect to amounts on deposit therein and a uniform amount to be deposited therein in each succeeding month prior to the next Distribution Date, will be equal to the amount of Operation and Maintenance Costs constituting Subordinated Fees that will be due and payable or are estimated to be due and payable as of such Distribution Date; and (k) to the Distribution Account. SECTION 3.12 Investment of Monies in the Intercreditor Agreement Accounts. (a) Amounts deposited into the Intercreditor Agreement Accounts, at the written request and direction of the Company, shall be invested by the Collateral Agent in Permitted Investments. Such Permitted Investments shall mature in such amounts and not later than such times as may be necessary to provide monies when needed to make payments with such monies as provided in this Agreement. Net interest or gain received from such Permitted Investments shall remain in each Intercreditor Agreement Account pending application as provided in this Agreement. Absent written instructions from the Company, the Collateral Agent shall invest the amounts held in the Intercreditor Agreement Accounts in Permitted Investments described in clause (a) of the definition of Permitted Investments. All such Permitted Investments shall be made in the name of the 13 Collateral Agent (it being understood and agreed that the Collateral Agent shall not be responsible for valuation losses in respect thereof) and shall be made in such manner as to preserve the Lien of the Security Agreement thereon. The Collateral Agent shall maintain records reflecting the interest of each Intercreditor Agreement Account in such Permitted Investments. (b) In computing the amount in any Intercreditor Agreement Account (or any other separate account or fund created under the provisions of, and for any purpose provided in, this Agreement), each Permitted Investment on deposit therein shall be valued, as reasonably determined by the Collateral Agent (it being understood and agreed that the Collateral Agent shall not be responsible for valuation losses in respect thereof), at the fair value thereof, including accrued interest thereon. On the Business Day immediately preceding each Monthly Transfer Date and the date of any withdrawal of monies on deposit in any Intercreditor Agreement Account, the Collateral Agent shall so value each Permitted Investment on deposit in such Intercreditor Agreement Account and, promptly thereafter, shall notify the Company, the Senior Secured Parties and the Independent Engineer as to the amount of any deficiency or surplus in such Intercreditor Agreement Account as of such date based upon such valuation. (c) Amounts deposited in any Intercreditor Agreement Account may be combined with amounts deposited in other Intercreditor Accounts for purposes of making any Permitted Investment, provided that such Intercreditor Agreement Account shall maintain an undivided interest in any such combined Permitted Investment based upon its pro rata share of the amount contributed by such Intercreditor Agreement Account at the time of the making of such combined Permitted Investment. SECTION 3.13 Monies to Be Held in Trust. All monies required to be deposited with or paid to the Collateral Agent for the account of any Intercreditor Agreement Account under any provision of this Agreement and all investments made therewith, and all investments made therewith, and all monies withdrawn from any Intercreditor Agreement Account and held by the Collateral Agent, shall be held by the Collateral Agent in trust and, while so held, for and on behalf of the Senior Secured Parties. SECTION 3.14 Dominion and Control. Each of the Mobile Energy Parties hereby transfers, assigns and sets over all of its right, title and interest in and to all Intercreditor Agreement Accounts and all amounts or investments deposited or held in any Intercreditor Agreement Account and grants to the Collateral Agent sole dominion and control over such amounts. Neither of the Mobile Energy Parties shall have the right to withdraw monies from any Intercreditor Agreement Account hereunder, except to the extent such monies are disbursed by the Collateral Agent pursuant to the terms of this Agreement. SECTION 3.15 Reserve Account Security. (a) In addition to and without in any way limiting the provisions of Sections 3.5 and 3.8 but subject to Section 3.15(c), the Company shall not be required at any time to deposit any monies into the Maintenance Plan Funding Subaccount, and the Company shall be entitled from time to time to withdraw monies on deposit in the Maintenance Plan Funding Subaccount or, subject to and in accordance with Section 3.8(c), the Distribution Account, provided that and for so long as Reserve Account Security having an Available Amount thereunder equal to the amount of such monies otherwise required to be and not so deposited or the amount of such monies so withdrawn (as the case may be) shall have been delivered to the Collateral Agent, at or prior to such time, for deposit into the Maintenance Plan Funding Subaccount or the Distribution Account (as the case may be). At the time of any such deposit, the Collateral Agent shall be entitled to receive, and (subject to Section 7.2) shall be fully protected in relying upon, an Opinion of Counsel to the effect that such Reserve Account Security (i) is permitted by this Section 3.15 and has been delivered in accordance with the provisions hereof, (ii) has been duly authorized, executed and delivered by the provider thereof and (iii) constitutes a legal, valid and binding obligation of such provider, enforceable against such provider in accordance with its terms, except as such enforceability (A) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent 14 conveyance, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights and remedies generally as such laws would apply in the event of a bankruptcy, insolvency or reorganization of, or other similar occurrence with respect to, such provider and (B) is subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law) and other customary qualifications and limitations. The Company may from time to time, at its discretion, replace or reduce the Available Amount (in whole or in part) under any Reserve Account Security on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account (as the case may be) with other Reserve Account Security having an Available Amount thereunder, or with monies in an amount, equal to the Available Amount so replaced or reduced. (b) Each Reserve Account Security on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account shall provide that not less than forty-five (45) days prior to the occurrence of a Termination Event with respect to such Reserve Account Security, the provider thereof shall deliver written notice to the Collateral Agent and the Company of such occurrence. The Company shall provide notice to the Collateral Agent of the occurrence of any Credit Standard Event or Default Event within three (3) Business Days of its actual or constructive knowledge of the event giving rise to such occurrence. (c) If (i) (in lieu of any monies required to be deposited into, or in replacement of monies or other Reserve Account Security on deposit in, the Maintenance Plan Funding Subaccount) any Reserve Account Security is on deposit in the Maintenance Plan Funding Subaccount pursuant to Section 3.15(a), then, immediately upon the occurrence of a Required Deposit Event with respect to such Reserve Account Security, the Company agrees to deposit into the Maintenance Plan Funding Subaccount an amount of monies equal to the Required Deposit with respect to such Required Deposit Event and (ii) (in lieu of any monies required to be deposited into, or in replacement of monies or other Reserve Account Security on deposit in, the Distribution Account) any Reserve Account Security is on deposit in the Distribution Account pursuant to Section 3.15(a), then, immediately upon the occurrence of a Required Deposit Event with respect to such Reserve Account Security, the Company agrees to deposit into the Distribution Account an amount of monies equal to the Required Deposit with respect to such Required Deposit Event. (d) If the Company fails to make any Required Deposit pursuant to Section 3.15(c) as and when due, then the Collateral Agent shall, and is hereby authorized and directed to, draw or call upon such Reserve Account Security in an amount equal to the amount of such Required Deposit that the Company so failed to deposit; provided, however, that, if a Required Deposit Event occurs at a time when more than one Reserve Account Letter of Credit or Southern Guaranty is on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, the Collateral Agent may elect, subject to, in the case of the Maintenance Plan Funding Subaccount, Section 3.5(c) and, in the case of the Distribution Account, Section 3.8(b), the order in which the Collateral Agent shall draw upon such Reserve Account Letters of Credit or call upon such Southern Guaranties (as the case may be). Any amounts drawn or called upon by the Collateral Agent under any such Reserve Account Security shall be deposited into the Reserve Account Security Account in which such Reserve Account Security was deposited. The Company's obligations under Section 3.15(c) shall be satisfied to the extent of any such deposit. SECTION 3.16 Payment of 1994 Bonds. On each 1994 Bond Payment Date, the Collateral Agent shall, upon receipt of an Officer's Certificate of the Company specifying the aggregate amount due and payable on account of principal of and premium, if any, and interest on the 1994 Bonds, make payment of such aggregate amount by debiting the Revenue Account (or, if the monies on deposit in the Revenue Account are insufficient therefor and so long as no Trigger Event has occurred and is continuing, the Collateral Agent may debit, in the following order of priority, the Operating Account, the Maintenance Reserve Account, the Distribution Account, the Subordinated Fee Account and the Subordinated Debt Account (including, in the case of the Maintenance Plan Funding Subaccount and 15 the Distribution Account, the then Available Amount under any Reserve Account Security on deposit therein)) to the extent necessary to make, or to cause to be deemed to be made, such payment, and by immediately paying over to, or deeming to be immediately paid over to (as applicable), the 1994 Bond Trustee the amount so debited. The Collateral Agent, in its capacity as the 1994 Bond Trustee and as Collateral Agent hereunder, and the Company hereby agree that the 1994 Bond Trustee shall (a) receive each such payment, or shall deem each such payment to be received by it (as applicable), and (b) immediately pay the amount thereof over to, or deem such amount to be paid over to (as applicable), the Collateral Agent (as assignee of the payee under the 1994 Bonds), in respect of the applicable payment in respect of the 1994 Bonds, for credit to the applicable Account or Accounts in the amount by which such Account was or Accounts were so debited in connection with such payment. The provisions of this Section 3.16 shall remain in effect only so long as the Company is the payee under, and the Collateral Agent is the assignee of, the 1994 Bonds. ARTICLE IV PRIORITIES; SUBORDINATION SECTION 4.1 Priority of Security Interests. (a) Each Senior Secured Party agrees that, as among the Senior Secured Parties and subject to the priorities set forth in and the other provisions of Article VI, the Security Interest of each Senior Secured Party in any Shared Collateral ranks and will rank equally in priority with the Security Interest of the other Senior Secured Parties in the same Shared Collateral. (b) The priorities specified in this Agreement are applicable irrespective of any statement in any other Security Document or in any other Contract to the contrary, the time or order or method of attachment or perfection of Liens or the time or order of filing of Financing Statements or the giving or failure to give notice of the acquisition or expected acquisition of purchase money or other security interests and, to the extent not provided for in this Agreement, the rights and priorities of the Senior Secured Parties shall be determined in accordance with applicable Law. (c) The Mobile Energy Parties hereby covenant and agree, as a condition to entering into any Financing Document or Subordinated Loan Agreement with a Senior Secured Party or Subordinated Debt Provider (as the case may be), to cause each Person holding Senior Debt or Subordinated Debt to become a party to this Agreement by executing an amendment to this Agreement and becoming a Senior Secured Party or a Subordinated Debt Provider (as the case may be) hereunder, and each of the Collateral Agent and the Intercreditor Parties hereby covenants and agrees to cooperate in respect thereof. SECTION 4.2 Subordination. (a) The Mobile Energy Parties and each Subordinated Debt Provider hereby agree for the benefit of the Senior Secured Parties that all Subordinated Debt shall be junior and subordinate, to the extent and in the manner set forth hereinafter, in right of payment to the prior indefeasible payment or satisfaction in full in cash of all Secured Obligations. In furtherance thereof, each Subordinated Debt Provider shall be subject to the following: (i) Except for receiving of payments in accordance with Section 3.11(i), a Subordinated Debt Provider shall not ask, demand, sue for, take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner (including from or by way of the Collateral or any guaranty of payment or performance), payment of all or any Subordinated Debt unless and until the Senior Debt Termination Date shall have occurred. (ii) Until the Senior Debt Termination Date, a Subordinated Debt Provider shall not (A) accelerate Subordinated Debt for any reason (other than as a result of a Bankruptcy Event in respect of either of the Mobile Energy Parties), (B) exercise any rights or enforce any remedies or assert 16 any claim with respect to the Collateral or any assets of either of the Mobile Energy Parties or sell any of the Collateral, (C) seek to foreclose Liens that may be granted to it pursuant to the terms of the Contracts granting such Liens to such Subordinated Debt Provider or (D) take any action, directly or indirectly, or institute any proceedings, directly or indirectly, with respect to the foregoing; provided, however, that if any principal, interest or other amount required to be paid to such Subordinated Debt Provider by the Company is not paid when due, such Subordinated Debt Provider may charge interest at the overdue rate specified in the applicable Subordinated Loan Agreement. (iii) Upon any distribution of all or any of the assets of either of the Mobile Energy Parties to its creditors upon the dissolution, winding up, liquidation, arrangement, reorganization or composition of such Mobile Energy Party, whether in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings or upon a general assignment for the benefit of creditors or any other marshaling of the assets and liabilities of such Mobile Energy Party or otherwise, any payment or distribution of any kind (whether in cash, property or securities) that otherwise would be payable or deliverable upon or with respect to Subordinated Debt shall be paid or delivered directly to the Collateral Agent, if such payment is of cash, for application to and, if such payment is of non-cash property or securities, as Collateral for, in either case, the payment or prepayment of the Secured Obligations until the Secured Obligations have been paid or otherwise satisfied in full and the Collateral Agent shall have received notice of such satisfaction, termination or expiration. (iv) Each of the Senior Secured Parties hereby authorizes and directs the Collateral Agent on its behalf to demand specific performance of the terms of subordination set forth in this Section 4.2(a), whether or not the Mobile Energy Parties shall have complied with any of the provisions hereof applicable to them, at any time when a Subordinated Debt Provider shall have failed to comply with any of such provisions applicable to such Subordinated Debt Provider. Each Subordinated Debt Provider hereby irrevocably waives any defense based upon the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance. (v) Until the Senior Debt Termination Date, a Subordinated Debt Provider shall not commence or join with any creditor other than the Collateral Agent in commencing any proceeding referred to in paragraph (iii) of this Section 4.2(a) for the payment of any amounts that otherwise would be payable or deliverable upon or with respect to Subordinated Debt. (vi) Subject to the termination of the Financing Commitments and the indefeasible payment or satisfaction in full of all of the Financing Liabilities, the Subordinated Debt Providers shall be subrogated to the rights of the Senior Secured Parties to receive payments or distributions of assets of the Mobile Energy Parties made on the Financing Liabilities until the Subordinated Debt shall have been satisfied in full. The foregoing provisions of this Section 4.2(a) regarding subordination are for the benefit of the Senior Secured Parties and shall be enforceable by them directly against the Subordinated Debt Providers, and no Senior Secured Party shall be prejudiced in its right to enforce subordination of any Subordinated Debt by any act or failure to act by either of the Mobile Energy Parties or anyone in custody of its assets or property. The Mobile Energy Parties shall not make any payment to the Subordinated Debt Providers, and the Subordinated Debt Providers shall not retain any payment from the Mobile Energy Parties, in contravention of this Section 4.2(a). (b) Each of the parties hereto hereby acknowledges and agrees that all amounts applied to the payment of rebate pursuant to Section 148 of the Code and all IDB Claims shall be treated as Operation and Maintenance Costs incurred in 17 accordance with Prudent Plant Operating Standards and shall in no way be affected by or subject to the terms of Section 4.2 of this Agreement. ARTICLE V EXERCISE OF RIGHTS So long as any Secured Obligations remain outstanding, the following provisions shall apply: (a) If a Trigger Event shall have occurred and be continuing, upon the written request of the Required Senior Creditors contained in Senior Creditor Certificates, the Collateral Agent, on behalf of the Indenture Trustee, the Tax-Exempt Indenture Trustee and the Working Capital Facility Provider, as applicable, shall be permitted and is hereby authorized to take any and all actions and to exercise any and all rights, remedies and options that it may have under this Agreement, the other Financing Documents and applicable Law; provided, however, that if the underlying event that caused such Trigger Event is a Bankruptcy Event in respect of either of the Mobile Energy Parties, no written request of the Required Senior Creditors shall be required in order to permit and authorize the Collateral Agent following such Trigger Event to take any and all actions and to exercise any and all rights, remedies and options that it may have under this Agreement, the other Financing Documents or applicable Law; provided further, however, that the Collateral Agent shall not amend, modify or supplement (or agree to consent to any such amendment, modification or supplement), directly or indirectly or in the name of either of the Mobile Energy Parties, any Project Contract if such amendment, modification or supplement shall adversely affect any Senior Secured Party in any material respect unless the Collateral Agent shall have obtained the prior written consent of such Senior Secured Party to such amendment, modification or supplement. The Collateral Agent shall provide each Senior Secured Party with at least thirty (30) days prior written notice of all such proposed amendments, modifications or supplements to the Project Contracts. Nothing contained herein shall be construed as restricting the right of any Senior Secured Party to cause the acceleration, in accordance with the applicable Financing Document, of the Senior Debt held by such Senior Secured Party. (b) The Senior Secured Parties hereby agree to give each other and the Collateral Agent written notice of the occurrence of any Event of Default or Trigger Event as soon as practicable after the occurrence thereof; provided, however, that the failure to provide such notice shall not limit or impair the rights of the Senior Secured Parties hereunder or under any other Financing Document or result in any liability to the Senior Secured Party failing to do so. (c) Each Intercreditor Party and the Collateral Agent hereby acknowledge and agree that to the extent that Indenture Securities Collateral is held by the Indenture Trustee in accordance with Article IV of the Indenture, (i) such Indenture Securities Collateral is held for the benefit of the Holders of the Indenture Securities, (ii) the Indenture Trustee shall hold such Indenture Securities Collateral solely for the benefit of the Holders of the Indenture Securities and (iii) such Indenture Securities Collateral shall not be subject to the Lien granted by the Security Agreement or the Mortgage. The Indenture Trustee hereby acknowledges and agrees that it shall make all payments to the Collateral Agent required to be made by it pursuant to the Indenture in accordance with the terms and conditions of the Indenture. (d) Each Intercreditor Party and the Collateral Agent hereby acknowledge and agree that to the extent Tax-Exempt Indenture Securities Collateral is held by the Tax-Exempt Indenture Trustee in accordance with Article IV of the Tax-Exempt Indenture, (i) such Tax-Exempt Indenture 18 Securities Collateral is held for the benefit of the Holders of the Tax- Exempt Indenture Securities, (ii) the Tax-Exempt Indenture Trustee shall hold such Tax-Exempt Indenture Securities Collateral solely for the benefit of the Holders of the Tax-Exempt Indenture Securities and (iii) such Tax-Exempt Indenture Securities Collateral shall not be subject to the Lien granted by the Security Agreement or the Mortgage. The Tax- Exempt Indenture Trustee hereby acknowledges and agrees that it shall make all payments to the Collateral Agent required to be made by it pursuant to the Tax-Exempt Indenture in accordance with the terms and conditions of the Tax-Exempt Indenture. (e) Each Intercreditor Party hereby acknowledges and agrees that the Collateral Agent shall administer the Shared Collateral in the manner contemplated by this Agreement and the other Security Documents and the Collateral Agent shall exercise, as directed by the Required Senior Creditors in Senior Creditor Certificates in accordance with paragraph (a) of this Article V, such rights and remedies with respect to the Shared Collateral (including the curing of defaults under the Project Contracts) as are granted to it under the Security Documents, this Agreement and applicable Law. No Intercreditor Party and no class or classes of Intercreditor Parties shall have any right (i) to direct the Collateral Agent to take any action in respect of the Shared Collateral other than in accordance with paragraph (a) of this Article V or (ii) to take any action with respect to the Shared Collateral (A) independently of the Collateral Agent or (B) other than to direct the Collateral Agent in writing to take action in accordance with paragraph (a) of this Article V; provided, however, that nothing in paragraph (e) of this Article V shall be deemed to limit the ability of any Senior Secured Party to take any action in accordance with paragraph (i) of this Article V. (f) From time to time during the continuation of a Trigger Event, the Collateral Agent shall, as instructed in Senior Creditor Certificates of the Required Senior Creditors in accordance with paragraph (a) of this Article V, render an accounting of the current balance of each Intercreditor Agreement Account or other amounts or monies administered by the Collateral Agent under this Agreement. (g) Each of the Mobile Energy Parties covenants and agrees that it shall not take any action that would prohibit or impair the ability of the Collateral Agent from participating in any objection to any foreclosure or similar proceeding instituted by a junior lienor against either Mobile Energy Party; provided, however, that nothing in this paragraph (g) shall, or shall be deemed to, affect the relationship among the Senior Secured Parties or the relationship among the Senior Secured Parties, the other Intercreditor Parties and the Collateral Agent, nor shall anything in this paragraph (g) affect any representation, warranty, covenant or agreement of any Senior Secured Party under or in this Agreement. (h) Each Senior Secured Party hereby agrees that, upon the request of the Collateral Agent, it shall give notice to the Collateral Agent and the Company of (i) all the outstanding Financing Liabilities owed to such Senior Secured Party as of the date of such request, (ii) the unutilized outstanding Financing Commitments of such Senior Secured Party as of the date of such request and (iii) any other information that the Collateral Agent may reasonably request. The Company agrees that, as of the end of each Fiscal Quarter and from time to time upon the reasonable request of the Collateral Agent, the Company shall send to the Collateral Agent an Officer's Certificate of the Company certifying as to the matters described in clauses (i) and (ii) of the preceding sentence. (i) Notwithstanding the foregoing provisions of this Article V, each Senior Secured Party individually shall be authorized to cure any default of the Company under any Project Contract in accordance with the Consent to Assignment executed in connection with such Project Contract; provided, however, that monies advanced in connection with such cure shall 19 not constitute Senior Debt unless such monies would otherwise satisfy the requirements for the issuance of Senior Debt. (j) The Intercreditor Parties hereby agree that if, at any time during the term of this Agreement, any Intercreditor Party receives any payment or distribution of assets of the Mobile Energy Parties of any kind or character, whether monies or cash proceeds resulting from liquidation of the Shared Collateral (other than in accordance with this Agreement), such Intercreditor Party shall hold such payment in trust for the benefit of the Senior Secured Parties and shall immediately remit such payment or distribution to the Collateral Agent, and the Collateral Agent shall deposit such monies or proceeds in the Revenue Account (or pursuant to Article VI) for application or distribution, as the case may be, in accordance with the terms of this Agreement. ARTICLE VI DIVISION OF PROCEEDS SECTION 6.1 Division of Proceeds. (a) Upon and following a Wind-Up Event, the proceeds of any sale, disposition or other realization or collection by the Collateral Agent or by any Senior Secured Party upon the Shared Collateral (or any portion thereof) pursuant to the Security Documents shall be distributed in the following order of priorities: First, to the Tax-Exempt Indenture Trustee from proceeds of the Shared Collateral, any amount required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of the Tax-Exempt Indenture Securities (to the extent not already provided for in the Tax-Exempt Indenture); Second, to the Collateral Agent, to the Indenture Trustee and the Tax-Exempt Indenture Trustee and to the IDB, ratably, from proceeds of the Shared Collateral (other than Receivables and Fuel Inventory), to the extent available, and then from Receivables and Fuel Inventory, an amount equal to the amounts due in respect of the Collateral Agent Claims, the Trustee Claims and the IDB Claims, respectively, due and payable as of the date of such distribution, provided that, prior to any such distribution to (i) the Indenture Trustee or the Tax-Exempt Indenture Trustee, the Collateral Agent shall have received a certificate signed by a Responsible Officer of the Indenture Trustee and the Tax-Exempt Indenture Trustee (as the case may be) setting forth the amount so payable to the Indenture Trustee and the Tax-Exempt Indenture Trustee (as the case may be) as of the date of such distribution and (ii) the IDB, the Collateral Agent shall have received a certificate signed by an Authorized Officer of the IDB setting forth the amount so payable to the IDB as of the date of such distribution; Third, to the Working Capital Facility Provider from the proceeds of Receivables and Fuel Inventory, an amount equal to the unpaid amount of all Financing Liabilities owed by the Company under the Working Capital Facility, provided that prior to any such distribution the Collateral Agent shall have received a certificate executed by an Authorized Representative of the Working Capital Facility Provider setting forth the amount so payable to the Working Capital Facility Provider as of the date of such distribution; Fourth, to the Senior Secured Parties (including the Working Capital Facility Provider to the extent that all amounts owed to it under the Working Capital Facility have not been repaid pursuant to paragraph Third of this Section 6.1(a)), ratably, an amount equal to the unpaid amount of all Financing Liabilities owed to the Senior Secured Parties, provided that prior to any such distribution the Collateral Agent shall have received a certificate executed by an Authorized Representative of each 20 such Senior Secured Party setting forth the amount so payable to such Senior Secured Party as of the date of such distribution; Fifth, to the Subordinated Debt Providers, ratably, an amount equal to the unpaid obligations owed to such Subordinated Debt Providers by the Mobile Energy Parties under any Subordinated Loan Agreement, provided that prior to any such distribution the Collateral Agent shall have received a certificate executed by an Authorized Representative of each such Subordinated Debt Provider setting forth the amount so payable to such Subordinated Debt Provider as of the date of such distribution; and Sixth, to the Mobile Energy Parties or their successors or assigns or to whomever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, any surplus then remaining from such proceeds, it being understood that each of the Mobile Energy Parties shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate of the sums referred to in paragraphs First through Fifth of this Section 6.1(a). (b) As used in this Section 6.1, "proceeds" of Shared Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Shared Collateral, including any thereof received under any reorganization, liquidation or adjustment of Debt of the Mobile Energy Parties or any issuer of or obligor on any of the Shared Collateral. (c) The Collateral Agent shall, upon receipt of indemnity satisfactory to it and subject to Section 7.3, use reasonable efforts to join in any foreclosure or similar proceeding instituted by a junior lienor with respect to the Shared Collateral. The Collateral Agent shall hold all proceeds of the Collateral received by it in connection with such proceeding instituted by a junior lienor and not consolidated with any action by the Collateral Agent on behalf of the Senior Secured Parties pending application of such proceeds by the Collateral Agent in accordance with the written instructions of the Required Senior Creditors. SECTION 6.2 Application of Loss Proceeds. (a) Subject to Section 6.1, all Loss Proceeds to be distributed by the Collateral Agent pursuant to Section 3.10(d)(i) or 3.10(d)(iv) shall be distributed within five (5) Business Days of the receipt by the Collateral Agent of the appropriate notice set forth therein in the following order of priorities: First, to the Tax-Exempt Indenture Trustee from proceeds of the Shared Collateral, any amount required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of the Tax-Exempt Indenture Securities (to the extent not already provided for in the Tax-Exempt Indenture); Second, to the Collateral Agent, to the Indenture Trustee and the Tax-Exempt Indenture Trustee and to the IDB, ratably, an amount equal to the amounts due in respect of the Collateral Agent Claims, the Trustee Claims and the IDB Claims, respectively, due and payable as of the date of such distribution, provided that, prior to any such distribution to (i) the Indenture Trustee or the Tax-Exempt Indenture Trustee, the Collateral Agent shall have received a certificate signed by a Responsible Officer of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) setting forth the amount so payable to the Indenture Trustee and the Tax-Exempt Indenture Trustee (as the case may be) as of the date of such distribution and (ii) the IDB, the Collateral Agent shall have received a certificate signed by an Authorized Officer of the IDB setting forth the amount so payable to the IDB as of the date of such distribution; and provided further that such amounts shall be payable from proceeds of the Shared Collateral other than Loss Proceeds relating solely to Receivables and Fuel Inventory, to the extent available, prior to the application of Loss Proceeds relating solely to Receivables or Fuel Inventory for such purpose; 21 Third, to the Working Capital Facility Provider, from Loss Proceeds relating solely to Fuel Inventory, an amount equal to the unpaid Financing Liabilities owed under the Working Capital Facility, provided that prior to any such distribution the Collateral Agent shall have received a certificate executed by a Responsible Officer of the Working Capital Facility Provider setting forth the amount so payable to the Working Capital Facility Provider as of the date of such distribution; Fourth, to the Senior Secured Parties, ratably, an amount equal to the unpaid amount of all Financing Liabilities owed to the Senior Secured Parties, provided that prior to any such distribution the Collateral Agent shall have received a certificate executed by a Responsible Officer of each such Senior Secured Party setting forth the amount so payable to such Senior Secured Party as of the date of such distribution; Fifth, to the Mill Owners, in an amount specified pursuant to Section 10.7 of the Master Operating Agreement or Article XIV of the Lease, as applicable, provided that prior to any such distributions the Collateral Agent shall have received a certificate executed by a Responsible Officer of each of the Mill Owners and the Company setting forth the amount so payable to each such Mill Owner as of the date of such distribution; Sixth, to the Subordinated Debt Providers, ratably, an amount equal to the unpaid amounts owed to such Subordinated Debt Providers by the Mobile Energy Parties under any Subordinated Loan Agreement, provided that prior to any such distribution the Collateral Agent shall have received a certificate executed by a Responsible Officer of each such Subordinated Debt Provider setting forth the amount payable to such Subordinated Debt Provider pursuant to this clause as of the date of such distribution; and Seventh, to the Mobile Energy Parties or their successors or assigns or to whomever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, any surplus then remaining from such proceeds. (b) Subject to Section 6.1 and the following sentence, within five (5) Business Days after the completion of the rebuilding, repair, restoration or replacement of the Energy Complex contemplated by Section 3.10(d)(ii) or 3.10(d)(iii) in connection with an Event of Loss or Event of Eminent Domain, the Collateral Agent shall, from any Excess Loss Proceeds with respect thereto and upon receipt of an Officer's Certificate of the Company specifying the amounts set forth in clauses (i), (ii) and (iii) below, (i) deposit the Working Capital Facility Distribution Amount in respect of such Excess Loss Proceeds into the Working Capital Facility Account, (ii) transfer the Indenture Distribution Amount in respect of such Excess Loss Proceeds to the Indenture Trustee for deposit into the Indenture Securities Redemption Subaccount and (iii) transfer the Tax-Exempt Indenture Distribution Amount to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Redemption Subaccount. Notwithstanding the foregoing, if such Excess Loss Proceeds are less than $3,000,000, then, upon receipt by the Collateral Agent of an Officer's Certificate of the Company directing the Collateral Agent to so transfer such Excess Loss Proceeds, the Collateral Agent shall (A) deposit such Excess Loss Proceeds into the Revenue Account, provided that, if there are any Tax-Exempt Indenture Securities then Outstanding, such Officer's Certificate shall be accompanied by a written opinion of Bond Counsel (which shall also be delivered to the Tax-Exempt Indenture Trustee) to the effect that such transfer and deposit will not adversely effect the exclusion of interest on such Tax-Exempt Indenture Securities from gross income for Federal income tax purposes or (B) deposit into the Working Capital Facility Account and transfer to the Indenture Trustee for deposit into the Indenture Securities Principal Subaccount and to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Principal Subaccount an amount equal to such Excess Loss Proceeds, ratably based upon the respective amounts set forth in clauses (i), (ii) and (iii) above, to be applied to the payment or redemption of Senior Debt at the earliest dates permissible under the 22 terms thereof. The Company hereby agrees that it will deliver the applicable Officer's Certificate of the Company specified in this Section 6.2(b) no later than three (3) Business Days after the completion of such rebuilding, repair, restoration or replacement of the Energy Complex. SECTION 6.3 Specific Collateral. Each Senior Secured Party agrees that the proceeds of any sale, disposition or other realization with respect to Collateral held by it for the benefit of holders of some but not all of the Senior Debt shall be applied to the payment of obligations owed to such Senior Secured Parties for as long as the specific Collateral is held. ARTICLE VII RIGHTS OF SENIOR SECURED PARTIES; RIGHTS AND DUTIES OF COLLATERAL AGENT SECTION 7.1 Rights of Senior Secured Parties. As between the Senior Secured Parties and the Subordinated Debt Providers, the Senior Secured Parties and the Collateral Agent (upon receipt of Senior Creditor Certificates from the Required Senior Creditors) may, at any time and from time to time, without any consent of or notice to any Subordinated Debt Providers and in each case in accordance with the Financing Documents: (a) amend in any manner any Financing Document in accordance with the terms thereof; (b) sell, exchange, release, not perfect any Lien in respect of and otherwise deal with any property at any time pledged, assigned or mortgaged to secure the Financing Liabilities in accordance with the Financing Documents; (c) release anyone liable in any manner under or in respect of the Financing Liabilities; (d) exercise or refrain from exercising any rights against the Mobile Energy Parties and others; and (e) apply any sums from time to time received to payment or satisfaction of the Financing Liabilities, except as otherwise provided in Article VI. SECTION 7.2 Duties of Collateral Agent. (a) The Collateral Agent will give notice to the Senior Secured Parties of any action taken, or notices received, by the Collateral Agent hereunder or under any other Financing Document (other than ministerial actions in the ordinary course of the administration of the Intercreditor Agreement Accounts, including transfers and deposits of monies pursuant to Section 3.11). Notice of any action to be taken hereunder shall be given prior to the taking of such action by the Collateral Agent unless the Collateral Agent determines that to do so would be detrimental to the interests of the Senior Secured Parties, in which event such notice shall be given promptly after the taking of such action. (b) The Senior Secured Parties agree that all liens on and security interests in the Shared Collateral securing the Secured Obligations shall be held in the name of the Collateral Agent and administered by and through the Collateral Agent in accordance with this Agreement, the other Financing Documents to which the Collateral Agent is a party and applicable Law. If, as of the date hereof, or at any time in the future, any Senior Secured Party at any time holds a lien on or security interest in any Shared Collateral in its own name, it agrees to assign it, without warranty or recourse, to the Collateral Agent (to be held by the Collateral Agent as the collateral agent for the Senior Secured Parties). The Collateral Agent shall hold its liens on and security interests in the Shared Collateral on behalf of the Senior Secured Parties, as agent, fiduciary and trustee thereof, in the capacity of Collateral Agent hereunder and under the other Security Documents, as provided herein and therein. (c) Notwithstanding anything to the contrary in this Agreement or any other Financing Document, the Collateral Agent shall not be required to exercise any rights or remedies under this Agreement, any of the other Financing Documents or applicable Law or give any consent under this Agreement or any of the other Financing Documents or enter into any Contract amending, supplementing, waiving or otherwise modifying any provision of any this Agreement or any other Financing Document unless it shall have been directed to do so in Senior Creditor Certificates of the Required Senior Creditors. 23 (d) Upon receipt of Senior Creditor Certificates from Senior Secured Parties holding or otherwise representing a majority in principal amount of the Combined Exposure directing the Collateral Agent to deliver the notice specified in each of Section 5.17(c)(i)(B) of the Indenture and Section 4.17(c)(i)(B) of the IDB Lease Agreement, and of any comparable provision of the Working Capital Facility, the Collateral Agent will deliver such notice to each of the Indenture Trustee, the Tax-Exempt Indenture Trustee and the Working Capital Facility Provider. (e) Subject to the provisions of this Article VII, upon the occurrence of a Trigger Event, the Collateral Agent shall take whatever action may be necessary or prudent (including qualifying itself or one of its subsidiaries or Affiliates to do business in the State of Alabama, appointing a co-Collateral Agent hereunder or taking such other action as the Collateral Agent may determine to be appropriate under the circumstances, in each case in accordance with applicable Law), and whether or not directed by the Required Senior Creditors in Senior Creditor Certificates, in order to exercise such rights and remedies with respect to the Shared Collateral (including entering and taking possession of all or any portion thereof, exercising all remedies available to a secured party under the UCC and curing of defaults under the Project Contracts) as are granted to it under, and to protect and enforce it rights under, this Agreement, the other Security Documents and applicable Law. SECTION 7.3 Rights of Collateral Agent. (a) The Collateral Agent may execute any of its duties under this Agreement, any other Financing Documents to which it is a party or applicable Law by or through agents, custodians, nominees or attorneys-in-fact and shall be entitled to, and (in the absence of bad faith on its part) may conclusively rely upon, advice of counsel concerning all matters pertaining to such duties. If at any time or times it shall be necessary or prudent in order to conform to any law of any jurisdiction in which the Shared Collateral or any portion thereof is held, or the Collateral Agent shall be advised by counsel satisfactory to it that it is so necessary or prudent in the interest of the Senior Secured Parties, or if the Required Senior Creditors shall so direct the Collateral Agent in Senior Creditor Certificates, the Collateral Agent and the Intercreditor Parties shall execute and deliver all instruments and agreements necessary or proper to appoint another Collateral Agent hereunder or one (1) or more Persons approved by the Collateral Agent either to act as co- Collateral Agent jointly with the Collateral Agent originally named herein or any successor or successors or to act as separate Collateral Agent. In the event any Intercreditor Party shall have not joined in the execution of such instruments and agreements within ten (10) days after the receipt of a written request from the Collateral Agent to do so, or during a Trigger Event Period, the Collateral Agent may act under the foregoing provisions of this Section 7.3(a) without the concurrence of such Intercreditor Party; and each of the Intercreditor Parties hereby appoints the Collateral Agent as its agent and attorney to act under such foregoing provisions in either of such contingencies. (b) Neither the Collateral Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it under or in connection with this Agreement or any other Financing Documents (except for its gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Senior Secured Parties for any recitals, statements, representations or warranties made in this Agreement or any other Financing Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement or any other Financing Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Documents or for any failure of the Mobile Energy Parties or any other Person to perform their obligations hereunder or thereunder. (c) The Collateral Agent (in the absence of bad faith on its part) shall be entitled to conclusively rely, and shall be fully protected in relying, upon any note, writing, resolution, request, direction, certificate, notice, consent, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, 24 statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons or upon an Opinion of Counsel, independent accountants or other experts selected by the Collateral Agent. In connection with any request or direction of the Required Senior Creditors, the Collateral Agent shall act in accordance with directions contained in, and (in the absence of bad faith on its part) shall be entitled to conclusively rely and shall be fully protected in relying upon, any Senior Creditor Certificate delivered by a Senior Secured Party in accordance with this Agreement; provided, however, that in the event the Collateral Agent receives conflicting directions contained in Senior Creditor Certificates from more than one of the Senior Secured Parties, the Collateral Agent shall act in accordance with directions contained in Senior Creditor Certificates representing the greatest percentage in principal amount of the Combined Exposure. Subject to this Article VII, the Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other applicable Financing Document (i) if such action would, in the opinion of the Collateral Agent (which may be based upon an Opinion of Counsel), be contrary to law or the terms of this Agreement or such other applicable Financing Document, (ii) if such action is not specifically provided for in this Agreement or such other Financing Documents or it shall not have received any such advice or concurrence of the Required Senior Creditors, (iii) if, in connection with the taking of any such action hereunder or under such Financing Documents that would constitute an exercise of remedies hereunder or under such Financing Documents, it shall not first be indemnified to its satisfaction by the Senior Secured Parties against any and all risk of nonpayment, liability and expense that may be incurred by it by reason of taking or continuing to take any such action or (iv) if, notwithstanding anything to the contrary contained in Section 7.3(e), in connection with the taking of any such action that would constitute a payment due under any Project Contract, it shall not first have received from the Senior Secured Parties funds equal to the amount payable. In no event shall the Collateral Agent be required to risk or expend its own funds. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Financing Document in accordance with a request contained in Senior Creditor Certificates of the Required Senior Creditors delivered in accordance with this Agreement, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Intercreditor Parties. (d) If, with respect to a proposed action to be taken by it, the Collateral Agent shall determine in good faith that the provisions of this Agreement or any other Financing Document relating to the functions or responsibilities or discretionary powers of the Collateral Agent are or may be ambiguous or inconsistent, the Collateral Agent shall notify the Senior Secured Parties, identifying the proposed action, and may decline either to perform such function or responsibility or to take the action requested unless it has received the written confirmation of the Required Senior Creditors executed by their Authorized Representatives that the Required Senior Creditors concur in the circumstances that the action proposed to be taken by the Collateral Agent is consistent with the terms of this Agreement or such other Financing Document or is otherwise appropriate. The Collateral Agent shall be fully protected in acting or refraining from acting upon the confirmation of the Required Senior Creditors in this respect, and such confirmation shall be binding upon the Collateral Agent and the other Intercreditor Parties. (e) The Collateral Agent shall not be deemed to have actual, constructive, direct or indirect knowledge or notice of the occurrence of any default or Event of Default unless and until a Responsible Officer of the Collateral Agent has received a written notice or a certificate from an Authorized Representative of an Intercreditor Party stating that a default or an Event of Default has occurred. The Collateral Agent shall have no obligation whatsoever either prior to or after receiving such notice or certificate to inquire whether or not a default or an Event of Default has in fact occurred and shall be entitled to rely conclusively, and shall be fully protected in so relying, on any notice or certificate so furnished to it. No provision of this Agreement or any other Financing Document shall require the Collateral Agent to 25 expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or under any other Financing Document or the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability, including an advance of monies necessary to take the action requested, is not reasonably assured to it; in addition, in respect of any potential environmental liability or the taking of title to any real property, the Collateral Agent may decline to act unless it receives indemnity satisfactory to it in its sole discretion, including an advance of monies necessary to take the action requested. In the event that the Collateral Agent receives such a notice of the occurrence of any Event of Default, the Collateral Agent shall give notice thereof to the Senior Secured Parties. The Senior Secured Parties shall provide indemnity satisfactory to the Collateral Agent for any action directed by the Required Senior Creditors including an advance of monies necessary to take the action requested. The Collateral Agent shall take such action with respect to such Event of Default as so requested pursuant to paragraph (a) of Article V, subject, however, to the third sentence of this Section 7.3(e). (f) The Mobile Energy Parties will pay upon demand to the Collateral Agent the amount of any and all reasonable fees and out-of-pocket expenses, including the reasonable fees and expenses of its counsel (and any one local counsel) and of any of its experts and agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement and the other Financing Documents (including out-of-pocket expenses incurred in connection with any mortgage privilege or recording tax, and any surety bonds (and application for surety bonds) relating thereto), (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement (whether through negotiations, legal proceedings or otherwise) of any of the rights of the Collateral Agent or the Senior Secured Parties hereunder or under the other Financing Documents or (iv) the failure by the Mobile Energy Parties to perform or observe any of the provisions hereof or of any of the other Security Documents. The provision of this Section 7.3(f) shall survive the expiration or earlier termination of this Agreement. (g) Each of (i) the Mobile Energy Parties hereby agrees to deliver to the Collateral Agent, concurrently with the delivery thereof to any Senior Secured Party, and (ii) the Senior Secured Parties hereby agrees to deliver to the Collateral Agent, concurrently with the delivery thereof to either of the Mobile Energy Parties, all written notices, requested documents and other instruments delivered by such Person to such Senior Secured Party or the Mobile Energy Parties (as the case may be) under or pursuant to the Financing Documents, except to the extent any other Person has agreed to deliver such notices, requested documents and other instruments pursuant to any other Financing Document. (h) The Collateral Agent is hereby authorized to pay or cause to be paid any mortgage privilege or recording tax, or expenses relating to surety bonds relating thereto, as instructed by the Company in an Officer's Certificate. SECTION 7.4 Lack of Reliance on the Collateral Agent. Each of the Senior Secured Parties expressly acknowledges that neither the Collateral Agent nor any of its officers, directors, employees, agents or attorneys-in-fact has made any representations or warranties to it and that no act by the Collateral Agent hereafter taken, including any review of the Energy Complex or of the affairs of the Mobile Energy Parties, shall be deemed to constitute any representation or warranty by the Collateral Agent to any Senior Secured Party. Each Senior Secured Party (other than the Indenture Trustee and the Tax-Exempt Indenture Trustee) represents to the Collateral Agent that it has, independently and without reliance upon the Collateral Agent or any other Senior Secured Party, and based upon such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Energy Complex and the Mobile Energy Parties. Each Senior Secured Party (other than the Indenture Trustee and the Tax-Exempt Indenture Trustee) also represents that it will, independently and without reliance upon the Collateral Agent or any other Senior Secured Party, and based upon such documents and information as it shall deem 26 appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Energy Complex and the Mobile Energy Parties. Except for notices, reports and other documents expressly required to be furnished to the Senior Secured Parties by the Collateral Agent hereunder, the Collateral Agent shall not have any duty or responsibility to provide any Senior Secured Party with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Energy Complex and the Mobile Energy Parties that may come into the possession of the Collateral Agent or any of its officers, directors, employees, agents or attorneys-in-fact. ARTICLE VIII INDEMNIFICATION The Senior Secured Parties severally agree to indemnify the Collateral Agent in its capacity as such and in its individual capacity (to the extent not reimbursed by the Mobile Energy Parties and without limiting the obligation of the Mobile Energy Parties to do so), ratably according to the aggregate amounts of their respective Secured Obligations on the date the activities giving rise to the Collateral Agent's demand for indemnification occurred, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time be imposed on, incurred by or asserted against the Collateral Agent in its capacity as such and in its individual capacity in any way relating to or arising out of this Agreement or the other Financing Documents or any surety bond (and any application for a surety bond) relating to any applicable mortgage privilege or recording tax or the performance of its duties as Collateral Agent hereunder or thereunder or any action taken or omitted by the Collateral Agent in its capacity as such under or in connection with any of the foregoing (including any claim that the Collateral Agent is the owner or operator of the Energy Complex and liable as such pursuant to any Environmental Requirement, and payments made in connection with any applicable mortgage privilege or recording tax and any surety bonds (and applications for surety bonds) relating thereto), provided that the Senior Secured Parties shall not be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent that any of the foregoing result from the Collateral Agent's gross negligence or willful misconduct. Each of the Mobile Energy Parties agrees, jointly and severally, to indemnify the Collateral Agent and each Senior Secured Party from and against any and all claims, losses and liabilities relating to or arising out of (i) this Agreement or any other Financing Documents (including enforcement of such Financing Documents, but excluding any such claims, losses or liabilities resulting from the Collateral Agent's or such Senior Secured Party's gross negligence or willful misconduct), (ii) any Environmental Requirement applicable to the Shared Collateral or (iii) any refund or adjustment of any amount paid or payable to the Collateral Agent or any Senior Secured Party under or in respect of any Project Contract or any other Shared Collateral, or any interest thereon, that may be ordered or otherwise required by any Person. The agreements in this Article VIII shall survive the payment or satisfaction in full of the Secured Obligations or any other termination of this Agreement. ARTICLE IX ELIGIBILITY OF COLLATERAL AGENT; REMOVAL AND REPLACEMENT OF COLLATERAL AGENT 27 SECTION 9.1 Corporate Collateral Agent Required; Eligibility. There shall at all times be a Collateral Agent hereunder that shall be a bank or trust company organized and doing business under the laws of the United States of America or of any State thereof, authorized under such laws and the laws of the State of Alabama to exercise corporate trust powers, having (or whose obligations are unconditionally guaranteed by a corporation having) a combined capital and surplus of at least $250,000,000, which bank or trust company is subject to supervision or examination by Federal or state authority and does not provide credit or credit enhancement to either of the Mobile Energy Parties. If such bank or trust company publishes reports of condition at least annually, pursuant to Law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.1, the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Collateral Agent shall cease to be eligible in accordance with the provisions of this Article, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 9.1. Notwithstanding anything to the contrary contained in any of the Financing Documents, (a) the Person acting as Collateral Agent hereunder shall at all times be the 1994 Bond Trustee, the Secured Party and the Mortgagee, (b) the Person acting as Collateral Agent hereunder may not at any time resign, or be removed or replaced, as the Collateral Agent unless it also resigns, or is removed or replaced, as the 1994 Bond Trustee, the Secured Party and the Mortgagee at such time and (c) upon the resignation, removal or replacement of the 1994 Bond Trustee, the Secured Party or the Mortgagee, the Person acting as Collateral Agent hereunder shall also resign or be removed or replaced. SECTION 9.2 Resignation, Removal and Replacement. Subject to the last sentence of Section 9.1, the Collateral Agent may resign as Collateral Agent upon thirty (30) days' written notice to the Senior Secured Parties and may be removed at any time with or without cause by the Required Senior Creditors, with any such resignation or removal to become effective only upon the appointment of a successor Collateral Agent under this Section 9.2. If the Collateral Agent shall resign or be removed as Collateral Agent, then the Required Senior Creditors shall (and if no such successor shall have been appointed within thirty (30) days of the Collateral Agent's resignation or removal, the Collateral Agent may) appoint a successor agent for the Senior Secured Parties, whereupon (provided that the Collateral Agent resigning or being removed shall be paid all amounts in respect of the Collateral Agent Claims due and owing to it) such successor agent shall succeed to the rights, powers and duties of the "Collateral Agent," and the term "Collateral Agent" shall mean such successor agent effective upon its appointment, and the former Collateral Agent's rights, powers and duties as Collateral Agent shall be terminated, without any other or further act or deed on the part of such former Collateral Agent (except that such former Collateral Agent shall deliver all Collateral then in its possession to the successor Collateral Agent) or any of the Intercreditor Parties. The indemnity given any former Collateral Agent pursuant to Article VIII and any further indemnity granted under Section 6.1(c), 7.3(c), 7.3(e) or 7.3(f) shall survive any resignation or removal hereunder. After any former Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent. In the event that a successor Collateral Agent is not appointed within the time period specified in this Section 9.2 following a resignation or removal of the Collateral Agent, the Collateral Agent or any Senior Secured Party may petition a court of competent jurisdiction for the appointment of a successor Collateral Agent. ARTICLE X REPRESENTATIONS (a) Representations of Mobile Energy Parties. Each of the Mobile Energy Parties represents and warrants, as to itself and not to the other, to the Collateral Agent as follows: 28 (i) The Company is (A) a limited liability company duly formed, validly existing and in good standing under the laws of the State of Alabama and (B) duly authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary. Mobile Energy is (A) a corporation duly formed, validly existing and in good standing under the laws of the State of Alabama and (B) duly authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary. Each of the Mobile Energy Parties has all requisite limited liability company or corporate (as the case may be) power and authority to own and operate the property it purports to own and to carry on its business as now being conducted and as proposed to be conducted in respect of the Energy Complex. (ii) Each of the Mobile Energy Parties has all necessary limited liability company or corporate (as the case may be) power and authority to execute, deliver and perform its obligations under this Agreement. (iii) All action on the part of the Mobile Energy Parties that is required for the authorization, execution, delivery and performance of this Agreement has been duly and effectively taken. The execution, delivery and performance of this Agreement by the Mobile Energy Parties does not require the approval or consent of any member or shareholder, or holder or trustee of any Debt or other obligations, of either of the Mobile Energy Parties that has not been obtained. (iv) This Agreement has been duly executed and delivered by each of the Mobile Energy Parties and constitutes a legal, valid and binding obligation of such Mobile Energy Party, enforceable against it in accordance with the terms thereof, except as such enforceability (i) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws relating to or affecting the enforcement of creditors' rights and remedies generally and (ii) is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and the discretion of the court before which any proceeding therefor may be brought and to public policy or Federal or state laws that might limit rights to indemnification. (v) Neither the execution, delivery and performance of this Agreement by the Mobile Energy Parties nor the consummation of any of the transactions contemplated hereby by the Mobile Energy Parties nor performance of or compliance with the terms and conditions hereof or thereof by the Mobile Energy Parties (A) contravenes any Governmental Approvals or any provision of Law applicable to either of the Mobile Energy Parties or any of the Collateral, (B) conflicts with or constitutes a default under or results in the violation of the provisions of the Articles of Organization of the Company or the Operating Agreement or certificate of incorporation or by-laws of Mobile Energy or, unless such conflict, default or violation would not reasonably be expect to have a Material Adverse Effect, of any other Project Documents or any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which either of the Mobile Energy Parties is a party or by which such Mobile Energy Party or any of its property or assets is bound or to which either may be subject or (C) results in the creation or imposition of any Liens (other than Permitted Liens) on any of the property or assets of either of the Mobile Energy Parties, or results in the acceleration of any obligation of either of the Mobile Energy Parties, that would reasonably be expected to have a Material Adverse Effect. (vi) There are no claims, actions, suits, investigations or proceedings at law or in equity by or before any arbitrator or any Governmental Authority now pending or (to the knowledge of the Mobile 29 Energy Parties) threatened against either of the Mobile Energy Parties or any Affiliate thereof, or any property or other assets or rights of either of the Mobile Energy Parties or any Affiliate thereof with respect to this Agreement, any other Project Document or the Energy Complex, that would reasonably be expected to result in a Material Adverse Effect. (b) Representations of Senior Secured Parties. Each of the Indenture Trustee, the Tax-Exempt Indenture Trustee and the Working Capital Facility Provider represents and warrants, as to itself and not the others, to the Collateral Agent as follows: (i) It is duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization and is duly qualified to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary, except where the failure to effect such qualification would not have a material adverse effect upon its ability to perform its obligations under this Agreement and the other Financing Documents to which it is a party. It has all necessary power and authority (corporate or otherwise) to execute, deliver and perform under this Agreement and such other Financing Documents. (ii) All action on its part that is required for the authorization, execution, delivery and performance of this Agreement and the other Financing Documents to which it is a party has been duly and effectively taken. The execution, delivery and performance of this Agreement and the other Financing Documents to which it is a party do not require the approval or consent of any shareholder or the holder or trustee of any Debt or other obligations that has not been obtained. (iii) This Agreement and each of the other Financing Documents to which it is a party have been duly executed and delivered by each such Senior Secured Party and constitute the legal, valid and binding obligation of each such Senior Secured Party, enforceable against it in accordance with the terms thereof, except as such enforceability (A) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights and remedies generally and (B) is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (iv) Neither the execution, delivery and performance of this Agreement and the other Financing Documents to which it is a party nor the consummation of any of the transactions contemplated hereby or thereby or performance of or compliance with the terms and conditions hereof or thereof (A) contravenes any Governmental Approvals or any provision of Law applicable to such Senior Secured Party or (B) constitutes a default under or results in the violation of the provisions in the charter, certificate of incorporation or by-laws of such Senior Secured Party or of any indenture, loan or credit agreement or any other agreement, lease, instrument or document to which such Senior Secured Party is a party or by which it or its properties may be bound. (v) There are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the best of such Senior Secured Party's knowledge, threatened that could reasonably be expected to have a material and adverse effect on the performance by such Senior Secured Party of its obligations hereunder or under the other Financing Documents to which it is a party or that questions the validity, binding effect or enforceability hereof or of such other Financing Documents, any action to be taken pursuant hereto or thereto or any transactions contemplated hereby or thereby. (c) Representations of Collateral Agent. The Collateral Agent represents and warrants to the Senior Secured Parties as follows: 30 (i) It is duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization and is duly qualified to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary, except where the failure to effect such qualification would not have a material adverse effect upon its ability to perform its obligations under this Agreement and the other Financing Documents to which it is a party. It has no offices or employees in, and has no other contacts with, the State of Alabama in connection with the transactions provided for or otherwise contemplated by the Financing Documents to which it is a party, in each case that would require it to so qualify in the State of Alabama. It has all necessary power and authority (corporate or otherwise) to execute, deliver and perform under this Agreement and such other Financing Documents to which it is a party. (ii) All action on its part that is required for the authorization, execution, delivery and performance of this Agreement and the other Financing Documents to which it is a party has been duly and effectively taken. The execution, delivery and performance of this Agreement and the other Financing Documents to which it is a party do not require the approval or consent of any shareholder or the holder or trustee of any Debt or other obligations that has not been obtained. (iii) This Agreement and each of the other Financing Documents to which it is a party have been duly executed and delivered by the Collateral Agent and constitute the legal, valid and binding obligation of the Collateral Agent, enforceable against it in accordance with the terms thereof, except as such enforceability (A) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights and remedies generally and (B) is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (iv) Neither the execution, delivery and performance of this Agreement and the other Financing Documents to which it is a party nor the consummation of any of the transactions contemplated hereby or thereby or performance of or compliance with the terms and conditions hereof or thereof (A) materially contravenes any Governmental Approvals or any provision of Law applicable to the Collateral Agent or (B) constitutes a default under or results in the violation of the provisions in the charter, certificate of incorporation or by-laws of the Collateral Agent or of any indenture, loan or credit agreement or any other agreement, lease, instrument or document to which the Collateral Agent is a party or by which it or its properties may be bound unless such default or violation could not reasonably be expected to have a material adverse effect on the ability of the Collateral Agent to perform its obligations hereunder and under the other Financing Documents to which it is a party. (v) There are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the best of the Collateral Agent's knowledge, threatened that could reasonably be expected to have a material and adverse effect on the performance by the Collateral Agent of its obligations hereunder or under the other Financing Documents to which it is a party or that questions the validity, binding effect or enforceability hereof or of such other Financing Documents, any action to be taken pursuant hereto or thereto or any transactions contemplated hereby or thereby. ARTICLE XI INDEPENDENT ENGINEER SECTION 11.1 Removal of Independent Engineer; Payment of Independent Engineer. (a) Stone & Webster Engineering Corporation is hereby appointed the 31 Independent Engineer. The Collateral Agent shall remove the Independent Engineer (i) upon receipt of an Officer's Certificate of the Company to the effect that the Independent Engineer has become incapable of acting or is, or is reasonably likely to be, adjudged bankrupt or insolvent or a receiver has been appointed for, or any public officer has taken charge or control of, the Independent Engineer or its property or its affairs for the purpose of rehabilitation, conservation or liquidation, (ii) upon receipt of Senior Creditor Certificates of the Required Senior Creditors directing the Collateral Agent to take such action or (iii) upon receipt of an Officer's Certificate of the Company to the effect that (A) in the reasonable determination of the Company, the Independent Engineer has failed to carry out its obligations under the Financing Documents or (B) a Qualified Engineer has agreed to perform, for costs and fees in an amount equal to or less than ninety-five percent (95%) of the amount of costs and fees charged by the then Independent Engineer, the services specified in and contemplated by the Financing Documents on substantially identical non-price terms as those contained in the Independent Engineer Agreement relating to the engagement of the then current Independent Engineer, provided that, in the case of this clause (B), such Officer's Certificate is delivered to the Collateral Agent during the last month of any Fiscal Year and the Independent Engineer Agreement relating to the engagement of such Qualified Engineer is attached to such Officer's Certificate. Any such removal of the Independent Engineer shall become effective only upon the appointment of a successor Independent Engineer under Section 11.1(b). (b) If the Independent Engineer shall be removed or shall resign, then the Company shall appoint a successor Independent Engineer from the list of Qualified Engineers, such successor to be, (i) in the case of a removal of the Independent Engineer pursuant to Section 11.1(a)(iii)(B), the Qualified Engineer referred to in such Section 11.1(a)(iii)(B) and (ii) in any other case, one (1) of two (2) Qualified Engineers designated by the Collateral Agent. (c) The Company shall pay for all services performed by the Independent Engineer and its reasonable costs and expenses related thereto. SECTION 11.2 Third Party Engineer Dispute Resolution. If the Company and the Independent Engineer are in dispute with respect to (or if the Independent Engineer fails to timely act with respect to) a notice, plan, report, certificate or budget, or any other matter for which the Company must provide an Independent Engineer Confirmation, and they are unable to resolve the dispute within seven (7) days of the Independent Engineer expressing its disagreement with (or the Independent Engineer's failing to so timely act with respect to) such notice, plan, report, certificate or budget, or such other matter, a Qualified Engineer (the "Third Party Engineer") shall be designated to consider and decide the issues raised by such dispute. The Company shall designate the Third Party Engineer not later than the third (3rd) day following the expiration of the seven (7) day period described above. Within three (3) days of such designation of a Third Party Engineer, each of the Company and the Independent Engineer shall submit to the Third Party Engineer a notice setting forth in detail such Person's position in respect of the issues in dispute. Such notice shall be accompanied by supporting documentation, if appropriate. The Third Party Engineer shall complete all proceedings and issue its decision with regard to the issues in dispute as promptly as reasonably possible, but in any event within ten (10) days of the date on which it is designated as Third Party Engineer hereunder unless the Third Party Engineer reasonably determines that additional time is required in order to give adequate consideration to the issues raised. In such case, the Third Party Engineer shall state in writing its reasons for believing that additional time is needed and shall specify the additional period required, which such period shall not exceed ten (10) days without the Company's agreement. If the Third Party Engineer determines that the concerns set forth in the Independent Engineer's notice are valid, the Third Party Engineer shall so state and shall state the corrective actions to be taken by the Company, if any. In such case, the Company shall promptly take such actions. The Company shall thereafter bear all costs that may arise from actions taken pursuant to the Third Party Engineer's decision. If the Third Party Engineer determines that the concerns set forth in the Independent Engineer's notice are not valid, the Third 32 Party Engineer shall so state and shall state the appropriate actions to be taken by the Company, if any. In such case, the Company shall take such actions and for purposes of this Agreement and the other Financing Documents, the Independent Engineer shall be deemed to have approved, confirmed, concurred in or consented to the notice, plan, report, certificate, budget or other such matter in dispute. The decision of the Third Party Engineer shall be final and non-appealable. The Company shall bear all reasonable costs incurred by the Third Party Engineer in connection with this dispute resolution mechanism. SECTION 11.3 Qualified Engineers. Each successor Independent Engineer and each Third Party Engineer shall be selected from the list of Qualified Engineers. At any time either the Company or the Collateral Agent may (and, upon consultation with the Senior Secured Parties and the Independent Engineer, the Collateral Agent shall) remove a Qualified Engineer from the list by obtaining the other Person's consent to such removal (which consent shall not be unreasonably withheld or delayed). However, neither the Company nor the Collateral Agent may remove a name or names from the list if such removal would leave the list without at least three (3) names, unless, concurrently therewith, the Company and the Collateral Agent (upon consultation with the Senior Secured Parties and the Independent Engineer) reasonably agree to the addition of one (1) or more names to such list. During January of each year, each of the Company and the Collateral Agent (upon consultation with the Senior Secured Parties and the Independent Engineer) shall review the current list of Qualified Engineers and give notice to the other of any proposed additions and deletions to the list. Any such proposed addition or deletion shall become effective upon obtaining the other party's consent (which may not be unreasonably withheld), provided that in no event may a deletion be effective if such deletion would leave the list without at least three (3) names, unless, concurrently therewith, the Company and the Collateral Agent (upon consultation with the Senior Secured Parties and the Independent Engineer) reasonably agree to the addition of one (1) or more names to such list. By mutual agreement between the Company and the Collateral Agent (upon consultation with the Senior Secured Parties and the Independent Engineer) a new name or names may be added to the list of Qualified Engineers at any time. ARTICLE XII MISCELLANEOUS SECTION 12.1 Agreement for Benefit of Parties Hereto. Nothing in this Agreement, express or implied, is intended or shall be construed to confer upon, or to give to, any Person other than the parties hereto and Persons for whom the parties hereto are acting as agents or representatives and, in either case, their respective successors and assigns, any right, remedy or claim under or by reason of this Agreement or any covenant, condition or stipulation hereof, and the covenants, stipulations and agreements contained in this Agreement are and shall be for the sole and exclusive benefit of the parties hereto and their respective successors and assigns and Persons for whom the parties hereto are acting as agents or representatives. SECTION 12.2 No Warranties. Except as otherwise expressly provided herein, the Senior Secured Parties have not made to each other nor do they hereby or otherwise make to each other any warranties, express or implied, nor do they assume any liability to each other with respect to the enforceability, validity, value or collectability of the Collateral (or any portion thereof). No Senior Secured Party shall be liable, except in the case of its gross negligence or willful misconduct, to any other Intercreditor Party for any action or failure to act, any error of judgment, any negligence or mistake or any oversight whatsoever on the part of any Intercreditor Party or any Intercreditor Party's agents, officers, employees or attorneys with respect to any transaction relating to any of the Contracts evidencing or entered into with respect to any of the Secured Obligations or any security therefor. SECTION 12.3 Severability.In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability 33 of the remaining provisions contained herein shall not in any way be affected or impaired thereby. SECTION 12.4 Notices. All notices, demands, certificates or other communications hereunder shall be in writing and shall be deemed sufficiently given or served for all purposes when delivered personally, when sent by certified or registered mail, postage prepaid, return receipt requested or by private courier service, or, if followed and confirmed by mail or courier service notice, when telecopied, in each case, with the proper address as indicated below. Each party hereto may, by written notice given to the other parties hereto, designate any other address or addresses to which notices, certificates or other communications to them shall be sent as contemplated by this Agreement. Notices shall be deemed to have been given if and when received by an officer, manager or supervisor in the department of the addressee specified for attention (unless such addressee refuses to accept delivery, in which case they shall be deemed to have been given when first presented to such addressee for acceptance). Until otherwise so provided by the respective parties hereto, all notices, certificates and communications to each of them shall be addressed as follows: Indenture Trustee: First Union National Bank of Georgia Corporate Trust Department M/C GA9094 999 Peachtree Street, N.E. Atlanta, Georgia 30309 Attention: Douglas Milner, Assistant Vice President Telephone No.: 404-827-7349 Telefax No.: 404-827-7305 Tax-Exempt Indenture Trustee: First Union National Bank of Georgia Corporate Trust Department M/C GA9094 999 Peachtree Street, N.E. Atlanta, Georgia 30309 Attention: Douglas Milner, Assistant Vice President Telephone No.: 404-827-7349 Telefax No.: 404-827-7305 Working Capital Facility Provider: Banque Paribas, as Agent 787 Seventh Avenue New York, New York 10019 Attention: Project Finance Group Telephone No.: 212-841-2000 Telefax No.: 212-841-2555 IDB: The Industrial Development Board of The City of Mobile, Alabama PO Box 2187 Mobile, Alabama 36652 Attention: Secretary Telephone No.: 334-433-6951 Telefax No.: 334-431-8608 Company: Mobile Energy Services Company, L.L.C. 900 Ashwood Parkway, Suite 300 Atlanta, Georgia 30338 Attention: President Telephone No.: 770-673-7781 Telefax No.: 770-392-7644 with a copy to: Mobile Energy Services Company, L.L.C. 34 P.O. Box 2747 200 Bay Bridge Road Mobile, Alabama 36652 Attention: Vice President and General Manager Telephone No.: 334-330-3600 Telefax No.: 334-452-6337 Mobile Energy: Mobile Energy Services Holdings, Inc. 900 Ashwood Parkway, Suite 450 Atlanta, Georgia 30338 Attention: President Telephone No.: 770-673-7730 Telefax No.: 770-673-7745 Collateral Agent: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attention: Corporate Trust and Agency Group Telephone No.: 212-250-6826 Telefax No.: 212-250-6961 SECTION 12.5 Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the parties hereto shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. SECTION 12.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 12.7 GOVERNING LAW. THE RIGHTS AND DUTIES OF THE COLLATERAL AGENT AND THE INTERCREDITOR PARTIES SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5- 1401), EXCEPT THAT SUCH LAW SHALL NOT APPLY WITH RESPECT TO ANY COLLATERAL WHERE, AND TO THE EXTENT THAT, IT IS NECESSARY TO APPLY THE LAWS OF ANOTHER JURISDICTION TO PERFECT LIENS IN SUCH COLLATERAL RELATING TO DEBT ISSUED UNDER THE FINANCING DOCUMENTS. SECTION 12.8 No Impairments of Other Rights. Nothing in this Agreement is intended or shall be construed to impair, diminish or otherwise adversely affect any other rights the Senior Secured Parties may have or may obtain against the Mobile Energy Parties, including the rights referred to in Section 8.10 of the Indenture and Section 8.10 of the Tax-Exempt Indenture. SECTION 12.9 Amendment; Waiver. No amendment, supplement, waiver or other modification of this Agreement shall be effective unless such amendment, supplement, waiver or other modification was effected in accordance with Section 7.2(c) of this Agreement and with the consent of (a) each Senior Secured Party, (b) each of the Mobile Energy Parties, unless such amendment, supplement, waiver or other modification relates to Sections 4.1(a) or 4.1(b) or Article V, VI or VII and would not reasonably be expected to materially and adversely affect such Mobile Energy Party and (c) the IDB and each Subordinated Debt Provider, unless such amendment, supplement, waiver or other modification relates to Section 4.1 or Article V, VI, VII or XI and would not reasonably be expected to materially and adversely affect the IDB or such Subordinated Debt Provider (as the case may be). Any approval of an amendment to or supplement or other modification of, or any waiver of any provision of, this Agreement shall be effective only in the specific instance and for the specific purpose for which such approval or waiver is given. No delay on the part of any Senior Secured Party in the exercise of 35 any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial waiver by any such Senior Secured Party of any right, power or remedy preclude any further exercise thereof, or the exercise of any other right, power or remedy. SECTION 12.10 Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 12.11 Termination. This Agreement shall remain in full force and effect until the Senior Debt Termination Date. Upon termination of this Agreement pursuant to this Section 12.11, the Collateral Agent shall take such actions as are reasonably requested by the Company to release and remove of record any Liens on the Collateral then held by or in favor of the Collateral Agent. SECTION 12.12 Entire Agreement. This Agreement, including the documents referred to herein, embodies the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings of the parties hereto relating to the subject matter herein contained. SECTION 12.13 Limited Recourse. Satisfaction of the obligations of the Mobile Energy Parties under this Agreement shall be had solely from the assets of the Mobile Energy Parties. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in the Guaranty) or of the stockholders of Mobile Energy, other than their respective interests in the Collateral, (b) any Member (other than Mobile Energy as provided in the Guaranty) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, Southern). Notwithstanding anything in this Section 12.13 to the contrary, (i) nothing contained in this Agreement shall limit or otherwise prejudice in any way the right of the Collateral Agent and the Senior Secured Parties to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party or limit or otherwise prejudice in any way the right of the Collateral Agent, the Senior Secured Parties, the Holders of Indenture Securities or the Holders of Tax-Exempt Indenture Securities to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Collateral granted under the Security Documents and (ii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud or wilful misrepresentations, including those contained in Officer's Certificates issued from time to time. SECTION 12.14 Submission to Jurisdiction. The parties hereto hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in New York City for the purposes of all legal proceedings arising out of or relating to this Agreement or the other Financing Documents of any of the transactions contemplated herein or therein. The parties hereto hereby irrevocably waive, to the fullest extent permitted by law, any objection that they may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 36 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written. FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee (on behalf of the Holders of the Indenture Securities) By: /s/ Name: Doug Milner Title: Assistant Vice President FIRST UNION NATIONAL BANK OF GEORGIA, as Tax- Exempt Indenture Trustee (on behalf of the Holders of the Tax-Exempt Indenture Securities) By: /s/ Name: Doug Milner Title: Assistant Vice President BANQUE PARIBAS, as Working Capital Facility Provider By: /s/ Name: Glenn R. Tobias Title: Group Vice President By: /s/ Name: Francis Ballard, Jr. Title: Vice President THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA By: /s/ Name: Clarence Boll Title: Vice Chairman MOBILE ENERGY SERVICES COMPANY, L.L.C. By: /s/ Name: Christopher J. Kysar Title: Vice President [Intercreditor Agreement] MOBILE ENERGY SERVICES HOLDINGS, INC. By: /s/ Name: Christopher J. Kysar Title: Vice President BANKERS TRUST (DELAWARE), as Collateral Agent By: /s/ Name: James H. Stallkamp Title: President [Intercreditor Agreement] 38 Appendix A DEFINED TERMS For purposes of any Financing Document (as defined herein), terms used in such Financing Document (including terms used herein) that are not otherwise defined therein shall have the following meanings, subject to any provisions contained in such Financing Document that affect the construction or interpretation of such terms. Except as otherwise expressly provided in any such Financing Document, if and to the extent that such Financing Document shall be amended, restated, supplemented or otherwise modified from time to time pursuant to the terms and provisions thereof, this Appendix A shall be, or be deemed to have been, amended, restated, supplemented or otherwise modified concurrently with the execution and delivery of such amendment, restatement, supplement or other modification in order to conform the terms herein and therein, mutatis mutandis, to the terms set forth in or required by such amendment, restatement, supplement or other modification. Except as otherwise expressly provided in any such Financing Document: (a) the terms used in such Financing Document have the meanings assigned to them in this Appendix A and include the plural as well as the singular; provided, however, that, in the case of the Indenture, all such terms that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (b) (i) all accounting terms not otherwise defined in such Financing Document have the meanings assigned to them, (ii) all financial statements and all certificates and reports as to financial matters required to be delivered to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), under such Financing Document shall be prepared and (iii) all calculations made for the purpose of determining compliance with such Financing Document shall (except as otherwise expressly provided herein) be made, in the case of clauses (i), (ii) and (iii) above, in accordance with, or by application of, GAAP applied on a basis consistent (except inconsistencies that are disclosed in writing to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), and are in accordance with GAAP as certified by a firm of independent certified public accountants of recognized national standing) with that used in the preparation of the then most recent corresponding financial statements furnished under such Financing Document to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be); (c) all references in such Financing Document to any designated "Article," "Section," "Appendix," "Schedule," "Exhibit" and other subdivision are to the designated Article, Section, Appendix, Schedule, Exhibit and other subdivision, respectively, of such Financing Document; (d) all references in such Financing Document to (i) the words "herein," "hereof" and "hereunder" and other words of similar import refer to such Financing Document as a whole and not to any particular Article, Section or other subdivision and (ii) the term "this Agreement" or "this Indenture" means such Financing Document as a whole, including Appendices, Schedules and Exhibits thereto; (e) all references in such Financing Document to any Project Document or other Contract defined or referred to therein shall include such Contract (and, in the case of the Senior Securities or any other instrument, any other instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified, or as such Contract may have been replaced (including (i) in the case of an Energy Services Agreement or the Master Operating [Intercreditor Agreement] 39 Agreement, any replacement Contract therefor then satisfying the Restricted Payment Alternative Agreement Requirements with respect thereto and (ii) in the case of any Project Contract, any replacement Contract therefor then satisfying the Event of Default Alternative Agreement Requirements with respect thereto), from time to time; (f) all references in such Financing Document to any Person (including any of its capacities) shall include the permitted successors and assigns of such Person (including in such capacity) in accordance with the terms of such Financing Document and the other Project Documents and, in the case of any Governmental Authority, any Person succeeding to its functions and capacities; (g) all references in such Financing Document to any Law shall include such Law or any successor Law as amended, supplemented or otherwise modified and in effect from time to time, and any other Law in substance substituted therefor; (h) any item or list of items set forth following the word "including," "include" or "includes" in such Financing Document is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included," such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such item or items similar to such items; (i) all references in such Financing Document to the Collateral Agent, the Indenture Trustee, the Tax-Exempt Indenture Trustee, the IDB or the Working Capital Facility Provider shall be deemed to refer to each such Person however designated in the Financing Documents so that (i) references to rights or duties of the Collateral Agent under such Financing Document shall be deemed to include the rights or duties of such Person as the "Secured Party" under the Security Agreement and as the "Mortgagee" under the Mortgage, (ii) references to rights or duties of the Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement, (iii) references to rights or duties of the Tax- Exempt Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement and (iv) references to rights or duties of the Working Capital Facility Provider under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement; provided, however, that, if such Financing Document is (A) the Security Agreement, references to rights or duties of the "Secured Party" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent, (B) the Mortgage, references to rights or duties of the "Mortgagee" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent and (C) the Working Capital Facility, references to rights or duties of the "Agent" thereunder or a Lender shall be deemed to include the rights or duties of such Person as the Working Capital Facility Provider; (j) all terms defined in such Financing Document shall have the meanings therein ascribed to them when used in any certificate, opinion or other document delivered pursuant thereto and, in the case of the Indenture and the Tax-Exempt Indenture, in the Senior Securities; (k) all references in such Financing Document to the knowledge of any Person that is a corporation, limited liability company or partnership, or any other Person that is not an individual, with respect to any subject or event (including the occurrence or non-occurrence of any circumstance, the failure to perform or observe, or the satisfaction of, any covenant or agreement or the pending or threatened nature of any action) shall be [Intercreditor Agreement] 40 deemed to mean that an Authorized Officer of such Person (or, if such Person is the Company, the Plant Manager thereof) has actual knowledge or awareness of such subject or event or when notice of such subject or event shall have been given, or deemed to have been given, to such Person in accordance with the provisions of such Financing Document; and (l) all references in such Financing Document to the Project Contracts shall be deemed to exclude any Project Contract (and the Consent to Assignment (if any) with respect thereto) (i) after the date on which such Project Contract (A) may have been terminated in accordance with Section 5.10 of the Indenture or Section 4.10 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), (B) shall have reached its stated termination date (if any) or (C) (other than in the case of the Energy Services Agreements and the Master Operating Agreement in connection with a Mill Closure) shall have been fully and finally performed by all parties thereto and (ii) after the date of any disposition of the Company's rights and obligations under such Project Contract in accordance with Section 5.8 of the Indenture or Section 4.8 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), except, in the case of clauses (i) and (ii) above, if and to the extent that any provisions of such Project Contract so excluded provide that the rights and obligations of any Person that is a party to such Contract shall survive the termination thereof. "Accounts" means, collectively, the Intercreditor Agreement Accounts, the Indenture Accounts and the Tax-Exempt Indenture Accounts. "Act" has the meaning specified (a) in the case of any Holder of Indenture Securities, in Section 1.4 of the Indenture and (b) in the case of any Holder of Tax-Exempt Indenture Securities, in Section 1.4 of the Tax-Exempt Indenture. "Additional Available Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies neither constituting Revenues nor otherwise required (except pursuant to the provisions of Section 3.10 of the Intercreditor Agreement) to be deposited into any Account that are deposited into the Loss Proceeds Account as other amounts available to the Company and necessary for the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of securities or partnership or other ownership interests or by contract or otherwise. Notwithstanding the foregoing, Southern, Mobile Energy, Southern Electric, the Operator and each Person owning, directly or indirectly, five percent (5%) or more of the membership interests in the Company shall be deemed to be an Affiliate of the Company. "Affiliate Subordinated Debt" means any unsecured, subordinated loan or loans to the Company from any of its Affiliates pursuant to a Subordinated Loan Agreement, fully subordinated as to payment and exercise of remedies and payable only from monies otherwise distributable by the Company from the Distribution Account in accordance with the Intercreditor Agreement. "Aggregate Demand" has the meaning specified in the Master Operating Agreement. "Alabama Act" means Ala. Code ss. 11-54-80 to ss. 11-54-101. [Intercreditor Agreement] 41 "Annual Budget" means the operating plan and budget for the Energy Complex developed by the Company for operation of the Energy Complex for any Fiscal Year, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Approved Institutional Investor" has the meaning specified (a) in the case of the Tax-Exempt Bonds, in the Limited Offering Memorandum dated August 17, 1995 relating to the initial offering thereof and (b) in the case of any other Tax- Exempt Indenture Securities, in any other offering memorandum relating to the initial offering of such Tax-Exempt Indenture Securities. "Articles of Organization" means the Articles of Organization of the Company dated July 13, 1995. "Authenticating Agent" means any Person acting as Authenticating Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Authorized Agent" means any Paying Agent, Authenticating Agent or Security Registrar or other agent appointed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or the Company or the IDB (as the case may be) in accordance with the Indenture or the Tax-Exempt Indenture (as the case may be) to perform any function that such indenture authorizes such agent to perform. "Authorized Officer" means (a) in the case of a corporation (including Mobile Energy) or limited liability company (including the Company), the chief executive officer, the president, the chief financial officer, a vice president, the treasurer or an assistant treasurer of such corporation or limited liability company and (b) in the case of any general or limited partnership, any Person authorized by the managing general partner (or such other Person that is responsible for the management of such partnership) to take the applicable action on behalf of such partnership or any officer (with a title specified in clause (a) above) of such partnership's managing general partner (or such other Person that is responsible for the management of such managing general partner). "Authorized Representative" means, in respect of any Person, the individual or individuals authorized to act on behalf of such Person by the board of directors, manager, management committee, board of control or any other governing body of such Person as designated from time to time in a certificate of such Person, which shall include or attach thereto specimen signatures, delivered to the Collateral Agent upon which the Collateral Agent may conclusively rely. "Authorized Trust Officer" means any officer of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or any other individual who shall be duly authorized by appropriate corporate action on the part of either such trustee to authenticate Senior Securities. "Automatic Acceleration Default" has the meaning specified (a) in the case of the Indenture, in Section 8.2(a) thereof and (b) in the case of the Tax-Exempt Indenture, in Section 8.2(a) thereof. "Available Amount" means, at any time, (a) in the case of any Reserve Account Letter of Credit, the undrawn stated amount of such Reserve Account Letter of Credit at such time and (b) in the case of any Southern Guaranty, an amount equal to the "Available Amount" set forth therein (as such amount may be increased or decreased in accordance with such Southern Guaranty). "Bankruptcy Code" means the Federal Bankruptcy Code of 1978. "Bankruptcy Event" means, in respect of any Person, (a) such Person's general inability, or its admission of its inability, to pay its debts as such debts become due, (b) the application by such Person for or its consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee [Intercreditor Agreement] 42 or liquidator of itself or of all or a substantial part of its property, (c) the commencement by such Person of a voluntary case under the Bankruptcy Code, (d) the making by such Person of a general assignment for the benefit of its creditors, (e) the filing of a petition by such Person seeking to take advantage as a debtor of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, winding-up or readjustment of debts, (f) the failure by such Person to controvert in a timely and appropriate manner, or its acquiescence in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, (g) the taking of any corporate or other action by such Person for the purpose of effecting any of the foregoing, (h) the commencement of a proceeding or case, without the application or consent of such Person, in any court seeking (i) such Person's reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator, examiner or the like of such Person or all or any substantial part of its property or (iii) similar relief in respect of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debt and such proceeding or case specified in this clause (h) shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and (except in the case of Section 5.19(a)(ii) of the Indenture or Section 4.19(a)(ii) of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility)) in effect, for a period of sixty (60) or more days or (i) an order for relief against such Person shall be entered in any involuntary case under the Bankruptcy Code. "Board of Directors" means (a) when used with respect to the Company, the Manager of the Company and (b) when used with respect to Mobile Energy, either the board of directors of Mobile Energy or any committee of such board duly authorized to act for it. "Board Resolution" means (a) when used with respect to the Company, a copy of a resolution certified by an Authorized Officer of the Company or the secretary or assistant secretary of the Company as having been adopted by the Manager of the Company and to be in full force and effect on the date of such certification and (b) when used with respect to Mobile Energy, means a copy of a resolution certified by an Authorized Officer or the secretary or assistant secretary of Mobile Energy as having been adopted by the Board of Directors of Mobile Energy and to be in full force and effect on the date of such certification. "Boiler Ash Agreement" means the Boiler Ash Disposal Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Bond Counsel" means Balch & Bingham or other nationally recognized counsel experienced in matters of municipal law and the tax-exempt status of obligations under the Code. "Business Day" means any day other than a Saturday or Sunday or other day on which banks in New York, New York or Atlanta, Georgia are authorized or required to be closed. "Capital Budget" means the capital plan and budget developed by the Company with respect to the capital improvements to the Energy Complex specified in the Master Operating Agreement and certain other planned capital expenditures thereto. "Capital Budget Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Casualty Proceeds" means all insurance proceeds (including title insurance proceeds) and other amounts actually received on account of an Event of Loss, including any net interest thereon or gain in respect thereof, other than (a) [Intercreditor Agreement] 43 proceeds of third-party liability insurance (to the extent paid directly from an insurer or insurers to a third-party) and (b) proceeds of business interruption insurance and other payments received for interruption of operations. "Casualty Proceeds" do not include Additional Available Proceeds with respect to such Event of Loss. "Closing Date" means the date on which the First Mortgage Bonds and the Tax-Exempt Bonds are originally issued. "Coal Supplier" means E.J. Hodder & Associates, Inc., a Tennessee corporation. "Coal Supply Agreement" means the Coal Supply Agreement dated as of May 1, 1995 between the Coal Supplier and the Company. "Code" means, as applicable, the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder or the Internal Revenue Code of 1954 and the rules and regulations promulgated thereunder. "Collateral" means, collectively, all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) by the Company or the IDB (as the case may be), in each case pursuant to the granting and assigning clauses of the applicable Financing Documents. "Collateral Agent" means Bankers Trust (Delaware), a Delaware banking corporation, or any other Person appointed as a substitute or replacement Collateral Agent under the Intercreditor Agreement. "Collateral Agent Claims" means all obligations of the Senior Secured Parties and the Mobile Energy Parties, now or hereafter existing, to pay fees, costs and expenses to the Collateral Agent pursuant to Section 7.3(f) and Article VIII of the Intercreditor Agreement. "Combined Exposure" means, at any time, the sum of (a) the aggregate principal amount of all Senior Securities Outstanding and (b) the aggregate principal amount of all outstanding Working Capital Facility Loans made, and the unutilized Working Capital Facility Commitment, under the Working Capital Facility. "Common Services Agreement" means the Common Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Company" means Mobile Energy Services Company, L.L.C., an Alabama limited liability company. "Company Request" and "Company Order" mean, respectively, a written request or order signed in the name of the Company by an Authorized Officer of the Company and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Company Step-In Rights" has the meaning specified for "MESC Step-In Rights" in the Master Operating Agreement. "Completion Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Consents to Assignment" means, collectively, (a) the Consents to Assignment, the Lease Estoppel and the Supplementary Lease Estoppel of Scott with respect to the Project Contracts to which it is a party, (b) the Consent to Assignment of the Pulp Mill Owner with respect to the Project Contracts to which it is a party, (c) the Consent to Assignment of the Tissue Mill Owner with respect to the Project Contracts to which it is a party, (d) the Consent to [Intercreditor Agreement] 44 Assignment of the Paper Mill Owner with respect to the Project Contracts to which it is a party, (e) the Consent to Assignment of Southern Electric with respect to the Project Contracts to which it is a party, (f) the Consent to Assignment of SCS with respect to the SCS Agreement, (g) any Consent to Assignment of the Coal Supplier with respect to the Coal Supply Agreement, (h) the Consent to Assignment of TRT with respect to the Nondisturbance Agreement (which may be effected pursuant to the Recognition Agreement to which TRT is a party), (i) the Consent to Assignment of the IDB with respect to the Project Contracts to which it is a party (which may be effected pursuant to the Recognition Agreements) and (j) the Consent to Assignment of Ahlstrom Recovery, Inc. with respect to Purchase Order Number MG-2601. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of August 1, 1995 among the Mobile Energy Parties and the Tax-Exempt Indenture Trustee. "Contract" means (a) any agreement (whether executory or non-executory and whether a Person entitled to rights thereunder is so entitled directly or as a third-party beneficiary), including an indenture, lease or license, (b) any deed or other instrument of conveyance, (c) any certificate of incorporation, articles of organization or charter and (d) any by-law. "Corporate Trust Office" means the principal office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) at which at any particular time the corporate trust business thereof shall be administered, which as of the Closing Date is (a) in the case of the Collateral Agent, Bankers Trust (Delaware), c/o Bankers Trust Company, Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group, (b) in the case of the Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309 and (c) in the case of the Tax-Exempt Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309, or such other office as may be designated by the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to the Mobile Energy Parties and, in the case of the Collateral Agent, to the other Intercreditor Parties. "Credit Standard Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the unsecured long-term Debt of the provider of such Reserve Account Letter of Credit shall not be rated "A" or higher by S&P, "A" or higher by Fitch and "A2" or higher by Moody's and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the Collateral Agent or the Indenture Trustee shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has not been satisfied or (ii) Southern shall have failed, or the Company shall have failed to cause Southern, to provide to the Collateral Agent or the Indenture Trustee, on or prior to the date that is forty-five (45) days after the end of each fiscal quarter of Southern, an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied. "Current Fiscal Quarter" has the meaning specified in the definition of Maintenance Reserve Account Required Deposit. "Debt" means, in respect of any Person, (a) indebtedness for borrowed money or the deferred purchase price of property or services (excluding obligations under agreements for the purchase price of goods and services in the normal course of business which are not more than ninety (90) days past due), (b) obligations as lessee under leases that shall have been or should be, in accordance with GAAP, recorded as capital leases, (c) obligations (whether matured or contingent) with respect to any letters of credit issued for the account of such Person, (d) obligations under direct or indirect guaranties or other similar contingent liabilities in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds [Intercreditor Agreement] 45 referred to in clause (a), (b) or (c) above and (e) all Debt of another Person secured by a lien on any property owned by the first Person (whether or not such Debt has been assumed by such first Person). "Debt Service Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to draw upon such Reserve Account Letter of Credit pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause third of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security Account is the Distribution Account, clause second of Section 3.8(b) of the Intercreditor Agreement, (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause second of Section 4.5 of the Indenture and (iv) if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, clause second of Section 4.6 of the Tax-Exempt Indenture and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent or the Indenture Trustee (as the case may be) to call upon such Southern Guaranty pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause fourth of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security Account is the Distribution Account, clause third of Section 3.8(b) of the Intercreditor Agreement and (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause third of Section 4.5 of the Indenture. "Debt Service Reserve Account" means any Account so designated (if any) established and created under any Series Supplemental Indenture to the Indenture for the benefit of Holders of Indenture Securities established thereunder. "Debt Service Reserve Account Required Balance" means, in respect of any Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Indenture establishing such Debt Service Reserve Account. "Default Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the provider of such Reserve Account Letter of Credit shall default in its payment obligations thereunder or (ii) the provider of such Reserve Account Letter of Credit shall become insolvent and (b) with respect to any Southern Guaranty, (i) Southern shall fail to perform any of the "Guaranteed Obligations" thereunder as and when due or (ii) Southern shall become insolvent. "Designated Southern Subsidiaries" means, for purposes of the satisfaction of the Southern Credit Standard, all of the Eligible Southern Subsidiaries other than, as designated by the Company to be excluded for such purposes, any one or all (including any combination) of the Eligible Southern Subsidiaries, provided that the aggregate net worth of such Eligible Southern Subsidiaries so excluded is equal to or less than ten percent (10%) of the aggregate net worth of all of the Eligible Southern Subsidiaries. For such purposes, "net worth" means (a) par value of common stock plus (b) paid-in capital plus (c) premium on preferred stock plus (d) retained earnings minus (e) accrued and unpaid dividends on, or other amounts due and payable in respect of, capital stock, in each case, of each of such Eligible Southern Subsidiaries. "Determination of Taxability" means a final determination by the Internal Revenue Service or a court of competent jurisdiction in a proceeding in which the Company has been afforded an opportunity to participate, or, at the election of the Company in its sole discretion, a determination by the Company based on an opinion of Bond Counsel, that as a result of any event the interest payable on any Tax-Exempt Indenture Security (in respect of which, at the time of original issuance, the Tax-Exempt Indenture Trustee received an opinion of Bond Counsel to the effect that interest payable on such Tax-Exempt Indenture Security was not includable for Federal income tax purposes in the gross income of any owner of such Tax-Exempt Indenture Security (other than an owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code)) is includable for Federal income tax purposes in the gross [Intercreditor Agreement] 46 income of any owner of such Tax-Exempt Indenture Security (other than any owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code). No such determination by the Internal Revenue Service shall be considered final unless the Company has been given written notice and, if it so desires, has been given the opportunity to contest the same, either directly or in the name of any owner of a Tax-Exempt Indenture Security and until the conclusion of any appellate review, if sought. Interest on Tax-Exempt Indenture Securities shall not be deemed includable for Federal income tax purposes merely by reason of such interest being treated as a tax preference item for purposes of a Federal alternative minimum tax, loss of or reduction in a related deduction or other indirect adverse tax consequences. "Distribution Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Distribution Date" means any Business Day following an Interest Payment Date and preceding the Monthly Transfer Date immediately succeeding such Interest Payment Date, as selected by the Company. "Easement Deeds" means, collectively, (a) the Easement Deed, dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Company certain easements, (b) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Pulp Mill Owner certain easements, (c) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Company certain easements, (d) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Tissue Mill Owner certain easements, (e) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Company certain easements and (f) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Paper Mill Owner certain easements. "Easements" means, collectively, all easements, licenses, franchises, rights-of-way and spur track agreements to which the Company is now or hereafter a party or beneficiary affecting construction on, or the use or operation of, or constituting a part of, the Site (including the Easement Deeds). "Eligible Southern Subsidiaries" means, at any time, each of Alabama Power Company, an Alabama corporation, Georgia Power Company, a Georgia corporation, Gulf Power Company, a Maine corporation, Mississippi Power Company, a Mississippi corporation, and Savannah Electric and Power Company, a Georgia corporation, provided that a majority of the voting securities of such Person is owned, directly or indirectly, by Southern at such time. "Eminent Domain Proceeds" means all amounts and proceeds actually received in respect of any Event of Eminent Domain, including any net interest thereon or gain in respect thereof. "Eminent Domain Proceeds" do not include Additional Available Proceeds with respect to such Event of Eminent Domain. "Energy Complex" has the meaning specified in the Master Operating Agreement. "Energy Services Agreements" means, collectively, the Pulp Mill Energy Services Agreement, the Tissue Mill Energy Services Agreement and the Paper Mill Energy Services Agreement. "Environmental Bonds" means, collectively, (a) (i) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1973, (ii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1976 and (iii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1980, in the case of clauses (i), (ii) and (iii) above, issued under and secured by a Trust Indenture dated as of April 1, 1973, as supplemented by a First Supplemental Indenture thereto dated as of [Intercreditor Agreement] 47 September 1, 1976 and a Second Supplemental Indenture thereto dated as of October 1, 1980 between the IDB and AmSouth Bank of Alabama, as trustee, and (b) the IDB's Industrial Revenue Bonds (Scott Paper Company Project), Series B of 1976 issued under and secured by a Trust Indenture dated as of September 1, 1976 between the IDB and AmSouth Bank of Alabama, as trustee . "Environmental Indemnity Agreements" means, collectively, (a) the Pulp Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner, (b) the Paper Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Paper Mill Owner, (c) the Tissue Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner and (d) the Scott Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy). "Environmental Requirement" means any Governmental Approvals in effect from time to time relating to the protection of the environment or otherwise addressing environmental issues or environmental requirements of or by any Governmental Authority, or otherwise relating to noise or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, emission, discharge, release or handling of Hazardous Material, including the Comprehensive Environmental Response Compensation, and Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. ss. 1101 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. ss. 2761), the Occupational Health and Safety Act (29 U.S.C. ss. 641 et seq.), the Pollution Prevention Act (42 U.S.C. ss. 1201 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), Preservation Development, Etc. of Coastal Areas (Ala. Code ss. 9-7-1 et seq.), the Alabama Environmental Management Act (Ala. Code ss. 22-22A-1 et seq.), the Alabama Water Pollution Control Act (Ala. Code ss. 22-22A-1 et seq.), the Alabama Safe Drinking Water Act (Ala. Code ss. 22-23-30 et seq.), Water Well Standards (Ala. Code ss. 22- 24-1 et seq.), Water Wastewater Systems and Treatment Plants (Ala. Code ss. 22-25-1 et seq.), Sewage Collection, Treatment, and Disposal Facilities (Ala. Code ss. 22-26-1 et seq.), Solid Wastes Disposal Act (Ala. Code ss. 22-27-1 et seq.), the Alabama Air Pollution Control Act of 1971 (Ala. Code ss. 22-28-1 et seq.), the Hazardous Wastes Management and Minimization Act (Ala. Code ss. 22-30-1 et seq.), the Alabama Hazardous Substance Cleanup Fund (Ala. Code ss. 22-30A-1 et seq.), the Water Pollution Control Authority (Ala. Code ss. 22-34-1 et seq.), the Alabama Underground and Aboveground and Storage Tank Trust Fund Act (Ala. Code ss. 22-35-1 et seq.), the Alabama Underground Storage Tank and Wellhead Protection Act of 1988 (Ala. Code ss. 22-36-1 et seq.) and the Alabama Lead Ban Act of 1988 (Ala. Code ss. 22-37-1 et seq.) and, in each case, any regulations promulgated thereunder. "ERISA" means the Employee Retirement Income Security Act of 1974. "ESA Blockage Event" means, with respect to any Mill Owner or its respective Energy Services Agreement or its Mill, that: (a) such Energy Services Agreement or the Master Operating Agreement has been declared unenforceable by a Governmental Authority having jurisdiction, unless the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (i) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by [Intercreditor Agreement] 48 the Company and such Mill Owner, (ii) such declaration of enforceability has been overruled, reversed or rescinded by such Governmental Authority or by another Governmental Authority having final jurisdiction or greater jurisdiction than such first Governmental Authority or (iii) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (b) such Mill Owner has either (i) terminated, or delivered written notice pursuant to the Master Operating Agreement of its intention to terminate (which notice has not been rescinded), its rights and obligations under such Energy Services Agreement or the Master Operating Agreement in connection with a Mill Closure with respect to such Mill or (ii) denied that it has any obligations and substantially ceased performance under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (A) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by the Company and such Mill Owner or, provided that another Person is reasonably capable of performing such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement (as the case may be), by the Company and such other Person or (B) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (c) a default has occurred and is continuing in respect of such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement, unless, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been terminated as a result of such default, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (d) based upon the knowledge of either of the Mobile Energy Parties, it is reasonably likely that, on or prior to the next Distribution Date, either (i) there will be a Mill Closure with respect to such Mill or (ii) such Mill Owner will deliver written notice pursuant to the Master Operating Agreement of such Mill Owner's intention to terminate its rights and obligations under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been terminated as a result of such Mill Closure, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); or (e) a Bankruptcy Event has occurred and is continuing in respect of such Mill Owner, unless (i) the obligations of such Mill Owner under such Energy Services Agreement and the Master Operating Agreement have been expressly assumed with the approval of a court of competent jurisdiction or (ii) if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been rejected or otherwise terminated, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirement with [Intercreditor Agreement] 49 respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be). "Event of Default" means, so long as there are any Financing Commitments or any Financing Liabilities outstanding, an "Event of Default" under the Indenture, an "Event of Default" under the Tax-Exempt Indenture or an "Event of Default" under the Working Capital Facility. "Event of Default Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more Persons in substitution for or replacement of any such Project Contract, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that such alternative Contract (a) contains substantially equivalent terms and conditions or, if such terms and conditions are no longer available on a commercially reasonable basis, the terms and conditions then available on a commercially reasonable basis, (b) would, after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, maintain a minimum annual Senior Debt Service Coverage Ratio for each Fiscal Year through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) projected to be equal to or greater than the lesser of (i) the minimum annual Senior Debt Service Coverage Ratio projected to have been in effect for such Fiscal Year had performance under such Project Contract continued and (ii) 1.2 to 1.0 and (c) is reasonably capable of being performed by the parties thereto. Notwithstanding the foregoing, such alternative Contract need not satisfy the conditions described in clauses (a) and (b) above, provided that (A) the Company delivers to the applicable Senior Secured Parties an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements (other than the conditions set forth in subclauses (C) and (D) of clause (b)(ii) of the definition of Restricted Payment Alternative Agreement Requirements with respect to such alternative Contract) and (B) after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.2 to 1.0. "Event of Eminent Domain" means any compulsory transfer or taking, or transfer under threat of compulsory transfer or taking, of a material part of the Energy Complex by any Governmental Authority or any Person acting with the authority thereof for more than six (6) months, unless such transfer or taking is the subject of a Good Faith Contest. "Event of Loss" means any physical loss or destruction of, or destruction to, the Energy Complex, or any other event that causes all or a material part of the Energy Complex to be rendered unfit for normal use for any reason whatsoever, including through failure of title. "Excess Loss Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies in an amount equal to the excess, if any, of all of the Loss Proceeds with respect to such Event of Loss or Event of Eminent Domain (as the case may be) over the total cost of the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Exchange Act" means the Securities Exchange Act of 1934. "Financing Commitment" means any commitment pursuant to the Financing Documents to provide credit to the Company. "Financing Documents" means all Contracts evidencing or securing the Financing Liabilities. [Intercreditor Agreement] 50 "Financing Liabilities" means all indebtedness, liabilities and obligations of the Mobile Energy Parties (including principal, interest, fees, reimbursement obligations, penalties, indemnities and legal expenses, whether due to acceleration or otherwise) owing to the Senior Secured Parties (of whatsoever nature and however evidenced) under or pursuant to (a) the Indenture (including the Guaranty), (b) the Senior Securities, (c) the IDB Lease Agreement, (d) the Tax-Exempt Indenture, (e) the Working Capital Facility and any evidence of indebtedness entered into thereunder and (f) the other Security Documents, in the case of clause (a) through (f) above, whether direct or indirect, primary or secondary, fixed or contingent or now or hereafter arising out of or relating to any such Contract. "Financing Statements" means Uniform Commercial Code financing statements filed in connection with the other Security Documents. "First Mortgage Bonds" means the Indenture Securities issued on the Closing Date under the first Series Supplemental Indenture to the Indenture. "Fiscal Quarter" means the period of time beginning at 12:01 a.m. on the first day of each calendar quarter and ending at midnight on the last day of such calendar quarter. "Fiscal Year" means the period of time beginning at 12:01 a.m. on January 1 of each year and ending at midnight on December 31 of such year. "Fitch" means Fitch Investors Service, L.P., a New York limited partnership. "Fuel Inventory" means fuel inventory of the Energy Complex, in whatever form, including oil, gas, coal, black liquor, biomass and sludge. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "GDPIPD" means the Gross Domestic Product Implicit Price Deflator as published in the United States Department of Commerce, Bureau of Analysis publication entitled "Survey of Current Business." If the Gross Domestic Product Implicit Price Deflator ceases to exist or is no longer available, the Company, with the approval of the Independent Engineer, shall designate a substitute index that is reasonably similar to the Gross Domestic Product Implicit Price Deflator. "GDPIPD Factor" means, with respect to each Fiscal Year, the GDPIPD most recently published during or prior to such Fiscal Year divided by the GDPIPD published with respect to December 1994; provided, however, that such GDPIPD Factor shall not be less than one (1). "Good Faith Contest" means the contest of an item if (a) such item is diligently contested in good faith by appropriate proceedings and adequate reserves or bonding are established in accordance with GAAP with respect to such item and (b) the failure to pay or comply with such item during the period of such contest would not result in a Material Adverse Effect. "Governmental Approvals" means those authorizations, consents, approvals, waivers, exemptions, variances, registrations, certifications, permissions, permits and licenses with any Governmental Authority required for the ownership and operation of the Energy Complex and the performance of a Person's obligations under the Project Documents. "Governmental Authority" means any Federal, state, city, county, municipal, foreign, international, regional or other governmental or regulatory authority, agency, department, board, body, instrumentality, commission, arbiter or court. "Guaranteed Obligations" means all indebtedness, liabilities, obligations, covenants and duties of, and all terms and conditions to be observed by, the Company (including in its capacity as a "debtor in possession" under the [Intercreditor Agreement] 51 Bankruptcy Code) due or owing to, or in favor or for the benefit of, the Senior Secured Parties under the Security Documents or the Working Capital Facility (as the case may be), in each case (a) whether due or owing to, or in favor or for the benefit of, the Senior Secured Parties or any other Person that becomes the Indenture Trustee, the Tax-Exempt Indenture Trustee or the Working Capital Facility Provider (as the case may be) by reason of any succession or assignment at any time thereafter and (b) whether or not an allowable claim against the Company under the Bankruptcy Code, or otherwise enforceable against the Company, and including, in any event, interest accruing after the filing by or against the Company of a petition under the Bankruptcy Code; provided, however, that the satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company. "Guaranty" means the unconditional guaranty by Mobile Energy of the Guaranteed Obligations included in Article XIV of the Indenture, Article VIII of the IDB Lease Agreement and Article VIII of the Working Capital Facility (as the case may be). "Hazardous Materials" means hazardous wastes, hazardous substances, hazardous constituents, air contaminants or toxic substances, whether solids, liquids or gases, including substances defined or otherwise regulated as "hazardous materials," "regulated substances," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "carcinogens," "hazardous air pollutants," "criteria pollutants," "reproductive toxins," "radioactive materials," "toxic chemicals," or other similar designations in, or otherwise subject to regulation under, any Environmental Requirement, including petroleum hydrocarbons, asbestos-containing materials, urea formaldehyde foam insulation, polychlorinated biphenyls and radionuclides. "Holder" means a Person in whose name an Indenture Security or a Tax-Exempt Indenture Security (as the case may be) is registered in the register providing for the registration, including upon transfer or exchange, thereof pursuant to the Indenture or the Tax-Exempt Indenture (as the case may be). "IDB" means The Industrial Development Board of the City of Mobile, Alabama. "IDB Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses, indemnification payments or other amounts to the IDB under the Financing Documents, other than (a) rent payments under the IDB Lease Agreement and (b) payments in respect of principal of and premium, if any, and interest on the 1994 Bonds. "IDB Lease Agreement" means the Amended and Restated Lease and Agreement dated as of August 1, 1995 among the IDB and the Mobile Energy Parties. "IDB Request" and "IDB Order" mean, respectively, a written request or order signed in the name of the IDB by an Authorized Officer of the IDB and delivered to the Tax-Exempt Indenture Trustee. "Income Tax Deficiency" means (a) with respect to the second Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the sum of (A) the combined Federal and State of Alabama quarterly estimated income tax payments that would have been required to be paid by all Members during such Fiscal Year prior to such Distribution Date and (B) one-half of the amounts estimated to be required to be paid for County and City of Mobile, Alabama income taxes in respect of such Fiscal Year, if any, all calculated, solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (1) be a member of a consolidated, affiliated, combined, unitary or other tax group, (2) be a party to any tax sharing arrangements with any other Person and (3) have income, loss or credits [Intercreditor Agreement] 52 (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the first Distribution Date during such Fiscal Year in excess of the amount of distributions, if any, that would have been calculated by clause (b) below with respect to such Distribution Date and (b) with respect to the first Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the estimate, as of such Distribution Date, of the combined Federal, State of Alabama, and County and City of Mobile, Alabama income taxes that relate to the immediately preceding Fiscal Year of all Members, all calculated solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (A) be a member of a consolidated, affiliated, combined, unitary or other tax group, (B) be a party to any tax sharing arrangements with any other Person and (C) have income, loss or credits (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the second Distribution Date of such prior Fiscal Year. "Indenture" means the Trust Indenture dated as of August 1, 1995 among the Mobile Energy Parties and the Indenture Trustee. "Indenture Accounts" means, with respect to the Indenture Securities of any series, the Indenture Securities Account and each Debt Service Reserve Account (if any) established for the benefit of Holders of the Indenture Securities of such series. "Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Indenture Securities" means all Debt issued pursuant to the Indenture. "Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Indenture Trustee by the Company pursuant to the granting and assigning clauses of the Indenture and (b) the Shared Collateral. "Indenture Securities Interest Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Principal Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Redemption Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Independent Engineer" means Stone & Webster Engineering Corporation or another nationally recognized consulting or engineering firm appointed Independent Engineer pursuant to the terms of the Intercreditor Agreement. [Intercreditor Agreement] 53 "Independent Engineer Agreement" means the Independent Engineer Agreement dated as of August 1, 1995 between the Company and the Independent Engineer or any other similar Contract among such Persons. "Independent Engineer Confirmation" means a certificate signed by an authorized representative of the Independent Engineer confirming the reasonableness of statements and projections contained in certain Officer's Certificates delivered to the applicable Senior Secured Parties or the Collateral Agent under the Financing Documents, which confirmation may not be unreasonably withheld, conditioned or delayed. "Independent Insurance Advisor" means Sedgwick James or another nationally recognized insurance advisory firm appointed as insurance advisor under the Indenture and the Tax-Exempt Indenture by the Collateral Agent. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among the Senior Secured Parties, the Collateral Agent, the IDB and the Mobile Energy Parties. "Intercreditor Agreement Accounts" means, collectively, the Completion Account, the Revenue Account, the Mill Owner Reimbursement Account, the Working Capital Facility Account, the Operating Account, the Maintenance Reserve Account, the Loss Proceeds Account, the Subordinated Debt Account, the Subordinated Fee Account and the Distribution Account. "Intercreditor Parties" means, collectively, the Senior Secured Parties, the IDB, the Mobile Energy Parties, any Subordinated Debt Provider and any other Person party to the Intercreditor Agreement (other than the Collateral Agent). "Interest Payment Date" means each January 1 and July 1 of each year, commencing January 1, 1996. "Investment Grade" means a rating in one of the four highest categories (without regard to subcategories within such rating categories) by a Rating Agency. "Law" means any constitution, treaty, statute, code, ordinance, regulation, order, decree, writ or judicial or arbitral decision. "Lease" means the Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July, 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Lease Documents" means, collectively, the IDB Lease Agreement, the Tax- Exempt Indenture (including any Series Supplemental Indenture) and (to the extent relating to, or securing, the Tax-Exempt Indenture Securities) the other Financing Documents. "Lease Indemnity" means the Letter Agreement dated August 1, 1995 by the Mobile Energy Parties in favor of Scott, providing for the indemnification of Scott with respect to matters arising under the Utilities Land Sublease dated as of December 1, 1983, as amended, between Scott and the IDB. "Leased Land" means the land underlying the components of the Tax-Exempt Project marked on Exhibit A to the IDB Lease Agreement. "Lenders" has the meaning specified in the Working Capital Facility. "Lien" means any lien, claim, security interest, mortgage, trust arrangement, judgment, pledge, option, charge, easement, encumbrance, title retention, conditional sales agreement, encroachment, right-of-way, building or use restriction, preferential right or any other security agreement, arrangement or similar right in favor of any Person, whether voluntarily incurred or arising by operation of law, and includes any agreement to give any of the foregoing in [Intercreditor Agreement] 54 the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "Loss Proceeds" means, as applicable, Casualty Proceeds or Eminent Domain Proceeds. "Loss Proceeds Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Excess Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Expenditures" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, other than (a) fuel costs and expenses, (b) labor and employee expenses, including fringe benefits and labor relations expense, (c) payments for insurance premiums and like insurance related expenses required or otherwise maintained under any Project Document, (d) costs and expenses of consumable items such as process or cleaning chemicals and lubricants, (e) equipment rental, small tools and vehicle maintenance expenses, (f) costs and expenses associated with legal, accounting and other office and administrative functions, (g) permitting fees, (h) costs and expenses of safety supplies, office supplies and other office expenses, (i) property taxes and payments made in lieu of taxes, (j) computer maintenance expenses, (k) any amounts payable for services rendered under the Common Services Agreement, (l) ash disposal costs, (m) liquidated damages payable to the Mill Owners under the Master Operating Agreement, (n) amounts payable to the Mill Owners in connection with the exercise of Mill Owner Step-In Rights, (o) any amounts required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of the Tax-Exempt Indenture Securities (to the extent not already provided for in the Tax-Exempt Indenture) and (p) payments to the IDB (including IDB Claims and payments required to be made by the Company with respect to the 1994 Bonds), in the case of clauses (a) through (p) above, to the extent the foregoing costs or expenses are not customarily treated as capital expenditures. "Maintenance Plan" means the maintenance plan and budget for the Energy Complex, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Maintenance Plan Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Reserve Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Reserve Account Balance" means, with respect to the Current Fiscal Quarter, the sum of (a) the monies on deposit in the Maintenance Reserve Account, (b) amounts available to be drawn or called upon under any Reserve Account Security deposited in the Maintenance Plan Funding Subaccount and (c) the monies on deposit in, or otherwise credited to (by means of a guaranty, capital infusion agreement or otherwise), the Mill Owner Maintenance Reserve Account, in the case of clauses (a), (b) and (c) above, at the beginning of the Current Fiscal Quarter. "Maintenance Reserve Account Required Deposit" means, with respect to any Fiscal Quarter during any Fiscal Year (the "Current Fiscal Quarter"), one or more deposits into the Maintenance Reserve Account on Monthly Transfer Dates occurring during the Current Fiscal Quarter in an aggregate amount equal to the excess of the sum of paragraphs (a), (b) and (c) below over the Maintenance Reserve Account Balance with respect to the Current Fiscal Quarter: [Intercreditor Agreement] 55 (a) the amount of Maintenance Reserve Account Required Deposits with respect to each Fiscal Quarter preceding the Current Fiscal Quarter that were required to be deposited into the Maintenance Reserve Account during each such Fiscal Quarter but were not, and have not been since, so deposited; (b) the aggregate amount of any withdrawals from the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account during each Fiscal Quarter preceding the Current Fiscal Quarter that were in excess of the aggregate projected Maintenance Expenditures for each such Fiscal Quarter (as specified in the Maintenance Plan) but were not, and have not been since, redeposited in the Maintenance Reserve Account; and (c) the greatest of: (i) if the Current Fiscal Quarter is the first Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding sixteen (16) Fiscal Quarters (in each case as specified in the Maintenance Plan) by sixteen (16); (ii) if the Current Fiscal Quarter is the first or second Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fifteen (15) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fifteen (15); (iii) if the Current Fiscal Quarter is the first, second or third Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fourteen (14) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fourteen (14); and (iv) if the Current Fiscal Quarter is the first, second, third or fourth Fiscal Quarter of such Fiscal Year, the greatest of the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for any period consisting of the Current Fiscal Quarter and any number of consecutive Fiscal Quarters from one (1) to thirteen (13) immediately succeeding the Current Fiscal Quarter (in each case as specified in the Maintenance Plan) by such number of consecutive Fiscal Quarters. "Manager" means Mobile Energy and any Person appointed as an additional, substitute or replacement manager of the Company pursuant to the terms of the Articles of Organization. "Master Operating Agreement" means the Amended and Restated Master Operating Agreement dated as of July 13, 1995 among the Company (as assignee of Mobile Energy), Scott, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Material Adverse Effect" means (a) a change in the financial condition of either of the Mobile Energy Parties or the Energy Complex that would reasonably be expected to materially and adversely affect the ability of either of the Mobile Energy Parties to pay principal of and interest on the Senior Debt as and when required or (b) any event or occurrence of whatever nature that would materially and adversely affect (i) the ability of either of the Mobile Energy Parties to perform its obligations under the Project Documents or (ii) the Lien of the Security Documents. "Member" means any Person owning a membership interest in the Company. [Intercreditor Agreement] 56 "Mill Closure" means (a) a public announcement by a Mill Owner that it will close its respective Mill for a period of at least one (1) year or that it will reduce production of pulp, paper or tissue (as applicable) at such Mill (permanently or for a period of at least two (2) years) to less than ten percent (10%) of 1994 production levels or (b) the occurrence of a two (2) year period during which, for any reason other than the occurrence of a Force Majeure Event (as defined in the Master Operating Agreement), such Mill Owner's production of pulp, paper or tissue (as applicable) at such Mill is less than ten percent (10%) of 1994 production levels. "Mill Owner Maintenance Reserve Account" means the account so designated established and created pursuant to the Master Operating Agreement for the sole benefit of the Mill Owners. "Mill Owner Maintenance Reserve Account Agreement" means the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among Southern, the Company and the Mill Owners. "Mill Owner Reimbursement Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Mill Owner Step-In Rights" has the meaning specified in the Master Operating Agreement. "Mill Owners" means, collectively, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Mills" means, collectively, the Pulp Mill, the Tissue Mill and the Paper Mill. "Mixed-Use Bonds" means, collectively, the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series A and the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series B, in each case issued under and secured by a Trust Indenture dated as of December 1, 1984, as supplemented by a First Supplemental Indenture thereto dated as of June 1, 1985, between the IDB and AmSouth Bank of Alabama, as trustee. "Mobile Energy" means Mobile Energy Services Holdings, Inc., an Alabama corporation. "Mobile Energy Parties" means, collectively, the Company and Mobile Energy. "Mobile Energy Request" or "Mobile Energy Order" means, respectively, a written request or order signed in the name of Mobile Energy by an Authorized Officer of Mobile Energy and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Mobile Facility" means the integrated pulp, paper and tissue manufacturing facility located on a 730-acre site along the Mobile River and the Chickasaw Creek in Mobile, Alabama, comprised of the Mills and the Energy Complex. "Monthly Transfer Date" means the last Business Day of each month of each Fiscal Year, commencing with the first such day occurring after the Closing Date. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation. "Mortgage" means the Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 among the Company, the IDB and the Mortgagee. "Mortgagee" means Bankers Trust (Delaware), or any other Person appointed as a substitute or replacement Mortgagee under the Mortgage. "1983 Bonds" means the IDB's Exempt Facilities Revenue Bonds (Scott Paper Company Project), 1983 Series B, issued under and secured by a Trust Indenture [Intercreditor Agreement] 57 dated as of December 1, 1983 between the IDB and BankAmerica Trust Company of New York, as trustee. "1984 Bonds" means the IDB's Variable Rate Demand Solid Waste Revenue Refunding Bonds (Scott Paper Company Project) Series 1984 A, B, C, D and E issued under and secured by the 1984 Indenture. "1984 Indenture" means the Trust Indenture dated as of December 1, 1984, as supplemented by the First Supplemental Indenture thereto dated as of January 1, 1985 and the Second Supplemental Indenture thereto dated as of August 1, 1995, between the IDB and Chemical Bank, as trustee. "1984 Lease" means the Lease and Agreement dated December 1, 1984, as amended by Amendment No. 1 thereto dated as of November 8, 1994 and Amendment No. 2 thereto dated as of December 9, 1994, between the IDB and the Company (as assignee of Mobile Energy (as assignee of Scott)). "1994 Bond Payment Date" means each June 1 and December 1 of each year, commencing December 1, 1995. "1994 Bond Trustee" means Bankers Trust (Delaware), in its capacity as trustee under the 1994 Indenture. "1994 Bonds" means the IDB's Industrial Development Revenue Bonds (Scott Paper Recovery Boiler Project) 1994 Series A. For all purposes of the Financing Documents, (a) payments in respect of the principal of and premium, if any, and interest on the 1994 Bonds shall be treated as neither Operation and Maintenance Costs nor Senior Debt Service Requirements (or any other debt service) and (b) receipts (or deemed receipts) in respect of the 1994 Bonds shall not be treated as Revenues. "1994 Indenture" means the Trust Indenture dated as of December 1, 1994 between the IDB and the 1994 Bond Trustee. "1995 Bonds" has the meaning specified in Section 2.17(a) of the Tax-Exempt Indenture, which means the Tax-Exempt Bonds. "Non-Affiliate Subordinated Debt" means any unsecured loan or loans from any Person that is not an Affiliate of the Company pursuant to a Subordinated Loan Agreement, the amounts necessary for repayment of which have been included in the Annual Budget approved by the Collateral Agent and the Independent Engineer. "Nondisturbance Agreement" means the Estoppel and Nondisturbance Agreement dated as of December 12, 1994 between TRT and the Company (as assignee of Mobile Energy). "Officer's Certificate" means a certificate that has been signed by an Authorized Officer of either of the Mobile Energy Parties or of Southern (as the case may be). "O&M Agreement" means the Facility Operations and Maintenance Agreement dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Operator. "Operating Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Operating Agreement" means the Operating Agreement of the Company dated as of July 13, 1995, as amended by the First Amendment thereto dated as of July 13, 1995, among the Members. "Operation and Maintenance Costs" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, including and together [Intercreditor Agreement] 58 with (a) Subordinated Fees, (b) Maintenance Expenditures and (c) any such costs and expenses specified in clauses (a) through (p) of the definition of Maintenance Expenditures (other than (i) rent payments under the IDB Lease Agreement and (ii) payments of principal of and premium, if any, and interest on the 1994 Bonds). "Operator" means Southern Electric, in its capacity as operator under the O&M Agreement. "Opinion of Counsel" means a written opinion of counsel for any Person either expressly referred to in any Financing Document to which the Collateral Agent or any of the Senior Secured Parties is a party or otherwise satisfactory to the Collateral Agent or such Senior Secured Party (which may include counsel for either of the Mobile Energy Parties, whether or not such counsel is an employee of either or both of them). "Optional Modifications" means all modifications to the Energy Complex that are not Required Modifications. "Optional Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Outstanding" means, when used with respect to any of the Senior Securities (however referenced in any Financing Document), as of the date of determination, all such Senior Securities theretofore authenticated and delivered under the Indenture or the Tax-Exempt Indenture (as the case may be), except: (a) such Senior Securities theretofore canceled by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or delivered to either such Trustee for cancellation; (b) such Senior Securities or portions thereof deemed to have been paid within the meaning of, in the case of the Indenture, Section 12.1 thereof and, in the case of the Tax-Exempt Indenture, Section 12.1 thereof (as the case may be); and (c) such Senior Securities that have been exchanged for other Senior Securities or Senior Securities in lieu of which other Senior Securities have been authenticated and delivered pursuant to the Indenture or the Tax-Exempt Indenture (as the case may be) unless held by a Holder in whose hands such Senior Securities constitute valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Senior Securities (however referenced in any Financing Document) Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or the Tax-Exempt Indenture (as the case may be) or whether or not a quorum is present at a meeting of Holders of such Senior Securities, such Senior Securities owned by either of the Mobile Energy Parties (or any Affiliate thereof) shall be disregarded and deemed not to be Outstanding, except that, in determining whether or not the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to presence of a quorum, only such Senior Securities that a Responsible Officer of the Indenture Trustee or the Tax- Exempt Indenture Trustee (as the case may be) knows to be so owned shall be so disregarded. Any such Senior Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) such pledgee's right so to act with respect to such Senior Securities and that such pledgee is not a Mobile Energy Party (or any Affiliate thereof). [Intercreditor Agreement] 59 "Paper Mill" means the paper mill located at the Mobile Facility, which as of the Closing Date is owned by S.D. Warren. "Paper Mill Energy Services Agreement" means the Paper Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated July 13, 1995, between the Paper Mill Owner and the Company (as assignee of Mobile Energy). "Paper Mill Owner" means S.D. Warren, in its capacity as owner of the Paper Mill. "Paying Agent" means any Person acting as Paying Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Percentage Share" means an amount (expressed as a percentage) equal to: (a) with respect to the Working Capital Facility, (i) the Working Capital Facility Commitment in effect immediately prior to any deposit into the Working Capital Facility Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(i) of the Intercreditor Agreement divided by (ii) the Combined Exposure immediately prior to such deposit; (b) with respect to the Indenture, (i) the principal amount of the Indenture Securities Outstanding immediately prior to any transfer to the Indenture Trustee for deposit into the Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(ii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer; and (c) with respect to the Tax-Exempt Indenture, (i) the principal amount of the Tax-Exempt Indenture Securities Outstanding immediately prior to any transfer to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(iii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer. "Permitted Indebtedness" means (a) in the case of the Company: (i) the First Mortgage Bonds; (ii) Debt incurred under a Working Capital Facility having a Working Capital Facility Commitment not to exceed $15,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time, provided (and the Working Capital Facility shall contain provisions to such effect) that (A) no more than $5,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time) of such Debt may be scheduled to mature during any calendar month, (B) any Working Capital Facility Loan advanced thereunder shall mature no later than ninety-three (93) days from the date such Working Capital Facility Loan was first advanced, (C) the Company shall be required to repay all amounts advanced thereunder so that no amounts are outstanding once during each Fiscal Year (other than the Fiscal Year ending December 31, 1995) for a period of five (5) consecutive days and (D) the Working Capital Facility Provider thereunder shall become a party to the Intercreditor Agreement; (iii) the Tax-Exempt Bonds; (iv) reimbursement obligations in respect of letters of credit (if any) and other financial obligations arising under the Project Contracts and obligations arising under the Lease Indemnity; (v) purchase money obligations incurred to finance discrete items of equipment not comprising an integral part of the Energy Complex that extend only to the equipment being financed and that do not in the aggregate have annual debt service or lease obligations exceeding $2,000,000 (multiplied by the GDPIPD Factor in effect at the time such [Intercreditor Agreement] 60 obligations were incurred); (vi) trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (vii) obligations in respect of surety bonds or similar instruments in an aggregate amount not exceeding $10,000,000 (multiplied by the GDPIPD Factor in effect at the time such obligations were incurred) at any one time outstanding; (viii) Affiliate Subordinated Debt; (ix) Replacement Debt permitted to be issued pursuant to the terms of the Financing Documents; (x) Debt permitted to be issued pursuant to the terms of the Financing Documents for Required Modifications and Optional Modifications; (xi) Non-Affiliate Subordinated Debt (including any Non- Affiliate Subordinated Debt permitted by clause (x) above) in an aggregate principal amount not to exceed $75,000,000 (multiplied by the GDPIPD Factor in effect at the time such Debt was incurred) permitted to be issued pursuant to the terms of the Financing Documents; (xii) Refunding Debt permitted to be issued pursuant to the terms of the Financing Documents; and (xiii) the Company's obligations in respect of the 1994 Bonds, the Mixed-Use Bonds, the Environmental Bonds and the Refunding Letter of Credit; and (b) in the case of Mobile Energy, the Guaranty. "Permitted Investments" means investments in securities that are: (a) direct obligations of the United States of America or of any agency thereof; (b) obligations fully guaranteed by the United States of America or any agency thereof; (c) time deposits (which may be represented by certificates of deposit) issued by commercial banks organized under the laws of the United States of America or of any political subdivision thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union having a combined capital and surplus of at least $500,000,000 and having long-term unsecured Debt having a rating at least equal to (i) the highest rating assigned to the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) by at least two of the Rating Agencies or (ii) "B" by Thompson Bankwatch, Inc. (in either case provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such bank); (d) open market commercial paper of any corporation incorporated or doing business under the laws of the United States of America or of any political subdivision thereof then rated at least A-1/P-1 (or an equivalent thereof) by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such corporation); (e) obligations issued or guaranteed by, and any other obligations the interest on which is excluded from income for Federal income tax purposes issued by, any state of the United States of America or the District of Columbia or the Commonwealth of Puerto Rico or any political subdivision, agency, authority or instrumentality thereof, which issuer or guarantor has (i) a short-term Debt rating which is (on the date of acquisition thereof) A-1/P-1 (or an equivalent thereof) or better and (ii) a long-term Debt rating that is (on the date of acquisition thereof) "A" or better, in each case by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such issuer or guarantor); (f) guaranteed investment contracts of any financial institution organized under the laws of the United States of America or any state thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union, which financial institution has assets of at least $5 billion in the aggregate and has a long term Debt rating that is (on the date of acquisition thereof) "A" or better by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such institution); (g) investment contracts of any financial institution either (i) (A) fully secured by direct obligations of the United States, (B) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States or (C) securities or receipts evidencing ownership interests in obligations or specified portions thereof described in clause (A) or (B) above, in each case guaranteed as a full faith and credit obligation of the United States, having a market value at least equal to 102% of the amount deposited thereunder and possession of which obligation is held under arrangements satisfactory to the Collateral Agent, the Indenture [Intercreditor Agreement] 61 Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or (ii) with long-term Debt ratings of "A" or higher and short-term ratings in one of the highest two major categories by any of the Rating Agencies; (h) a contract or investment agreement with a provider or guarantor (i) which provider or guarantor is rated at least "A" or equivalent by each of the Rating Agencies (provided that if a guarantor is party to the rating, the guaranty is unconditional and is confirmed in writing prior to any assignment by the provider to another subsidiary of such guarantor), (ii) providing that monies invested shall be payable to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall be payable to the Collateral Agent) without condition (other than notice) and without breakage fee or other penalty, upon not more than two (2) Business Days' notice for application when and as required or permitted under the Indenture, the Intercreditor Agreement or the Tax-Exempt Indenture (as applicable), (iii) stating that such contract or agreement is unconditional, expressly disclaiming any right of setoff and providing for immediate termination in the event of insolvency of the provider and termination upon demand of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall provide for termination upon demand of the Collateral Agent) (which demand shall only be made at the direction of the Company) after any payment or other covenant default by the provider and (iv) the terms and provisions of which are in form and substance satisfactory to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be); and (i) investments in money market funds registered under the Investment Company Act of 1940 then rated in the highest category by S&P and Moody's. "Permitted Liens" means: (a) Liens specifically created, required or permitted by the Indenture, the Tax-Exempt Indenture or the IDB Lease Agreement; (b) the Liens created, or purported to be created, on the Collateral pursuant to the Security Documents; (c) Liens for taxes that are either not yet due, are due but payable without penalty or are the subject of a Good Faith Contest; (d) any exceptions to title that are set forth on Schedule B--Section 2 of the title insurance policy delivered to the Collateral Agent on the Closing Date (to the extent that such exceptions have not been released or subordinated prior to the Closing Date); (e) such minor defects, easements, rights of way, restrictions, irregularities, encumbrances and clouds on title and statutory liens that do not materially impair the property affected thereby and that do not individually or in the aggregate materially impair the value of the security interests granted under the Financing Documents; (f) the easements and other rights in favor of third-parties contained in the Project Contracts as of the Closing Date; (g) deposits or pledges to secure statutory obligations or appeals, release of attachments, stays of execution or injunction, performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or for purposes of like general nature in the ordinary course of business; (h) Liens in connection with worker's compensation, unemployment insurance or other social security or pension obligations; (i) legal or equitable encumbrances deemed to exist by reason of the existence of any litigation or other legal proceeding if the same are the subject of a Good Faith Contest (excluding any attachment prior to judgment, judgment lien or attachment in aid of execution on a judgment); (j) mechanic's, workmen's, materialmen's, construction or other like Liens arising in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations that are not yet due or that are the subject of a Good Faith Contest; (k) Liens securing purchase money obligations that constitute Permitted Indebtedness; (l) Liens in favor of the Mill Owners on the Mill Owner Maintenance Reserve Account, including monies on deposit therein or otherwise credited thereto (in accordance with the Mill Owner Maintenance Reserve Account Agreement) not exceeding $2,000,000, to the extent arising under the Master Operating Agreement or the Mill Owner Maintenance Reserve Account Agreement; and (m) Liens on cash collateral not exceeding $1,500,000 in favor of the issuer of the Refunding Letter of Credit. "Person" means any individual, sole proprietorship, corporation, partnership, limited liability company, joint venture, trust, unincorporated association, institution, Governmental Authority or any other entity. [Intercreditor Agreement] 62 "Place of Payment" means, when used with respect to the Senior Securities of any series, the office or agency maintained pursuant to, in the case of the Indenture, Section 9.14(a) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(a) thereof and, in either case, such other place or places, if any, where the principal of and premium, if any, and interest on the Senior Securities of such series are payable as specified in the Series Supplemental Indenture to the Indenture or the Tax-Exempt Indenture (as the case may be) establishing the Senior Securities of such series. "Predecessor Securities" means, with respect to any particular Senior Security, every previous Senior Security evidencing all or a portion of the same Debt as that evidenced by such particular Senior Security. For purposes of this definition, any Senior Security authenticated and delivered under, in the case of any Indenture Security, Section 2.9 of the Indenture and, in the case of any Tax-Exempt Indenture Security, Section 2.9 of the Tax-Exempt Indenture in lieu of a lost, destroyed or stolen Senior Security shall be deemed to evidence the same Debt as such lost, destroyed or stolen Senior Security. "Prepayment Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Principal Payment Date" means in respect of (a) the Indenture Securities, any January 1 or July 1 on which principal payments are due to Holders thereof and (b) the Tax-Exempt Indenture Securities, any January 1 on which principal payments are due to Holders thereof. "Processing Services" has the meaning specified in the Master Operating Agreement. "Project Contracts" means, collectively, (a) the Energy Services Agreements, (b) the Master Operating Agreement, (c) the Lease, (d) the Supplementary Lease, (e) the O&M Agreement, (f) the Common Services Agreement, (g) the Water Agreement, (h) the Boiler Ash Agreement, (i) the Environmental Indemnity Agreements, (j) the Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of June 16, 1995 and the Second Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy), (k) the Employee Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, among Scott, the Company (as assignee of Mobile Energy) and Southern Electric, (l) the SCS Agreement, (m) the Easement Deeds, (n) the Asset Purchase Agreement dated as of December 12, 1994 between Scott, as seller, and the Company (as assignee of Mobile Energy), as buyer, (o) the Coal Supply Agreement, (p) any other Contract entered into by either of the Mobile Energy Parties for the provision of fuel to the Energy Complex, (q) the IDB Lease Agreement, (r) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (s) the Construction, Financing and Installment Sale Agreement dated as of April 1, 1973 between the IDB and Scott, (t) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (u) the Facilities Lease and Agreement dated as of December 1, 1984 between the IDB and Scott, (v) the Sublease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (w) the Construction, Financing and Installment Sale Agreement dated as of September 1, 1976 between the IDB and Scott, (x) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (y) the Recovery Boiler Facilities Lease and Agreement dated as of December 1, 1994 between the IDB and Scott, (z) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (aa) the Nondisturbance Agreement, (bb) the Recognition Agreements, (cc) the Mill Owner Maintenance Reserve Account Agreement and (dd) the Transfer Agreement. "Project Costs" means costs and expenses (other than financing costs and expenses) paid, incurred or to be incurred by the Company after the Closing Date [Intercreditor Agreement] 63 to complete the capital improvements to the Energy Complex specified in the Master Operating Agreement in accordance with the Capital Budget and certain other planned expenditures relating to the Energy Complex. "Project Documents" means, collectively, the Project Contracts and the Financing Documents. "Project Participant" means each Person that is party to a Project Document. "Prudent Plant Operating Standards" has the meaning specified in the Master Operating Agreement. "Pulp Mill" means the pulp mill (including a process water plant and waste water treatment plant) located at the Mobile Facility, which as of the Closing Date is owned by Scott. "Pulp Mill Energy Services Agreement" means the Pulp Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Pulp Mill Owner" means Scott, in its capacity as owner of the Pulp Mill. "Pulp Mill Step-In Equipment" has the meaning specified in the Master Operating Agreement. "PURPA" means the Public Utility Regulatory Policies Act of 1978. "Qualified Engineer" means an independent engineer listed on Schedule 1 to the Intercreditor Agreement, as such Schedule may be amended from time to time in accordance with Section 11.3 of the Intercreditor Agreement. "Qualifying Facility" means a "Qualifying Cogeneration Facility" as specified in section 3(18)(B) of the Federal Power Act or a qualifying small power production facility within the meaning of section 201 of PURPA. "Rating Agencies" means, collectively, S&P, Fitch and Moody's, together with any other nationally recognized credit agency of similar standing if any such Person is not then currently rating the proposed subject of such rating. "Receivables" means all of the Company's rights to payment for goods sold or leased or services performed by the Company, including (a) rights evidenced by an account, note, contract, security, instrument, chattel paper or other evidence of indebtedness and (b) all "accounts" as defined in Section 9-106 of the Uniform Commercial Code as in effect in the State of New York on the Closing Date. "Recognition Agreements" means, collectively, (a) the Recognition, Cooperation and Consent Agreement relating to the Mixed-Use Bonds dated as of August 1, 1995 among the Company, the IDB, AmSouth Bank of Alabama, TRT and the Collateral Agent and (b) the Recognition, Cooperation and Consent Agreement relating to the Tax-Exempt Bonds dated as of August 1, 1995 among the Company, the IDB, the Tax-Exempt Indenture Trustee and the Collateral Agent. "Redemption Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Redistributed Proceeds" means, with respect to any Excess Loss Proceeds, the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the Working Capital Facility Distribution Amount in respect of such Excess Loss Proceeds. [Intercreditor Agreement] 64 "Refunding Debt" means Debt, the proceeds of which are used to refund outstanding Senior Debt. "Refunding Letter of Credit" means one or more letters of credit issued by a commercial bank in an aggregate amount not to exceed $1,500,000 to provide for the payment of accrued interest on the 1984 Bonds upon the redemption thereof. "Regular Record Date" means, for the Stated Maturity of any Senior Security of a series, or for the Stated Maturity of any installment of principal thereof or payment of interest thereon, the 15th day (whether or not a Business Day) of the month prior to such Stated Maturity, or any other date specified for such purpose in the form of Senior Security of such series attached to the Series Supplemental Indenture to the Indenture or the Tax-Exempt Indenture (as the case may be) relating to the Senior Securities of such series. "Replacement Debt" means Senior Securities, the proceeds of which are used to refinance all or a portion of the outstanding Tax-Exempt Indenture Securities (whether by effecting a gross-up of, or by the issuance of Senior Securities to replace, affected Tax-Exempt Indenture Securities) upon the occurrence of a Determination of Taxability. "Replacement Facility" means a facility with materially different performance capabilities from the Energy Complex that can be built to provide services to some or all of the Mills following the occurrence of an Event of Loss or an Event of Eminent Domain. "Required Deposit" means, at the time of any Required Deposit Event with respect to any Reserve Account Security on deposit in any Reserve Account Security Account, an amount equal to the aggregate Available Amount under such Reserve Account Security at such time; provided, however, that if such Required Deposit Event results from the occurrence of a Debt Service Event, such amount shall be equal to the aggregate amount required to be transferred pursuant to, if such Reserve Account Security Account is (a) the Maintenance Plan Funding Subaccount, Section 3.5(c) of the Intercreditor Agreement, (b) the Distribution Account, Section 3.8(b) of the Intercreditor Agreement, (c) a Debt Service Reserve Account, Section 4.5 of the Indenture and (d) a Tax-Exempt Debt Service Reserve Account, Section 4.6 of the Tax-Exempt Indenture. "Required Deposit Event" means (a) in the case of any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Reserve Account Letter of Credit, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Reserve Account Letter of Credit, unless such Reserve Account Letter of Credit has been replaced with monies or other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to such date, (iii) the occurrence of a Credit Standard Event or Default Event with respect to such Reserve Account Letter of Credit and the continuance thereof for a period of five (5) days, unless such Reserve Account Letter of Credit has been replaced with other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to the expiration of such period or (iv) the date on which a Trigger Event Notice has been delivered and (b) in the case of any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Southern Guaranty, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Southern Guaranty, unless such Southern Guaranty has been replaced with monies or other Reserve Account Security prior to such date, (iii) the occurrence of a Credit Standard Event with respect to such Southern Guaranty and the continuance thereof for a period of fifteen (15) days, unless (A) the Collateral Agent or the Indenture Trustee (as the case may be) shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied after such occurrence and prior to the expiration of such period or (B) such Southern Guaranty has been replaced with monies or other Reserve Account Security prior [Intercreditor Agreement] 65 to the expiration of such period, (iv) the occurrence of a Default Event and the continuance thereof for a period of five (5) days, unless such Southern Guaranty has been replaced with other Reserve Account Security prior to the expiration of such period or (v) the date on which a Trigger Event Notice has been delivered. "Required Interest Deposit" means, in the case of any Monthly Transfer Date with respect to: (a) the Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date, is equal to the amount of interest on the Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date (unless such next succeeding Interest Payment Date is January 1, 2020, in which case together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to December 1, 2019), is equal to the amount of interest on the Tax-Exempt Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Tax-Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax-Exempt Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). "Required Modifications" means those modifications reasonably necessary for the Energy Complex to remain in compliance with all material Governmental Approvals and maintain, at a minimum, the Maximum Capacity (as defined in the Master Operating Agreement) levels as in effect on the Closing Date. "Required Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Required Principal Deposit" means in the case of any Monthly Transfer Date with respect to: [Intercreditor Agreement] 66 (a) the Indenture Securities Principal Subaccount, an amount equal to one-sixth (1/6th) of the amount of principal of the Indenture Securities becoming due on each Principal Payment Date therefor occurring within the six (6) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within six (6) months after the Closing Date or any other date on which any Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date) (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Principal Subaccount, one-twelfth (1/12th) (unless such Monthly Transfer Date occurs on or after January 1, 2019, in which case one-eleventh (1/11th)) of the amount of principal of the Tax-Exempt Indenture Securities becoming due on each Principal Payment Date therefor occurring within the twelve (12) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within twelve (12) months after the Closing Date or any other date on which any Tax-Exempt Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date)(such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Tax-Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax-Exempt Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). "Required Senior Creditors" means Senior Secured Parties holding or otherwise representing 331/3% of the Combined Exposure. "Reserve Account Letter of Credit" means a letter of credit issued by a commercial bank whose long-term unsecured Debt is rated at least "A" by S&P, "A" by Fitch and "A2" by Moody's. "Reserve Account Security" means either, or any combination of, (a) one or more Southern Guaranties or (b) one or more Reserve Account Letters of Credit. [Intercreditor Agreement] 67 "Reserve Account Security Accounts" means, collectively, each Debt Service Reserve Account (if any), each Tax-Exempt Debt Service Reserve Account (if any), the Maintenance Plan Funding Subaccount and the Distribution Account. "Responsible Officer" means, when used with respect to the Collateral Agent, the Indenture Trustee and the Tax-Exempt Indenture Trustee, (a) any officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) within the Corporate Trust Office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be), including any vice president, any assistant vice president, any assistant secretary or any assistant treasurer, (b) any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) performing functions similar to those performed by any of the officers designated in clause (a) above and (c) with respect to a particular corporate trust matter, any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to whom such matter is referred because of such other officer's knowledge of and familiarity with the particular subject. "Restricted Payment Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more other Persons in substitution for or replacement of any such Project Contract that has been declared unenforceable or rejected or otherwise terminated, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that either (a) the Company has delivered to the Collateral Agent a letter from any two of the Rating Agencies (then currently rating the Indenture Securities or the Tax- Exempt Indenture Securities) confirming that, after giving effect to such alternative Contract, the ratings of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) are Investment Grade or (b) the Company (i) has provided to the Collateral Agent the Revenue Sufficiency Certification and (ii) has delivered to the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that (A) the term of such alternative Contract extends through the earlier of (1) the final maturity of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) and (2) the term of such Project Contract, (B) such alternative Contract contains termination provisions no less favorable to the Company than those contained in such Project Contract, (C) such alternative Contract has been in full force and effect for at least thirty-six (36) months, (D) the average of the two annual Senior Debt Service Coverage Ratios for the four immediately preceding semi-annual payment periods was equal to at least 1.25 to 1.0 and, based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.25 to 1.0 and (E) such alternative Contract is reasonably capable of being performed by the parties thereto. "Restricted Payments" means, collectively, (a) payments from the Subordinated Fee Account or any other payment in respect of Subordinated Fees, (b) distributions (from the Distribution Account or otherwise), including a return of capital contributions and dividends, paid to, or at the direction or for the benefit of, any Affiliate of the Company, but excluding distributions of cash from any Account to the extent such cash has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents, (c) the payment of principal of or premium, if any, or interest on any Affiliate Subordinated Debt, (d) the repurchase by the Company of any interest of any Member, or (e) the making of any loans or other advances from the Company to any Affiliate of the Company, but excluding advances of cash to the extent such cash (i) has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents or (ii) constitutes a payment required under the O&M Agreement or the SCS Agreement. "Revenue Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. [Intercreditor Agreement] 68 "Revenue Sufficiency Certification" means an Officer's Certificate of the Company, together with an Independent Engineer Confirmation, to the effect that, based upon projections prepared by the Company in accordance with Section 1.15 of the Indenture or Section 1.12 of the IDB Lease Agreement, or of any comparable provision of the Working Capital Facility, the Project Contracts then in effect (including any alternative Contract entered into, or to be entered into, by the Company with one or more other Persons in substitution or replacement of any other Project Contract as contemplated by the Event of Default Alternative Agreement Requirements or the Restricted Payment Alternative Agreement Requirements) generate sufficient Revenues to enable the Company to pay its debts and other obligations (including Operation and Maintenance Costs) when they become due through the final maturity of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be). "Revenues" means (without duplication), for any period, the revenues received by the Company for use of the services and facilities of the Energy Complex including (a) amounts received by the Company under the Project Contracts, (b) interest and other income earned and credited on monies deposited in the Accounts (to the extent not retained in such Accounts), (c) the proceeds of the sale of any part of the Energy Complex, provided that such sale is not prohibited by the Financing Documents, (d) the proceeds of any business interruption insurance and other payments received for interruption of operations (excluding any proceeds of any liability or physical damage insurance) and (e) all other monies that have been deposited into the Revenue Account as required or permitted by the terms of the Financing Documents. Notwithstanding the foregoing, "Revenues" do not include (i) capital contributions to the Company, (ii) the proceeds of any Debt or Loss Proceeds, (iii) amounts received by the Company in connection with the exercise of Company Step-In Rights (to the extent in excess of the Company's expenses incurred in connection therewith, including the cure or the attempted cure of the related Pulp Mill Triggering Event (as defined in the Master Operating Agreement)), (iv) monies transferred from the Completion Account to the Revenue Account pursuant to Section 3.9(c) of the Intercreditor Agreement, (v) monies transferred from any Debt Service Reserve Account to the Revenue Account pursuant to Section 4.5 of the Indenture, (vi) amounts received by the Company with respect to the 1994 Bonds and (vii) monies deposited into any Reserve Account Security Account in replacement (or satisfaction) of Reserve Account Security on deposit therein (including monies deposited into the Maintenance Plan Funding Subaccount pursuant to the last sentence of Section 3.5(a) of the Intercreditor Agreement). "S&P" means Standard & Poor's Ratings Group, a New York corporation. "Scott" means Scott Paper Company, a Pennsylvania corporation. "SCS" means Southern Company Services, Inc., an Alabama corporation. "SCS Agreement" means the Agreement dated July 14, 1995 between SCS and the Company. "S.D. Warren" means S.D. Warren Company, a Pennsylvania corporation. "SEC" means the Securities and Exchange Commission of the United States of America. "Secretary" means, in the case of a corporation (including Mobile Energy) or limited liability company (including the Company) the secretary or an assistant secretary of such corporation or limited liability company (as the case may be). "Secured Obligations" means, collectively, the Financing Liabilities, the Trustee Claims, the Collateral Agent Claims and the IDB Claims. "Secured Party" means Bankers Trust (Delaware) or any other Person appointed as a substitute or replacement Secured Party under the Security Agreement. [Intercreditor Agreement] 69 "Securities" has the meaning specified (a) in the case of the Indenture, in the first "WHEREAS" clause thereof and (b) in the case of the Tax-Exempt Indenture, in the last "WHEREAS" clause thereof. "Securities Act" means the Securities Act of 1933. "Security Agreement" means the Assignment and Security Agreement dated as of August 1, 1995 among the Company, the IDB and the Secured Party. "Security Documents" means, collectively, (a) the Mortgage, (b) the Security Agreement, (c) the Indenture (including any Series Supplemental Indenture), (d) the Intercreditor Agreement, (e) the Tax-Exempt Indenture (including any Series Supplemental Indenture), (f) the IDB Lease Agreement, (g) the Consents to Assignment and (h) each Financing Statement. "Security Interest" means the Liens created, or purported to be created, on Shared Collateral pursuant to any Security Document. "Security Register" has the meaning specified in Section 2.8 of the Indenture or Section 2.8 of the Tax-Exempt Indenture (as the case may be). "Security Registrar" means any Person acting as Security Registrar under the Indenture or the Tax-Exempt Indenture pursuant to Section 9.14 or Section 9.13 (as the case may be) thereof. "Senior Creditor Certificate" means a certificate of a Senior Secured Party, signed by an Authorized Representative of such Senior Secured Party, (a) setting forth the principal amount of the Financing Liabilities due or owing to, or in favor of or for the benefit of, such Senior Secured Party as of the date of such certificate and the outstanding unutilized Financing Commitments of such Senior Secured Party as of the date of such certificate, (b) setting forth a contact person for such Senior Secured Party, including phone and facsimile numbers for such person, (c) directing the Collateral Agent to take a specified action and (d) stating specifically the action the Collateral Agent is directed to take and the Security Document and the provision thereof pursuant to which the Collateral Agent is being directed to act. "Senior Debt" means, collectively, the Outstanding Senior Securities and the outstanding Working Capital Facility Loans. "Senior Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operation and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Senior Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (iv) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (v) the aggregate amount of overdue payments in respect of clauses (b)(i) through (iv) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Senior Debt Service Coverage Ratio. [Intercreditor Agreement] 70 "Senior Debt Service Requirement" means, for any period, the sum of (a) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (b) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (c) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (d) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (e) the aggregate amount of overdue payments in respect of the foregoing from previous periods, in each case determined on a cash basis in accordance with GAAP. "Senior Debt Termination Date" means the date on which all Financing Liabilities, other than contingent liabilities and obligations that are unasserted at such date, have been paid and satisfied in full and all Financing Commitments have been terminated. "Senior Secured Parties" means, collectively, (a) the Indenture Trustee (on behalf of the Holders of the Indenture Securities from time to time and, solely in its capacity as trustee on behalf of such Holders, itself), (b) the Tax-Exempt Indenture Trustee (on behalf of the Holders of the Tax-Exempt Indenture Securities from time to time and, solely in its capacity as trustee on behalf of such Holders, itself) and (c) the Working Capital Facility Provider (on behalf of the Lenders from time to time and itself). "Senior Securities" means, collectively, the Indenture Securities and the Tax-Exempt Indenture Securities. "Series Supplemental Indenture" means an indenture supplemental to the Indenture or the Tax-Exempt Indenture entered into by the Mobile Energy Parties or the IDB (as the case may be) and the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) for the purpose of establishing, in accordance with such indenture, the title, form and terms of the Senior Securities of any series. "Shared Collateral" means all Collateral other than (a) the Collateral referenced in clause (a) of the definition of Indenture Securities Collateral and (b) the Collateral referenced in clause (a) of the definition of Tax-Exempt Indenture Securities Collateral. "Sinking Fund" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Redemption Dates" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Requirements" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Site" means the real property on which the Energy Complex is situated, as more fully described in the Mortgage. "Southern" means The Southern Company, a Delaware corporation. "Southern Credit Standard" means, at any time, (a) Southern's outstanding senior long-term Debt is then rated at least, and not rated less than, "A" by either S&P or Moody's (unless such senior long-term Debt is not then rated by either S&P or Moody's, in which case each Designated Southern Subsidiary has outstanding senior long-term Debt that is then rated at least, and not rated less than, BBB by S&P or Baa2 by Moody's) and (b) the sum of (i) cash and cash equivalents (including marketable securities) of Southern and the Designated Southern Subsidiaries, (ii) amounts available from committed credit facilities of Southern and the Designated Southern Subsidiaries and (iii) amounts available from commercial paper authorized to be issued by Southern and rated not less than A-1/P-1 by S&P or Moody's (in each case as of the end of Southern's most recently [Intercreditor Agreement] 71 completed fiscal quarter and provided that such cash and cash equivalents and other amounts are available, without restriction, for distribution to the Collateral Agent or the Indenture Trustee, upon fifteen (15) days' notice) is equal to at least the aggregate amount of Southern Guaranties then outstanding multiplied by four. "Southern Electric" means Southern Electric International, Inc., a Delaware corporation. "Southern Guaranty" means one or more unconditional, absolute and irrevocable guaranties from Southern to be delivered to (a) the Collateral Agent for deposit into the Maintenance Plan Funding Subaccount or the Distribution Account pursuant to and in accordance with Section 3.15(a) of, and in substantially the form attached as Exhibit C to, the Intercreditor Agreement or (b) the Indenture Trustee for deposit into each Debt Service Reserve Account (if any) pursuant to and in accordance with Section 4.6(a) of, and in substantially the form attached as Exhibit A to, the Indenture, provided that, in the case of clause (a) and (b) above, the Southern Credit Standard is satisfied at the time of such delivery and deposit. "Southern Master Tax Sharing Agreement" means the Income Tax Allocation Agreement dated as of December 29, 1981 among Southern and its corporate subsidiaries. "Special Record Date" means, with respect to the payment of any defaulted principal or interest, a date fixed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) pursuant to, in the case of the Indenture Trustee, Section 2.10 of the Indenture and, in the case of the Tax-Exempt Indenture Trustee, Section 2.10 of the Tax-Exempt Indenture. "Stated Maturity" means, when used with respect to any Senior Security or any installment of principal thereof or payment of interest thereon, the date specified in such Senior Security as the fixed date on which such Senior Security or such installment of principal or payment of interest is due and payable. "Subordinated Debt" means, collectively, Affiliate Subordinated Debt and Non-Affiliate Subordinated Debt. "Subordinated Debt Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Debt Provider" means any Person providing Subordinated Debt pursuant to a Subordinated Loan Agreement. "Subordinated Fee" means a fee in exchange for the provisions of goods or services to either of the Mobile Energy Parties, the payment of which is fully subordinated to the Secured Obligations as to payment and exercise of remedies and that is payable only to the extent it would otherwise be distributable if on deposit in the Distribution Account. "Subordinated Fee Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Loan Agreement" means a binding agreement with a Subordinated Debt Provider providing unsecured debt financing for the benefit of the Energy Complex and on terms and conditions that shall satisfy the requirements of the Financing Documents. "Supplementary Lease" means the Supplementary Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Tax-Exempt Bonds" means the Tax-Exempt Indenture Securities issued on the Closing Date under the Tax-Exempt Indenture. [Intercreditor Agreement] 72 "Tax-Exempt Debt Service Reserve Account" means the Account so designated established and created under Section 4.4(a) of the Tax-Exempt Indenture and any Account so designated and created under any Series Supplemental Indenture to the Tax-Exempt Indenture for the benefit of Holders of the Tax-Exempt Indenture Securities established thereunder. "Tax-Exempt Debt Service Reserve Account Required Balance" means (a) in respect of the Tax-Exempt Debt Service Reserve Account established and created under Section 4.4(a) of the Tax-Exempt Indenture, the amount designated in Section 4.4(b) thereof and (b) in respect of any other Tax-Exempt Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Tax-Exempt Indenture establishing such Tax-Exempt Debt Service Reserve Account. "Tax-Exempt Indenture" means the Amended and Restated Trust Indenture dated as of August 1, 1995 between the IDB and the Tax-Exempt Indenture Trustee. "Tax-Exempt Indenture Accounts" means, with respect to the Tax-Exempt Indenture Securities of any series, the Tax-Exempt Indenture Securities Account and each Tax-Exempt Debt Service Reserve Account (if any) established for the benefit of Holders of the Tax-Exempt Indenture Securities of such series. "Tax-Exempt Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Tax-Exempt Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Tax-Exempt Indenture Securities" means all Outstanding Debt issued pursuant to the Tax-Exempt Indenture. "Tax-Exempt Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Tax-Exempt Indenture. "Tax-Exempt Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Tax-Exempt Indenture Trustee by the IDB pursuant to the granting and assigning clauses of the Tax-Exempt Indenture and (b) the Shared Collateral. "Tax-Exempt Indenture Securities Interest Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax-Exempt Indenture. "Tax-Exempt Indenture Securities Principal Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax-Exempt Indenture. "Tax-Exempt Indenture Securities Redemption Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax-Exempt Indenture. "Tax-Exempt Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Tax-Exempt Project" means those portions of the Energy Complex financed with the proceeds of the 1983 Bonds, as described generally in Exhibit A to the IDB Lease Agreement. "Termination Event" means, with respect to any Reserve Account Security, such Reserve Account Security shall have terminated or expired (other than any termination thereof pursuant to the last sentence of Section 3.8(c) of the Intercreditor Agreement). [Intercreditor Agreement] 73 "Third Party Engineer" means the independent engineering firm chosen from the list of engineers maintained as Schedule 1 to the Intercreditor Agreement and appointed Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Third Party Engineer Dispute Resolution" means the dispute resolution process involving a Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Tissue Mill" means the tissue mill located at the Mobile Facility, which as of the Closing Date is owned by Scott. "Tissue Mill Energy Services Agreement" means the Tissue Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Tissue Mill Owner and the Company (as assignee of Mobile Energy). "Tissue Mill Owner" means Scott, in its capacity as owner of the Tissue Mill. "Total Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operations and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account or the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Total Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayments of principal), (iv) all amounts payable by the Company as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents, (v) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the outstanding Subordinated Debt, (vi) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any Subordinated Debt Provider and (vii) the aggregate amount of overdue payments in respect of clauses (b)(i) through (vi) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Total Debt Service Coverage Ratio. "Transfer Agreement" means the Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement dated July 14, 1995 between Mobile Energy and the Company. "Trigger Event" means (a) an Event of Default under the Indenture and an acceleration of Indenture Securities thereunder, (b) an Event of Default under the Tax-Exempt Indenture and an acceleration of Tax-Exempt Indenture Securities thereunder, (c) an Event of Default under the Working Capital Facility and an acceleration of Working Capital Facility Loans thereunder or (d) a Bankruptcy Event in respect of either of the Mobile Energy Parties and the expiration of the shortest applicable grace period with respect thereto. "Trigger Event Period" means that a Trigger Event shall have occurred and be continuing, provided that, except in the case of any such Trigger Event that shall have resulted from a Bankruptcy Event in respect of either of the Mobile [Intercreditor Agreement] 74 Energy Parties, the written request of the Required Senior Creditors specified in Section 5.1(a) of the Intercreditor Agreement shall have been delivered to the Collateral Agent and not been rescinded. "TRT" means Three Rivers Timber Company, a Washington corporation. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which the Indenture was executed, except as provided in Section 11.6 thereof; provided, however, that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended. "Trustee Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses or other amounts to (a) the Indenture Trustee under the Indenture or (b) the Tax-Exempt Indenture Trustee under the Tax-Exempt Indenture. "Uniform Commercial Code" means the Uniform Commercial Code of the jurisdiction the law of which governs the Contract in which such term is used. "U.S. Government Obligations" means non-callable direct obligations of or obligations as to which the payment of principal of and interest is unconditionally guaranteed by the United States of America. "Water Agreement" means the Water Procurement and Effluent Service Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Paper Mill Owner and the Tissue Mill Owner. "Wind-Up Event" means, at any time upon and after a Trigger Event, the application of monies on deposit in any of the Intercreditor Agreement Accounts, or of proceeds from any sale, disposition or other realization of any Shared Collateral (other than the Intercreditor Agreement Accounts), in either case to the payment of amounts owing in respect of any Senior Debt and as a result of the exercise of remedies by the Collateral Agent under Article V of the Intercreditor Agreement. "Working Capital Escalation Factor" means, with respect to any Fiscal Year, a factor (calculated in June of such Fiscal Year) equal to the amount obtained by (a) dividing (i) the GDPIPD most recently published during such Fiscal Year by (ii) the GDPIPD published during the prior Fiscal Year on the date that most closely corresponds to, and is on or prior to, the date of such GDPIPD most recently published (provided that if the amount obtained is less than or equal to 1.015, then such amount shall be deemed to equal 1.015), (b) then subtracting 0.015, and (c) then multiplying by the Working Capital Escalation Factor with respect to the immediately preceding Fiscal Year. "Working Capital Facility" means the Revolving Credit Agreement dated as of August 1, 1995 between the Company and the Working Capital Facility Provider or any other Contract between the Company and a Working Capital Facility Provider pursuant to which funds for the working capital requirements of the Company are provided. "Working Capital Facility Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Working Capital Facility Commitment" means the aggregate of the commitments of the Lenders under the Working Capital Facility. "Working Capital Facility Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement and provided that the Working Capital Facility Commitment is subject to reduction in connection with such Event of Loss or Event of Eminent Domain pursuant to the [Intercreditor Agreement] 75 terms of the Working Capital Facility, an amount equal to the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the unutilized Working Capital Facility Commitment in effect immediately prior to such reduction, unless the Company would not be able to borrow Working Capital Facility Loans (because the conditions set forth in Article III of the Working Capital Facility are not available or not satisfied), in which case the lesser of (a) the Working Capital Facility's Percentage Share of such Excess Loss Proceeds and (b) the outstanding Working Capital Loans at such time. "Working Capital Facility O&M Loan" means a Working Capital Facility Loan, to the extent the proceeds thereof are applied to Operation and Maintenance Costs other than (a) rebates to the United States government pursuant to Section 148 of the Code, (b) Maintenance Expenditures and (c) payments of IDB Claims. "Working Capital Facility Provider" means Banque Paribas, a French banking corporation, and each other Person providing funds to the Company pursuant to a Working Capital Facility. "Working Capital Facility Loan" means a Loan (as defined in the Working Capital Facility) advanced by the Working Capital Facility Provider pursuant to the Working Capital Facility. [Intercreditor Agreement] 76 Schedule 1 Qualified Engineers 1. R.W. Beck and Associates 2. Jacobs-Sirrine 3. Rust Engineering Company [Intercreditor Agreement] 77 Exhibit A FORM OF REQUISITION FOR DISBURSEMENT FROM LOSS PROCEEDS ACCOUNT Requisition No. _______ Date:________________ Bankers Trust (Delaware), as Collateral Agent c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attention: Corporate Trust Department Ladies and Gentlemen: Reference is hereby made to that certain Intercreditor and Collateral Agency Agreement, dated as of August 1, 1995, by and among First Union National Bank of Georgia, as Trustee, First Union National Bank of Georgia, as Tax-Exempt Indenture Trustee, Banque Paribas, as Working Capital Facility Provider, The Industrial Development Board of the City of Mobile, Alabama, Mobile Energy Services Company, L.L.C. (the "Company"), Mobile Energy Services Holdings, Inc. and Bankers Trust (Delaware), as Collateral Agent (as such agreement may be amended, modified or supplemented from time to time, the "Intercreditor Agreement"). Terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Intercreditor Agreement. The Company hereby requests, pursuant to Section 3.10(b) of the Intercreditor Agreement, that the Collateral Agent make a disbursement from the Loss Proceeds Account in the aggregate amount of $_____ (the "Requested Disbursement"). The date that the Requested Disbursement is to be made is _____. Cash disbursement instructions for the Requested Disbursement are set forth in Annex 1 hereto. All monies released from the Loss Proceeds Account pursuant to this Requisition shall continue to constitute Collateral until applied in accordance with the Financing Documents, including the Mortgage. The undersigned, an Authorized Officer of the Company, hereby certifies in connection with this Requisition that (i) the proceeds of the Requested Disbursement will be used solely for the payment (or reimbursement, to the extent the same have been paid or satisfied by the Company) of the costs of the rebuilding, repair and restoration of the Energy Complex or the portion thereof that has been affected by an Event of Loss or an Event of Eminent Domain, or the building of a Replacement Facility as a result thereof, (ii) undisbursed funds in the Loss Proceeds Account are reasonably expected to be sufficient to complete the rebuilding, repair, restoration or replacement of the Energy Complex (such determination of sufficiency to take into account, without limitation, funds required to pay principal of and interest on the Senior Debt becoming due during such period in which commercial operation of the Energy Complex is interrupted as a result of such Event of Loss or Event of Eminent Domain), (iii) no payment default with respect to scheduled debt service under the Senior Debt has occurred and is continuing and (iv) work performed to date has been satisfactorily performed in a good and workmanlike manner and according to the rebuilding, repair, restoration or replacement plans. The Requested Disbursement, together with all other such requisitions made or reasonably expected to be made (i) during the current Fiscal Year, total [Intercreditor Agreement] Exhibit A-1 $_____ in the aggregate and (ii) in respect of such Event of Loss or Event of Eminent Domain, total $_____ in the aggregate, and the approval of the Independent Engineer hereto [is] [is not]1/ required. The Company hereby certifies that all conditions precedent to the Requested Disbursement as set forth in the Intercreditor Agreement have been satisfied. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: Name: Title: Date:__________________________________ Approved this ___ day of __________________, ____.1 STONE & WEBSTER ENGINEERING CORPORATION By:_______________________________________ Name:____________________________________ Title:_____________________________________ - -------- 1 Not required if the amount of disbursements requested pursuant to such requisition, together with the aggregate amount of disbursements requested or to be requested pursuant to all other such requisitions made or reasonably expected to be made (i) in any one Fiscal Year, does not exceed $5,000,000 or (ii) in respect of any Event of Loss or Event of Eminent Domain, does not exceed $7,500,000. [Intercreditor Agreement] Exhibit A-2 Exhibit B FORM OF MONTHLY TRANSFER DATE CERTIFICATE Date: ______ Bankers Trust (Delaware), as Collateral Agent c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attention: Corporate Trust Department Ladies and Gentlemen: Reference is hereby made to that certain Intercreditor and Collateral Agency Agreement, dated as of August 1, 1995, by and among First Union National Bank of Georgia, as Indenture Trustee, First Union National Bank of Georgia, as Tax-Exempt Indenture Trustee, Banque Paribas, as Working Capital Facility Provider, The Industrial Development Board of the City of Mobile, Alabama, Mobile Energy Services Company, L.L.C., Mobile Energy Services Holdings, Inc. and Bankers Trust (Delaware), as Collateral Agent (as the same may be amended, supplemented, waived or otherwise modified from time to time, the "Intercreditor Agreement"). Terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Intercreditor Agreement. The Company hereby certifies, pursuant to Section 3.11 of the Intercreditor Agreement, that the following monies are to be transferred or deposited by the Collateral Agent from the Revenue Account, in the order of priority set forth in such Section 3.11 (but only to the extent such monies are then on deposit in the Revenue Account), on ___________: (a) $_____, for deposit into the Mill Owner Reimbursement Account pursuant to and in accordance with Section 3.11(a); (b) $_____, for deposit into the Working Capital Facility Account pursuant to and in accordance with Section 3.11(b) of the Intercreditor Agreement; (c) $_____, for deposit into the Operating Account pursuant to and in accordance with Section 3.11(c) of the Intercreditor Agreement; (d) $__________, to the Collateral Agent pursuant to and in accordance with Section 3.11(d) of the Intercreditor Agreement; (e) $__________, to the Indenture Trustee pursuant to and in accordance with Section 3.11(d) of the Intercreditor Agreement; [Intercreditor Agreement] Exhibit B-1 (f) $__________, to the Tax-Exempt Indenture Trustee pursuant to and in accordance with Section 3.11(d) of the Intercreditor Agreement; (g) $__________, for deposit into the Working Capital Facility Account pursuant to and in accordance with Section 3.11(e)(i) of the Intercreditor Agreement; (h) $__________, $__________ and $__________, to the Indenture Trustee for deposit into the Indenture Securities Interest Subaccount, the Indenture Securities Principal Subaccount and the Indenture Securities Redemption Subaccount pursuant to and in accordance with Section 3.11(e)(ii) of the Intercreditor Agreement, respectively; (i) $__________, $__________ and $__________, to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Interest Subaccount, Tax-Exempt Indenture Securities Principal Subaccount and the Tax-Exempt Indenture Securities Redemption Subaccount pursuant to and in accordance with Section 3.11(e)(iii) of the Intercreditor Agreement, respectively; (j) $__________, for deposit into the Maintenance Reserve Account pursuant to and in accordance with Section 3.11(f) of the Intercreditor Agreement; (k) $__________, to the Indenture Trustee for deposit into each Debt Service Reserve Account pursuant to and in accordance with Section 3.11(g)(i) of the Intercreditor Agreement; (l) $__________, to the Tax-Exempt Indenture Trustee for deposit into each Tax-Exempt Debt Service Reserve Account pursuant to and in accordance with Section 3.11(g)(ii) of the Intercreditor Agreement; (m) $__________, to the Company for deposit into the Mill Owner Maintenance Reserve Account pursuant to and in accordance with Section 3.11(h) of the Intercreditor Agreement; (n) $__________, for deposit into the Subordinated Debt Account pursuant to and in accordance with Section 3.11(i) of the Intercreditor Agreement; (o) $__________, for deposit into the Subordinated Fee Account pursuant to and in accordance with Section 3.11(j) of the Intercreditor Agreement; and Exhibit B-2 (p) [$__________] [any remaining monies], for deposit into the Distribution Account pursuant to and in accordance with Section 3.11(k) of the Intercreditor Agreement. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: Name: Title: Dated: cc: Indenture Trustee Tax-Exempt Indenture Trustee Working Capital Facility Provider [Intercreditor Agreement] Exhibit B-3 Exhibit C-1 FORM OF MAINTENANCE PLAN FUNDING SUBACCOUNT SOUTHERN GUARANTY AGREEMENT Dated as of [_____] In consideration of the execution and delivery by Bankers Trust (Delaware), as collateral agent under the Intercreditor Agreement referred to below for the Senior Secured Parties referred to therein, of the Intercreditor Agreement dated as of August 1, 1995 among First Union National Bank of Georgia, as trustee for the holders of the Indenture Securities referred to therein, First Union National Bank of Georgia, as trustee for the holders of the Tax-Exempt Indenture Securities referred to therein, Banque Paribas, as the Working Capital Provider referred to therein, The Industrial Development Board of The City of Mobile, Alabama, Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), Mobile Energy Services Holdings, Inc., an Alabama corporation ("Mobile Energy"), and Bankers Trust (Delaware), as such collateral agent (the "Guaranteed Party") (such Intercreditor Agreement, as it may be amended, restated, supplemented, waived or otherwise modified, hereinafter the "Intercreditor Agreement") and of the rights of the Company under Section 3.15(a) thereof, and acknowledging that such execution and delivery and such rights of the Company constitute indirect benefit to the Guarantor at least equal to the Available Amount (as defined herein), The Southern Company, a Delaware corporation (the "Guarantor"), hereby agrees with the Guaranteed Party as follows (with terms not defined herein having the meanings ascribed to them in the Intercreditor Agreement): 1. Guaranty. The Guarantor hereby (a) guarantees to the Guaranteed Party the due and punctual payment, observance and performance of all indebtedness, liabilities, obligations, covenants and duties of, and all terms and conditions to be observed by, the Company due or owing under Section 3.15(c)(i) of the Intercreditor Agreement, in each case (i) whether due or owing to, or in favor or for the benefit of, the Guaranteed Party for its own benefit and the benefit of the Senior Secured Parties and the Holders from time to time, any other Person that becomes the Guaranteed Party by reason of any succession or assignment at any time thereafter or any Intercreditor Party and (ii) whether or not an allowable claim against the Company under the Bankruptcy Code, or otherwise enforceable against the Company, and including, in any event, interest accruing as provided in clause (F) below after the filing by or against the Company of a petition under the Bankruptcy Code (collectively, the "Guaranteed Obligations"), in accordance with their respective terms and when and as due, without regard to any counterclaim, set-off, deduction or defense of any kind that the Company may have or assert and (b) agrees so to pay, observe or perform the same when so due, or deemed to be due, upon demand; provided, however, that the amount of the payment obligations of the Guarantor in respect of the Guaranteed Obligations hereunder shall not at any time exceed the Available [Intercreditor Agreement] Exhibit C-1-1 Amount. For purposes of this Agreement, "Available Amount" means (A) $[_____] minus (B) the aggregate amount of any monies (including interest) paid in respect of each call honored by the Guarantor under this Agreement minus (C) the amount of any monies deposited into the Maintenance Plan Funding Subaccount pursuant to the last sentence of Section 3.5(a) of the Intercreditor Agreement minus (D) the amount of any other Reserve Account Security deposited into the Maintenance Plan Funding Subaccount to the extent that monies are not withdrawn therefrom on account of the deposit of such Reserve Account Security plus (E) the aggregate amount of monies withdrawn on account of this Agreement from the Maintenance Plan Funding Subaccount following the delivery of this Agreement to the Guaranteed Party pursuant to the first sentence of Section 3.15(a) of the Intercreditor Agreement (which shall not include any amounts (if any) that may be deemed to have been withdrawn therefrom on the Closing Date) plus (F) if any call honored by the Guarantor under this Agreement is with respect to a Debt Service Event, the amount of any interest from (and including) the Business Day following the date of any written demand on the Guarantor for payment of any of the Guaranteed Obligations to (but excluding) the date of such payment at the rate of interest equal to the then highest yield on any of the outstanding Senior Debt plus two percent (2%) (provided that no such interest shall be payable with respect to any amounts paid on the Business Day following the date of any such written demand)[; provided, however, that in no event shall the Available Amount exceed $[_____] plus interest as provided in clause (F) above]. Upon the written request of the Guarantor, the Guaranteed Party shall provide the Guarantor with a statement of the Available Amount and a calculation thereof. Upon the written request of the Guaranteed Party, the Guarantor shall confirm such statement and calculation. 2. Guaranty Absolute. (a) The Guarantor guarantees that the Guaranteed Obligations will be paid and performed strictly in accordance with the terms of the Intercreditor Agreement, regardless of any law or regulation now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Guaranteed Party with respect thereto. The obligations of the Guarantor under this Agreement are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Agreement, irrespective of whether or not any action is brought against the Company or whether or not the Company is joined in any such action or actions. The obligations of the Guarantor under this Agreement shall be irrevocable, absolute and unconditional, shall constitute a guaranty of payment and performance and not a guaranty of collection, shall be as primary obligor and not as surety only and shall be irrevocable, in each case irrespective of: (i) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of, or any consent to departure from, the Intercreditor Agreement, or any discharge, disallowance, invalidity, voidness or other unenforceability of the Guaranteed Obligations; (ii) the existence of any claim, set-off, defense or other right that the Company or the Guarantor may have at any time against the Guaranteed Party, whether in connection with this Agreement, the Intercreditor Agreement or any unrelated transaction; (iii) any change, restructuring or termination of the corporate structure or existence of the Company or the partial or total substitution of any other Person in the place of the Company under the Intercreditor Agreement whether by assignment, foreclosure or otherwise; or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Guaranteed Party upon the insolvency, [Intercreditor Agreement] Exhibit C-1-2 bankruptcy or reorganization of the Company or the Guarantor or otherwise, all as though such payment had not been made. (b) This Agreement shall not confer upon the Guaranteed Party or any other Person any right of payment or enforcement with respect to the Company under the Intercreditor Agreement that is in any manner broader or more expansive than such Persons' rights of payment and enforcement, if any, with respect to the Company under the Intercreditor Agreement. 3. Waiver. The Guarantor hereby waives promptness, diligence, presentment, demand of payment, notice of acceptance, notice of the incurrence or renewal of any of the Guaranteed Obligations and any other notice with respect to any of the Guaranteed Obligations and this Agreement and any requirement that the Guaranteed Party exhaust any right or take any action against the Company or any other Person or entity. 4. Subrogation. Notwithstanding any payment or payments made by the Guarantor hereunder, the Guarantor hereby irrevocably waives any and all rights of subrogation to the rights of the Guaranteed Party against the Company and any and all rights of reimbursement, assignment, indemnification or implied contract or any similar rights against the Company or against any endorser or other guarantor of all or any part of the Guaranteed Obligations until such time as the Guaranteed Obligations guaranteed hereby have been paid, performed and observed in full. If, notwithstanding the foregoing, any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of such Guaranteed Obligations shall not have been paid in full, such amount shall be held by the Guarantor in trust for the Guaranteed Party, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Guaranteed Party in the exact form received by the Guarantor, to be applied against such Guaranteed Obligations, whether matured or unmatured, in such order as the Guaranteed Party may determine. 5. Representations and Warranties. The Guarantor hereby represents and warrants as follows: (a) The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. (b) The execution and delivery by the Guarantor of this Agreement, and the performance by the Guarantor of its obligations hereunder (i) are within the Guarantor's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene its articles of incorporation or bylaws or any law or regulation applicable to or binding on the Guarantor or any of its properties and (iv) do not require the consent or approval of any Person that has not already been obtained. (c) This Agreement constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). [Intercreditor Agreement] Exhibit C-1-3 6. Continuing Guaranty; Assignment. This Agreement is a continuing guaranty and shall (a) apply to all Guaranteed Obligations whenever arising pursuant to the terms herein, (b) be binding upon the Guarantor and its successors and permitted assigns and (c) inure to the benefit of, and be enforceable by, the Guaranteed Party and its successors and permitted assigns. The Guarantor may not assign its obligations under this Agreement without the prior written consent of the Guaranteed Party, which consent may be withheld in the Guaranteed Party's sole discretion. The Guaranteed Party may not assign its rights under this Agreement without the prior written consent of the Guarantor, which consent may be withheld in the Guarantor's sole discretion. 7. Notices; Transfer of Funds. (a) The Guarantor shall provide the Guaranteed Party, no later than forty-five (45) days after the end of each fiscal quarter of the Guarantor, an Officer's Certificate of the Guarantor certifying as to the determination of whether or not the Southern Credit Standard has been satisfied as of the end of such fiscal quarter. (b) All notices, requests, demands and other communications that are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, electronic or digital transmission method, subject to the sender's facsimile machine receiving the correct answerback of the addressee and confirmation of uninterrupted transmission by a transmission report or the recipient confirming by telephone to sender that such recipient has received the facsimile message and subject to a copy being sent the same day for next day delivery by a reputable overnight delivery service; the day after it is sent, if sent for next day delivery to a domestic address by a reputable overnight delivery service; and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent (i) if to the Guaranteed Party, to its address set forth in Section 12.4 of the Intercreditor Agreement and (ii) if to the Guarantor, to: The Southern Company 64 Perimeter Center East Atlanta, Georgia 30364 Attention: Secretary Telecopy: 404-668-3559 with a copy of any demand for payment or notice of breach or default to: Troutman Sanders 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 Attention: John T.W. Mercer, Esq. Telecopy: 404-885-3525 or to such other place and with such other copies as the Guaranteed Party or the Guarantor may designate as to itself by written notice to the other pursuant to this Section 7(b). [Intercreditor Agreement] Exhibit C-1-4 (c) Payments to be made to the Guaranteed Party hereunder shall be made by wire transfer of funds to the Guaranteed Party, c/o Bankers Trust Company, for deposit into the Maintenance Plan Funding Subaccount established and created under the Intercreditor Agreement (ABA No.: 021001033; Account No. 15348), at Bankers Trust Company, Four Albany Street, New York, New York 10006 or such other account as the Guaranteed Party may designate by notice hereunder. 8. Delay and Waiver. No failure on the part of the Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 9. Entire Agreement; Amendments. This Agreement and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior writings with respect to the subject matter hereof. In the event of any conflict between the terms, conditions and provisions of this Agreement and any such agreement, document or instrument, the terms, conditions and provisions of this Agreement shall prevail. This Agreement may only be amended or modified by an instrument in writing signed by each of the Guarantor and the Guaranteed Party. 10. Headings. The headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. 11. Governing Law; Consent to Jurisdiction. (a) The rights and duties of the Guaranteed Party and the Guarantor under this Agreement shall, pursuant to Section 5-1401 of the New York General Obligations Law, be governed by the law of the State of New York, without reference to the choice of law provisions of New York law thereof (other than such Section 5-1401). (b) Each party hereto irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of this Agreement may be brought in the United States District Court for the Southern District of New York or, if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in New York, New York; (ii) consents to the jurisdiction of any such court in any such suit, action or proceeding; and (iii) waives any objection that such party may have to the laying of venue of any such suit, action or proceeding in any such court. 12. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND THE GUARANTEED PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER. 13. Severability. Any provision of this Agreement that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and [Intercreditor Agreement] Exhibit C-1-5 any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 14. No Recourse to Affiliates. Any obligations created herein shall be the sole obligations of the Guarantor, unless and to the extent that such obligations are assigned or delegated by the Guarantor pursuant to Section 6. The Guaranteed Party shall not have recourse to any subsidiary, partner, joint venturer, affiliate, director or officer of the Guarantor (or of any Person to whom the Guarantor's obligations hereunder are assigned or delegated pursuant to Section 6) for the performance of such obligations unless the obligations are assumed in writing by the Person against whom recourse is sought. 15. Termination. Subject to the last sentence of Section 2(a), this Agreement shall immediately terminate and be of no further force and effect upon the earlier to occur of (a) the reduction of the Available Amount to zero in accordance with Section 1 (including the deposit of other Reserve Account Security or any monies into the Maintenance Plan Funding Subaccount in an amount equal to the then Available Amount, to the extent that, in the case of such Reserve Account Security, monies are not withdrawn from the Maintenance Plan Funding Subaccount on account of the deposit of such Reserve Account Security) or (b) the payment, observance and performance of the Guaranteed Obligations guaranteed hereby. Upon such termination, the Guaranteed Party shall deliver to the Guarantor written evidence in form and substance reasonably satisfactory to the Guarantor of such termination and of the release of the Guarantor from all of its obligations hereunder. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [Intercreditor Agreement] Exhibit C-1-6 IN WITNESS WHEREOF, the Guarantor and the Guaranteed Party have caused this Agreement to be duly executed by their duly authorized officers, all as of the date hereof. THE SOUTHERN COMPANY By Name: Title: BANKERS TRUST (DELAWARE), as Collateral Agent By Name: Title: [MPFS Southern Guaranty] Exhibit C-2 FORM OF DISTRIBUTION ACCOUNT SOUTHERN GUARANTY AGREEMENT Dated as of [_____] In consideration of the execution and delivery by Bankers Trust (Delaware), as collateral agent under the Intercreditor Agreement referred to below for the Senior Secured Parties referred to therein, of the Intercreditor Agreement dated as of August 1, 1995 among First Union National Bank of Georgia, as trustee for the holders of the Indenture Securities referred to therein, First Union National Bank of Georgia, as trustee for the holders of the Tax-Exempt Indenture Securities referred to therein, Banque Paribas, as the Working Capital Provider referred to therein, The Industrial Development Board of The City of Mobile, Alabama, Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), Mobile Energy Services Holdings, Inc., an Alabama corporation ("Mobile Energy"), and Bankers Trust (Delaware), as such collateral agent (the "Guaranteed Party") (such Intercreditor Agreement, as it may be amended, restated, supplemented, waived or otherwise modified, hereinafter the "Intercreditor Agreement") and of the rights of the Company under Section 3.15(a) thereof, and acknowledging that such execution and delivery and such rights of the Company constitute indirect benefit to the Guarantor at least equal to the Available Amount (as defined herein), The Southern Company, a Delaware corporation (the "Guarantor"), hereby agrees with the Guaranteed Party as follows (with terms not defined herein having the meanings ascribed to them in the Intercreditor Agreement): 1. Guaranty. The Guarantor hereby (a) guarantees to the Guaranteed Party the due and punctual payment, observance and performance of all indebtedness, liabilities, obligations, covenants and duties of, and all terms and conditions to be observed by, the Company due or owing under Section 3.15(c)(ii) of the Intercreditor Agreement, in each case (i) whether due or owing to, or in favor or for the benefit of, the Guaranteed Party for its own benefit and the benefit of the Senior Secured Parties and the Holders from time to time, any other Person that becomes the Guaranteed Party by reason of any succession or assignment at any time thereafter or any Intercreditor Party and (ii) whether or not an allowable claim against the Company under the Bankruptcy Code, or otherwise enforceable against the Company, and including, in any event, interest accruing as provided in clause (D) below after the filing by or against the Company of a petition under the Bankruptcy Code (collectively, the "Guaranteed Obligations"), in accordance with their respective terms and when and as due, without regard to any counterclaim, set-off, deduction or defense of any kind that the Company may have or assert and (b) agrees so to pay, observe or perform the same when so due, or deemed to be due, upon demand; provided, however, that the amount of the payment obligations of the Guarantor in respect of the Guaranteed Obligations hereunder shall not at any time exceed the Available Amount. For purposes of this Agreement, "Available Amount" means (A) $[_____] minus (B) the aggregate amount of any monies (including interest) paid in respect of each call honored by the Guarantor under this Agreement minus (C) the amount of any other Reserve Account Exhibit C-2-1 Security or any monies not then constituting Revenues deposited into the Distribution Account to the extent that, in the case of such Reserve Account Security, monies are not withdrawn from the Distribution Account on account of the deposit of such Reserve Account Security plus (D) if any call honored by the Guarantor under this Agreement is with respect to a Debt Service Event, the amount of any interest from (and including) the Business Day following the date of any written demand on the Guarantor for payment of any of the Guaranteed Obligations to (but excluding) the date of such payment at the rate of interest equal to the then highest yield on any of the outstanding Senior Debt plus two percent (2%) (provided that no such interest shall be payable with respect to any amounts paid on the Business Day following the date of any such written demand)[; provided, however, that in no event shall the Available Amount exceed [_____] plus interest as provided in clause (D) above]. Upon the written request of the Guarantor, the Guaranteed Party shall provide the Guarantor with a statement of the Available Amount and a calculation thereof. Upon the written request of the Guaranteed Party, the Guarantor shall confirm such statement and calculation. 2. Guaranty Absolute. (a) The Guarantor guarantees that the Guaranteed Obligations will be paid and performed strictly in accordance with the terms of the Intercreditor Agreement, regardless of any law or regulation now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Guaranteed Party with respect thereto. The obligations of the Guarantor under this Agreement are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Agreement, irrespective of whether or not any action is brought against the Company or whether or not the Company is joined in any such action or actions. The obligations of the Guarantor under this Agreement shall be irrevocable, absolute and unconditional, shall constitute a guaranty of payment and performance and not a guaranty of collection, shall be as primary obligor and not as surety only and shall be irrevocable, in each case irrespective of: (i) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of, or any consent to departure from, the Intercreditor Agreement, or any discharge, disallowance, invalidity, voidness or other unenforceability of the Guaranteed Obligations; (ii) the existence of any claim, set-off, defense or other right that the Company or the Guarantor may have at any time against the Guaranteed Party, whether in connection with this Agreement, the Intercreditor Agreement or any unrelated transaction; (iii) any change, restructuring or termination of the corporate structure or existence of the Company or the partial or total substitution of any other Person in the place of the Company under the Intercreditor Agreement whether by assignment, foreclosure or otherwise; or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Guaranteed Party upon the insolvency, bankruptcy or reorganization of the Company or the Guarantor or otherwise, all as though such payment had not been made. (b) This Agreement shall not confer upon the Guaranteed Party or any other Person any right of payment or enforcement with respect to the Company under the Intercreditor Agreement that is in any manner broader or more expansive than such Persons' rights of payment and enforcement, if any, with respect to the Company under the Intercreditor Agreement. Exhibit C-2-2 3. Waiver. The Guarantor hereby waives promptness, diligence, presentment, demand of payment, notice of acceptance, notice of the incurrence or renewal of any of the Guaranteed Obligations and any other notice with respect to any of the Guaranteed Obligations and this Agreement and any requirement that the Guaranteed Party exhaust any right or take any action against the Company or any other Person or entity. 4. Subrogation. Notwithstanding any payment or payments made by the Guarantor hereunder, the Guarantor hereby irrevocably waives any and all rights of subrogation to the rights of the Guaranteed Party against the Company and any and all rights of reimbursement, assignment, indemnification or implied contract or any similar rights against the Company or against any endorser or other guarantor of all or any part of the Guaranteed Obligations until such time as the Guaranteed Obligations guaranteed hereby have been paid, performed and observed in full. If, notwithstanding the foregoing, any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of such Guaranteed Obligations shall not have been paid in full, such amount shall be held by the Guarantor in trust for the Guaranteed Party, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Guaranteed Party in the exact form received by the Guarantor, to be applied against such Guaranteed Obligations, whether matured or unmatured, in such order as the Guaranteed Party may determine. 5. Representations and Warranties. The Guarantor hereby represents and warrants as follows: (a) The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation. (b) The execution and delivery by the Guarantor of this Agreement, and the performance by the Guarantor of its obligations hereunder (i) are within the Guarantor's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene its articles of incorporation or bylaws or any law or regulation applicable to or binding on the Guarantor or any of its properties and (iv) do not require the consent or approval of any Person that has not already been obtained. (c) This Agreement constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 6. Continuing Guaranty; Assignment. This Agreement is a continuing guaranty and shall (a) apply to all Guaranteed Obligations whenever arising pursuant to the terms herein, (b) be binding upon the Guarantor and its successors and permitted assigns and (c) inure to the benefit of, and be enforceable by, the Guaranteed Party and its successors and permitted assigns. The Guarantor may not assign its obligations under this Agreement without the prior written consent of the Guaranteed Party, which consent may be withheld in the Guaranteed Party's sole discretion. The Guaranteed Party may not assign its rights under this Agreement without the Exhibit C-2-3 prior written consent of the Guarantor, which consent may be withheld in the Guarantor's sole discretion. 7. Notices; Transfer of Funds. (a) The Guarantor shall provide the Guaranteed Party, no later than forty-five (45) days after the end of each fiscal quarter of the Guarantor, an Officer's Certificate of the Guarantor certifying as to the determination of whether or not the Southern Credit Standard has been satisfied as of the end of such fiscal quarter. (b) All notices, requests, demands and other communications that are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, electronic or digital transmission method, subject to the sender's facsimile machine receiving the correct answerback of the addressee and confirmation of uninterrupted transmission by a transmission report or the recipient confirming by telephone to sender that such recipient has received the facsimile message and subject to a copy being sent the same day for next day delivery by a reputable overnight delivery service; the day after it is sent, if sent for next day delivery to a domestic address by a reputable overnight delivery service; and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent (i) if to the Guaranteed Party, to its address set forth in Section 12.4 of the Intercreditor Agreement and (ii) if to the Guarantor, to: The Southern Company 64 Perimeter Center East Atlanta, Georgia 30364 Attention: Secretary Telecopy: 404-668-3559 with a copy of any demand for payment or notice of breach or default to: Troutman Sanders 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 Attention: John T.W. Mercer, Esq. Telecopy: 404-885-3525 or to such other place and with such other copies as the Guaranteed Party or the Guarantor may designate as to itself by written notice to the other pursuant to this Section 7(b). (c) Payments to be made to the Guaranteed Party hereunder shall be made by wire transfer of funds to the Guaranteed Party, c/o Bankers Trust Company, for deposit into the Distribution Account established and created under the Intercreditor Agreement (ABA No.: 021001033; Account No. 15346), at Bankers Trust Company, Four Albany Street, New York, New York 10006 or such other account as the Guaranteed Party may designate by notice hereunder. Exhibit C-2-4 8. Delay and Waiver. No failure on the part of the Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 9. Entire Agreement; Amendments. This Agreement and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior writings with respect to the subject matter hereof. In the event of any conflict between the terms, conditions and provisions of this Agreement and any such agreement, document or instrument, the terms, conditions and provisions of this Agreement shall prevail. This Agreement may only be amended or modified by an instrument in writing signed by each of the Guarantor and the Guaranteed Party. 10. Headings. The headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. 11. Governing Law; Consent to Jurisdiction. (a) The rights and duties of the Guaranteed Party and the Guarantor under this Agreement shall, pursuant to Section 5-1401 of the New York General Obligations Law, be governed by the law of the State of New York, without reference to the choice of law provisions of New York law thereof (other than such Section 5-1401). (b) Each party hereto irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of this Agreement may be brought in the United States District Court for the Southern District of New York or, if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in New York, New York; (ii) consents to the jurisdiction of any such court in any such suit, action or proceeding; and (iii) waives any objection that such party may have to the laying of venue of any such suit, action or proceeding in any such court. 12. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND THE GUARANTEED PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER. 13. Severability. Any provision of this Agreement that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 14. No Recourse to Affiliates. Any obligations created herein shall be the sole obligations of the Guarantor, unless and to the extent that such obligations are assigned or delegated by the Guarantor pursuant to Section 6. The Guaranteed Party shall not have recourse to any subsidiary, partner, joint venturer, affiliate, director or officer of the Guarantor (or of Exhibit C-2-5 any Person to whom the Guarantor's obligations hereunder are assigned or delegated pursuant to Section 6) for the performance of such obligations unless the obligations are assumed in writing by the Person against whom recourse is sought. 15. Termination. Subject to the last sentence of Section 2(a), this Agreement shall immediately terminate and be of no further force and effect upon the earlier to occur of (a) the reduction of the Available Amount to zero in accordance with Section 1 (including the deposit of other Reserve Account Security or any monies not then constituting Revenues into the Distribution Account in an amount equal to the then Available Amount, to the extent that, in the case of such Reserve Account Security, monies are not withdrawn from the Distribution Account on account of the deposit of such Reserve Account Security), (b) the payment, observance and performance of the Guaranteed Obligations guaranteed hereby or (c) the termination of this Agreement pursuant to the last sentence of Section 3.8(c) of the Intercreditor Agreement. Upon such termination, the Guaranteed Party shall deliver to the Guarantor written evidence in form and substance reasonably satisfactory to the Guarantor of such termination and of the release of the Guarantor from all of its obligations hereunder. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Exhibit C-2-6 IN WITNESS WHEREOF, the Guarantor and the Guaranteed Party have caused this Agreement to be duly executed by their duly authorized officers, all as of the date hereof. THE SOUTHERN COMPANY By: Name: Title: BANKERS TRUST (DELAWARE), as Collateral Agent By: Name: Title: [DA Southern Guaranty] EXHIBIT D FORM OF CONSENT TO ASSIGNMENT THIS CONSENT TO ASSIGNMENT (this "Consent"), dated as of [_____], is executed by [_____], a [_____] (the "Consenting Party"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Senior Secured Parties (as hereinafter defined) (the "Collateral Agent"). W I T N E S S E T H: WHEREAS, the Company, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Indenture Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Indenture"), pursuant to which the Company (i) has issued its First Mortgage Bonds, the proceeds of which were used to (among other things) repay to The Southern Company a portion of the amounts advanced to pay certain costs associated with the acquisition of the energy and black liquor recovery complex located at an integrated pulp, paper and tissue manufacturing facility in Mobile, Alabama (together with the related real property rights and other related assets of the Company, the "Energy Complex") and (ii) may, from time to time, issue additional Senior Debt (as defined in the Indenture); WHEREAS, the Company, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "IDB") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to a portion of the Energy Complex relating to the IDB's Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995, issued for the benefit of the Company pursuant to an Amended and Restated Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Tax-Exempt Indenture") between the IDB and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax-Exempt Bonds were used to refinance certain outstanding tax-exempt bonds and to pay for certain other costs. The Company may cause the IDB to issue, from time to time, additional Senior Debt under the Tax-Exempt Indenture; WHEREAS, the Company and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Indenture Trustee and the Tax-Exempt Trustee, the "Senior Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified and, together with any replacement working capital facility, the Exhibit D-1 "Working Capital Facility"), borrowings under which will be used from time to time to finance certain working capital requirements of the Company; WHEREAS, the Consenting Party and the Company have entered into [specify contracts entered into between the Consenting Party and the Company] (collectively, as the same may be amended, supplemented, waived or otherwise modified, the "Contracts"); WHEREAS, the Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Senior Secured Parties pursuant to an Assignment and Security Agreement dated as of August 1, 1995 between the Collateral Agent and the Company and a Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits dated as of August 1, 1995 between the Collateral Agent and the Company; and WHEREAS, the Collateral Agent, the Senior Secured Parties, the Company and Mobile Energy have entered into a Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows. 1. Consent to Assignment. The Consenting Party hereby irrevocably consents to the Company's assignment of the Contracts to the Collateral Agent as security; and the Consenting Party shall, at the Collateral Agent's request in the exercise of its rights as Collateral Agent, continue performance under the Contracts in accordance with their terms and the terms of this Consent to Assignment. 2. No Defaults. The Consenting Party represents and warrants to, and agrees with, the Collateral Agent that (a) the Consenting Party shall perform and comply with all material terms and provisions of the Contracts applicable to it, (b) the Contracts are in full force and effect and there are no [further] amendments, modifications or supplements thereto, either oral or written, (c) the Consenting Party has not assigned, transferred or hypothecated any of its right, title and interest in and to any of the Contracts or any interest therein, (d) the Consenting Party has no knowledge of any default by the Company in any respect in the performance of any provision of any of the Contracts or of any claims or rights of set-off by the Consenting Party or any of its affiliates against the Company, the Company has fulfilled all of its obligations under the Contracts required to be performed on or prior to the date hereof and there are no breaches or unsatisfied conditions presently existing (or that, with the giving of notice or the passage of time or both, would exist) or that would result from the consummation of any transaction contemplated by the Contracts or this Consent to Assignment to take place on the date hereof that would allow the Consenting Party to terminate this Consent to Assignment or the Contracts, (e) none of the Company's rights under any of the Contracts has been waived, (f) the security assignment of the Contracts by the Company to the Collateral Agent, and the acknowledgment of and consent to such assignment by the Consenting Party, will not cause or constitute a default under any of the Contracts or an event or condition that, with the giving of notice or the passage Exhibit D-2 of time or both, would constitute a default under any of the Contracts and (g) a foreclosure or other exercise of remedies under the Financing Documents or any sale thereunder by the Collateral Agent or any of its designees or assignees, whether by judicial proceedings or under any power of sale contained therein, or any conveyance from the Company or the Collateral Agent or any such designee or assignee, in lieu thereof, shall not cause or constitute a default under any of the Contracts or an event or condition that, with the giving of notice or the passage of time or both, would constitute a default under any of the Contracts. 3. Notice of Termination, Transfer, Etc.. (a) The Consenting Party will not, without the prior written consent of the Collateral Agent, (i) cancel, suspend or terminate any of the Contracts, except as provided in the Contracts and in accordance with Section 3(b) hereof, or consent to or accept any cancellation, suspension or termination thereof by the Company, (ii) sell, assign or otherwise dispose of (by operation of law or otherwise) any part of its interest in the Contracts, (iii) amend or modify the Contracts in any respect that may reasonably be expected to have a material effect on the Company's rights or obligations or (iv) claim prevention of or interference with performance of its obligations under the Contracts. The Consenting Party agrees to deliver duplicates or copies of all (i) notices of default delivered under or pursuant to any of the Contracts to the Collateral Agent promptly upon delivery thereof to the Company (and the Consenting Party agrees that no such notice of default shall be effective until received by the Collateral Agent) and (ii) amendments to any of the Contracts (and the Consenting Party agrees that no such amendment shall be effective until received by the Collateral Agent). (b) The Consenting Party will not exercise any right it may have under any of the Contracts, at law or in equity, to cancel, suspend or terminate any such Contract (other than upon the stated expiration of the term of such Contract) or any of its obligations thereunder on account of any default, breach or other act or omission of the Company thereunder without (i) in the case of a default by the Company that is the failure by the Company to pay amounts to the Consenting Party that are due and payable under the Contracts, first providing to the Collateral Agent written notice of such default, breach or other act or omission and the greater of (A) the cure period specified in such Contract and (B) ninety (90) days [If ninety (90) days is impracticable, then sixty (60) days] from the date such notice is received by the Collateral Agent to pay such amounts and (ii) in the case of a default, breach or other act or omission that cannot be cured by the payment of money to the Consenting Party, first providing to the Collateral Agent written notice of such default, breach or other act or omission and the greater of (A) the cure period specified in such Contract and (B) one hundred and eighty (180) days from the date such notice is received by the Collateral Agent to cure such breach or default so long as the Collateral Agent or its designee shall have commenced to cure such breach, default or other act or omission within ninety (90) days and thereafter diligently pursues such cure to completion or, with respect to any default, breach or other act or omission that is not susceptible of being cured by the Collateral Agent, to rectify, to the Consenting Party's reasonable satisfaction, the effect on the Consenting Party thereof within one hundred and eighty (180) days from the date such notice is received by the Collateral Agent. If possession of the Energy Complex (by way of foreclosure proceedings or otherwise) is necessary to cure such breach, default or other act or omission, the Collateral Agent or its successor, transferee or assignee will be allowed a reasonable additional period to complete such proceedings or otherwise accomplish such possession, provided that in no event shall such additional period exceed ninety (90) days. Exhibit D-3 If the Collateral Agent or its successor, transferee or assignee is prohibited by any court order or bankruptcy or insolvency proceedings from curing the default, breach or other act or omission or from commencing or prosecuting foreclosure proceedings, the foregoing time periods shall be extended by the period of such prohibition. The Consenting Party consents to the transfer of the Company's interest under the Contracts to the Collateral Agent for the benefit of the Senior Secured Parties or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by the Company in lieu of foreclosure and agrees that, upon such foreclosure, sale or conveyance, the Consenting Party shall recognize the Collateral Agent or such other purchaser or grantee as the applicable party under any Contracts so transferred, provided that the Collateral Agent or such purchaser or grantee assumes the obligations of the Company under such Contracts. The notice specified in this Section 3(b) shall be in writing and shall be addressed to the Collateral Agent as set forth below or to such other address as the Collateral Agent may have specified by written notice delivered in accordance herewith. Such notice shall be effective (a) if by telecopier, when transmitted to the telecopier number specified herein and received at such number, (b) if by registered or certified mail, postage prepaid, return receipt requested, on the third business day after delivered to a United States post office and a receipt therefor is issued thereby or (c) if by any other means, when delivered to the specified address. Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attention: Corporate Trust Department Telecopier No.: 212-250-6961 Failure of the Consenting Party to provide such notice to the Collateral Agent shall not constitute a breach of this Consent to Assignment, and the Collateral Agent agrees that the Consenting Party shall have no liability to the Collateral Agent for such failure whatsoever; provided, however, that no cancellation, suspension or termination of any of the Contracts by the Consenting Party, or of any of the Consenting Party's obligations thereunder by the Consenting Party, shall be binding upon the Collateral Agent without such notice and the expiration of the applicable cure period set forth in this Section 3(b). 4. No Previous Assignment. Except for the assignment contemplated by this Consent to Assignment, the Consenting Party represents and warrants to the Collateral Agent that it has no actual notice of any assignment of any of the Contracts and that it has not previously consented to any assignment, transfer or hypothecation of any of the Contracts or any interest therein by the Company. 5. Payments to Revenue Account. The Consenting Party hereby agrees that, until the Collateral Agent has given the Consenting Party written notice that the obligations secured by the Contracts have been paid, observed and satisfied in full, all payments to be made by the Consenting Party pursuant to the terms of any of the Contracts shall be in lawful money of the United States of America, in immediately available funds, directly to the Collateral Agent, c/o Exhibit D-4 Bankers Trust Company, for deposit into the Revenue Account established and created under the Intercreditor Agreement (Account No. 15351), at Bankers Trust Company, Four Albany Street, New York, New York 10006, or to such other person or at such other address as the Collateral Agent may from time to time specify in writing to the Consenting Party. By executing this Consent to Assignment, the Company hereby directs the Consenting Party to make all payments due to the Company under any of the Contracts directly to the Collateral Agent, c/o Bankers Trust Company, or such other person as provided for above until the Consenting Party has received the notice referred to in the first sentence of this Section 5. 6. Protection of Collateral Agent. In the event that (a) either (i) the Company's interest in the Energy Complex shall be sold, assigned or otherwise transferred pursuant to the exercise of any right, power or remedy by the Collateral Agent or pursuant to judicial proceedings or (ii) the Company rejects any of the Contracts under the Federal Bankruptcy Code, or other similar Federal or state statute, and such rejection is approved by the appropriate bankruptcy court or is otherwise effective pursuant to such statute and (b) in either case (i) no funds payable under the Contracts shall be due and payable to the Consenting Party, (ii) the Collateral Agent shall have arranged for the curing of any material default or breach by the Company under the Contracts that is susceptible of being corrected by the Collateral Agent or by a purchaser at any judicial or non-judicial sale, (iii) the Contracts shall have been terminated pursuant to the terms thereof by reason of a default or a rejection in bankruptcy under the Federal Bankruptcy Code, or other similar Federal or state statute, and (iv) the effect upon the Consenting Party of any default not susceptible of being corrected shall have been rectified, to the Consenting Party's reasonable satisfaction, then the Consenting Party shall, within fifteen (15) days after receipt of written request therefor, execute and deliver to the Collateral Agent or its nominee, purchaser, assignee or transferee (as the case may be) an agreement containing the same terms as the Contracts so terminated for the remainder of the term thereof. References in this Consent to Assignment to "Contracts" shall be deemed also to refer to such new agreements. 7. Acknowledgment of the Collateral Agent's Obligations and Rights. None of the Collateral Agent, the Senior Secured Parties or the IDB has any obligation hereunder to extend credit to the Consenting Party or any contractor of the Consenting Party at any time for any purpose. None of the Collateral Agent, the Senior Secured Parties or the IDB shall have any obligation to the Consenting Party under any of the Contracts unless and until such time as it succeeds to the interests of the Company under such Contracts. 8. Exercise of Remedies by the Collateral Agent. Upon delivery of written notice by the Collateral Agent to the Consenting Party that the Collateral Agent or any of its designees or assignees (as the case may be) expressly elects to assume the obligations of the Company under any of the Contracts, the Collateral Agent or any of its designees or assignees shall have the full right and power to enforce directly against the Consenting Party all obligations of the Consenting Party under such Contracts and otherwise to exercise all remedies thereunder and to make all demands and give all notices and make all requests required or permitted to be made by the Company under such Contracts. It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it, and nothing contained herein shall be construed as creating any liability on Bankers Exhibit D-5 Trust (Delaware), individually or personally, to perform any covenant, either express or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto. 9. The Company Not to Cause Breach. The Company hereby irrevocably waives any rights that it may have, including those arising under any of the Contracts, to seek to compel the Consenting Party to act in a manner inconsistent with this Consent to Assignment while this Consent to Assignment is in effect. 10. Representations. The Consenting Party represents and warrants to the Company and the Collateral Agent as follows: (a) The Consenting Party is duly organized, validly existing and in good standing under the laws of the State of [insert jurisdiction of organization] and is qualified to do business in the State of Alabama. (b) The Consenting Party has the necessary [corporate] power and [corporate] authority to execute, deliver and perform the Contracts and this Consent to Assignment; the execution and delivery by the Consenting Party of the Contracts and this Consent to Assignment and the performance of its obligations thereunder and hereunder have been duly authorized by all necessary [corporate] action and do not and will not (i) require any consent or approval of the Consenting Party's [insert board of directors and shareholders or other governing body and holders of ownership interests], except for those consents and approvals that have been duly obtained and are in full force and effect, (ii) violate any provision of the [insert name of charter and by-laws] of the Consenting Party or any provision of any law, rule or regulation, or any order, writ, judgment, injunction, decree, determination or award having applicability to the Consenting Party, (iii) result in a breach of or constitute a default under any indenture, loan agreement, credit agreement or any other agreement, lease or instrument to which the Consenting Party is a party or by which it or its properties may be bound or affected or (iv) result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, charge or encumbrance of any nature now owned or hereafter acquired by the Consenting Party; and the Consenting Party is not in violation, breach or default of any provision of the [insert name of charter and bylaws] of the Consenting Party or any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award having applicability to the Consenting Party or any agreement referred to above in clause (iii) of this Section 10(b), which violation could have a material adverse effect on the ability of the Consenting Party to perform its obligations under this Consent to Assignment or any Contract. (c) Each of the Contracts and this Consent to Assignment has been duly executed and delivered and constitutes a valid and binding obligation of the Consenting Party, enforceable against the Consenting Party in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or in law). Exhibit D-6 (d) No consent or approval of, or other action by, or any notice or filing with, any court or administrative or governmental body (except those previously obtained and in full force and effect) is required in connection with the execution and delivery of any of the Contracts or this Consent to Assignment or the performance by the Consenting Party of its obligations thereunder or hereunder; and the Consenting Party has obtained all permits, licenses, approvals, consents, authorizations and exemptions with respect to the performance of its obligations under the Contracts and this Consent to Assignment required by applicable laws, statutes, rules and regulations in effect as of the date hereof. (e) The Consenting Party is not in default with respect to any of the Contracts and has no knowledge, as of the date hereof, of any claims or, except as otherwise set forth in the Contracts, rights of set-off by the Consenting Party or by any of its affiliates against the Company. The Consenting Party will not exercise any right of set-off it may have against the Company or Mobile Energy under any Contract other than with respect to matters arising under such Contract. (f) There are no proceedings pending or, to the best of the Consenting Party's knowledge after due inquiry, threatened against or affecting the Consenting Party in any court or before any governmental authority or arbitration board or tribunal (whether or not purportedly on behalf of the Consenting Party) that may result in a material adverse effect on the property, business, prospects or financial condition of the Consenting Party or on the ability of the Consenting Party to perform its obligations under, or that purports to affect the legality, validity or enforceability of, any of the Contracts or this Consent to Assignment; and the Consenting Party is not in default with respect to any order of any court, governmental authority or arbitration board or tribunal that may result in a material adverse effect on the Consenting Party's ability to perform its obligations under this Consent to Assignment or the Contracts. 11. Binding Upon Successors. All agreements, covenants, conditions, representations and warranties in this Consent to Assignment shall be binding upon and inure to the benefit of and be enforceable by the successors and assigns of each of the parties hereto. 12. Captions. The captions or headings at the beginning of each Section hereof are for convenience only and shall not affect the construction hereof. 13. Governing Law. THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5-1401). 14. Amendment. This Consent to Assignment may be modified, amended or rescinded only by a writing expressly referring to this Consent to Assignment and signed by all of the parties hereto. 15. Severability. Any provision of this Consent to Assignment that may be determined by competent authority to be invalid or unenforceable in any jurisdiction shall, as to such Exhibit D-7 jurisdiction, be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable any remaining terms and provisions hereof, and such invalidity or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. 16. Counterparts. This Consent to Assignment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Exhibit D-8 IN WITNESS WHEREOF, each of the Consenting Party, the Collateral Agent and the Company have duly executed this Consent to Assignment as of the date first above written. [insert name of the Consenting Party], a [insert jurisdiction of organization], as the Consenting Party By: Name: Title: BANKERS TRUST (DELAWARE), a Delaware corporation, not in its individual capacity, but solely as the Collateral Agent By: Name: Title: MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as the Company By: Name: Title: EX-4 5 Exhibit 4.4 - ------------------------------------------------------------------------------- AMENDED AND RESTATED TRUST INDENTURE dated as of August 1, 1995 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee Providing for the Issuance from Time to Time of Securities in One or More Series - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions; Construction.............................. 3 SECTION 1.2. Compliance Certificates and Opinions................... 3 SECTION 1.3. Form of Documents Delivered to Trustee................. 4 SECTION 1.4. Acts of Holders........................................ 5 SECTION 1.5. Notices, etc. to Trustee, IDB and Mobile Energy Parties............................................. 6 SECTION 1.6. Notices to Holders; Waiver............................. 7 SECTION 1.7. Effect of Headings and Table of Contents............... 7 SECTION 1.8. Successors and Assigns................................. 7 SECTION 1.9. Severability Clause.................................... 7 SECTION 1.10. Benefits of Indenture.................................. 7 SECTION 1.11. Governing Law.......................................... 7 SECTION 1.12. Legal Holidays......................................... 8 SECTION 1.13. Execution in Counterparts.............................. 8 SECTION 1.14. Amendment and Restatement.............................. 8 SECTION 1.15. Survival of Assignment Agreement.........................8 ARTICLE II. THE SECURITIES SECTION 2.1. Form of Security to be Established by Series Supplemental Indenture.......................... 9 SECTION 2.2. Form of Trustee's Authentication....................... 9 SECTION 2.3. Amount Unlimited; Issuable in Series; Limitations on Issuance......................................... 9 SECTION 2.4. Authentication and Delivery of Securities.............. 11 SECTION 2.5. Form and Denominations................................. 12 SECTION 2.6. Execution of Securities................................ 13 SECTION 2.7. Temporary Securities................................... 13 SECTION 2.8. Registration, Transfer and Exchange.................... 13 SECTION 2.9. Mutilated, Destroyed, Lost and Stolen Securities.......................................... 15 SECTION 2.10. Payment of Principal and Interest; Principal and Interest Rights Preserved.......................... 15 SECTION 2.11. Persons Deemed Owners.................................. 17 SECTION 2.12. Cancellation........................................... 17 SECTION 2.13. Dating of Securities; Computation of Interest.......... 17 SECTION 2.14. Source of Payments Limited; Rights and Liabilities of the Mobile Energy Parties............... 17 SECTION 2.15. Parity of Securities................................... 18 SECTION 2.16. Allocation of Principal and Interest................... 18 SECTION 2.17. Authorization and Provisions for Issuance of 1995 Bonds; Application of Proceeds.................... 18 ARTICLE III. REPRESENTATIONS AND WARRANTIES SECTION 3.1. Organization, Power, Authority and Status of IDB.................................................. 20 SECTION 3.2. Authorization; Enforceability; Execution and Delivery............................................. 20 i SECTION 3.3. No Conflicts; Laws and Contracts; No Default........... 21 SECTION 3.4. Litigation............................................. 21 SECTION 3.5. Signed Certificates.................................... 21 ARTICLE IV. TAX-EXEMPT INDENTURE ACCOUNTS SECTION 4.1. Establishment of Tax-Exempt Indenture Securities Account..................................... 22 SECTION 4.2. Payments into Tax-Exempt Indenture Securities Account............................................. 22 SECTION 4.3. Application of Funds in Tax-Exempt Indenture Securities Account..................................... 22 SECTION 4.4. Establishment of 1995 Bond Tax-Exempt Debt Service Reserve Account........................................ 23 SECTION 4.5. Payments into Tax-Exempt Debt Service Reserve Accounts............................................... 23 SECTION 4.6. Application of Funds in Tax-Exempt Debt Service Reserve Accounts....................................... 23 SECTION 4.7. Reserve Account Letter of Credit....................... 24 SECTION 4.8. Investment of Monies in the Tax-Exempt Indenture Accounts..................................... 25 SECTION 4.9. Monies to be Held in Trust............................. 27 SECTION 4.10. Dominion and Control................................... 27 ARTICLE V. COVENANTS SECTION 5.1. Payment of Principal, Premium, if any, and Interest............................................ 27 SECTION 5.2. Performance of Covenants by IDB........................ 27 SECTION 5.3. Rights Under IDB Lease Agreement....................... 27 SECTION 5.4. Arbitrage and Tax Covenants............................ 28 SECTION 5.5. No Disposition of Tax-Exempt Indenture Securities Collateral............................................. 28 SECTION 5.6. Access to Books........................................ 28 SECTION 5.7. Covenant to Perform Further Acts....................... 28 SECTION 5.8. Enforcement of Duties and Obligations of Mobile Energy Parties......................................... 29 SECTION 5.9. Further Assurances..................................... 29 SECTION 5.10. Filing and Recording................................... 29 SECTION 5.11. Trustee's Obligations.................................. 29 ARTICLE VI. REDEMPTION AND PREPAYMENT OF SECURITIES SECTION 6.1. Applicability of Article............................... 30 SECTION 6.2. Election to Redeem or Prepay; Notice to Trustee........ 30 SECTION 6.3. Optional Redemption; Extraordinary Redemption; Prepayment; Selection of Securities to Be Redeemed or Prepaid................................. 30 SECTION 6.4. Notice of Redemption or Prepayment..................... 32 SECTION 6.5. Securities Payable on Redemption Date or Prepayment Date........................................ 33 SECTION 6.6. Securities Redeemed or Prepaid in Part................. 34 SECTION 6.7. Determination of Taxability............................ 34 ARTICLE VII. SINKING FUNDS SECTION 7.1. Applicability of Article............................... 34 SECTION 7.2. Sinking Funds for Securities........................... 35 ii ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES SECTION 8.1. Events of Default...................................... 35 SECTION 8.2. Enforcement of Remedies................................ 36 SECTION 8.3. Specific Remedies...................................... 37 SECTION 8.4. Judicial Proceedings Instituted by Trustee............. 37 SECTION 8.5. Holders May Demand Enforcement of Rights by Trustee............................................. 39 SECTION 8.6. Control by Holders..................................... 40 SECTION 8.7. Waiver of Past Events of Defaults...................... 40 SECTION 8.8. Holder May Not Bring Suit Except Under Certain Conditions............................................. 40 SECTION 8.9. Undertaking to Pay Court Costs......................... 41 SECTION 8.10. Right of Holders to Receive Payment Not to Be Impaired............................................ 41 SECTION 8.11. Application of Monies Collected by Trustee............. 41 SECTION 8.12. Securities Held by Certain Persons Not to Share in Distribution........................................... 43 SECTION 8.13. Waiver of Appraisement, Valuation, Stay, Right to Marshaling............................................. 43 SECTION 8.14. Remedies Cumulative; Delay or Omission Not a Waiver.............................................. 43 SECTION 8.15. Intercreditor Agreement................................ 44 ARTICLE IX. THE TRUSTEE SECTION 9.1. Certain Duties and Responsibilities.................... 44 SECTION 9.2. Notice of Events of Defaults........................... 45 SECTION 9.3. Certain Rights of Trustee.............................. 46 SECTION 9.4. Not Responsible for Recitals or Issuance of Securities.......................................... 47 SECTION 9.5. May Hold Securities.................................... 47 SECTION 9.6. Funds May Be Held by Trustee or Paying Agent........... 47 SECTION 9.7. Compensation, Reimbursement and Indemnification........ 47 SECTION 9.8. Corporate Trustee Required; Eligibility................ 48 SECTION 9.9. Resignation and Removal; Appointment of Successor.......................................... 48 SECTION 9.10. Acceptance of Appointment by Successor................. 49 SECTION 9.11. Merger, Conversion, Consolidation or Succession to Business............................................... 50 SECTION 9.12. Preferential Collection of Claims Against any Obligor............................................. 50 SECTION 9.13. Maintenance of Offices and Agencies.................... 53 SECTION 9.14. Co-Trustee or Separate Trustee......................... 56 SECTION 9.15. Taxes.................................................. 58 ARTICLE X. HOLDERS' LISTS AND REPORTS BY TRUSTEE, IDB AND MOBILE ENERGY PARTIES SECTION 10.1. IDB to Furnish Trustee Names and Addresses of Holders............................................. 58 SECTION 10.2. Preservation of Information; Communications to Holders............................................. 58 SECTION 10.3. Reports by Trustee..................................... 59 SECTION 10.4. Reports by the IDB and Mobile Energy Parties........... 61 ARTICLE XI. SUPPLEMENTAL INDENTURES AND AMENDMENTS TO IDB LEASE AGREEMENT iii SECTION 11.1. Supplemental Indentures Without Consent of Holders............................................ 61 SECTION 11.2. Supplemental Indenture With Consent of Holders......... 62 SECTION 11.3. Documents Affecting Immunity or Indemnity.............. 64 SECTION 11.4. Execution of Supplemental Indentures................... 64 SECTION 11.5. Effect of Supplemental Indentures...................... 64 SECTION 11.6. Reference in Securities to Supplemental Indentures.......................................... 64 SECTION 11.7. Supplements and Amendments to IDB Lease Agreement Without Consent of Holders............................. 65 SECTION 11.8. Supplements and Amendments to IDB Lease Agreement With Consent of Holders................................ 65 ARTICLE XII. SATISFACTION AND DISCHARGE SECTION 12.1. Satisfaction and Discharge of Securities............... 66 SECTION 12.2. Satisfaction and Discharge of Indenture................ 70 SECTION 12.3. Application of Trust Money............................. 71 ARTICLE XIII. MEETINGS OF HOLDERS OF SECURITIES; ACTION WITHOUT MEETING SECTION 13.1. Purposes for Which Meetings May Be Called.............. 71 SECTION 13.2. Call, Notice and Place of Meetings..................... 72 SECTION 13.3. Persons Entitled to Vote at Meetings................... 72 SECTION 13.4. Quorum; Action......................................... 72 SECTION 13.5. Attendance at Meetings; Determination of Voting Rights; Conduct and Adjournment of Meetings......... 73 SECTION 13.6. Counting Votes and Recording Action of Meetings........ 74 SECTION 13.7. Action Without Meeting................................. 75 ARTICLE XIV. LIMITED OBLIGATIONS OF IDB AND LIMITED RECOURSE SECTION 14.1. Limited Obligations of IDB............................. 75 SECTION 14.2. Limited Recourse....................................... 75 EXHIBIT A - Form of 1995 Bond iv AMENDED AND RESTATED TRUST INDENTURE, dated as of August 1, 1995, between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA (the "IDB"), a public corporation organized under the laws of the State of Alabama, its principal office and mailing address being at 451 Government Street, Mobile, Alabama 36602, and FIRST UNION NATIONAL BANK OF GEORGIA, as trustee (the "Trustee"), its corporate trust office and mailing address being at 999 Peachtree Street, N.E., 11th Floor, Atlanta, Georgia 30309. W I T N E S S E T H : WHEREAS, the IDB is a public corporation organized under the laws of the State of Alabama under the Alabama Act (as defined below); and the IDB is authorized and empowered, under the Alabama Act, to issue bonds for, and to acquire, construct, enlarge, improve, equip, maintain, lease and dispose of, projects, which is defined to include any land and any building or other improvement thereon, and all real and personal properties deemed necessary in connection therewith, suitable for use by, among other things, any industry for the manufacturing, processing or assembling of any agricultural, manufactured or mineral products and facilities for or useful in the control, reduction, abatement or prevention of pollution of air or water or both and to sell and lease the same to others for such rentals or payments and on such terms and conditions as the IDB may deem advisable; WHEREAS, the IDB, by due corporate action, previously (a) authorized the financing of the cost of acquisition and construction of the Tax-Exempt Project (as defined below) and the leasing thereof to a predecessor-in-interest of Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), and (b) issued and sold $112,300,000 principal amount of the 1983 Bonds (as defined below) to provide funds for and toward the costs thereof; WHEREAS, the IDB, by due corporate action, previously authorized the refunding of the 1983 Bonds, and issued and sold $93,000,000 principal amount (of which $85,000,000 principal amount are currently outstanding) of the 1984 Bonds (as defined below) pursuant to the 1984 Indenture (as defined below) to provide funds for the costs of refunding the 1983 Bonds; WHEREAS, the IDB, by due corporate action, has authorized the execution, delivery and performance by it of this Indenture and has authorized the payment of the 1984 Bonds, within the meaning of Article VIII of the 1984 Indenture and for all other purposes of the 1984 Indenture, and the redemption of the 1984 Bonds thereafter; and, upon such payment, and the issuance of the 1995 Bonds (as defined in Section 2.17), (a) the 1984 Lease (as defined below) shall be amended and restated in its entirety as and by the IDB Lease Agreement (as defined below) and (b) the 1984 Indenture shall be amended and restated in its entirety as and by this Indenture (except that the provisions of Article VIII of the 1984 Indenture shall survive with respect to the 1984 Bonds); and WHEREAS, the IDB may from time to time issue additional bonds, debentures, promissory notes or other evidences of indebtedness in one (1) or more series (together with the 1995 Bonds, the "Securities") in accordance with the terms of this Indenture; the IDB has duly authorized the execution, delivery and performance by it of this Indenture to secure the Securities and to provide for the authentication and delivery thereof by the Trustee. NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in consideration of the premises and of the purchase of the Securities by the Holders (as defined below) thereof, and in order to secure the payment of the principal of and premium, if any, and interest on all Securities from time to time outstanding and the performance of the covenants therein and herein contained and to declare the terms and conditions on which such Securities are secured, the IDB hereby grants, bargains, mortgages, sells, releases, conveys, assigns, transfers, pledges, sets over and confirms to the Trustee, and grants to the Trustee a security interest in, (a) all right, title and interest of the IDB in the IDB Lease Agreement and all amendments, modifications and renewals thereof, reserving, however, the IDB's rights to receive notices, to indemnification and to reimbursement of its fees and expenses incurred under the IDB Lease Agreement, (b) all right, title and interest of the IDB in and to the Tax-Exempt Indenture Accounts (as defined below), including any and all monies contained therein or hereafter delivered to the Trustee for deposit therein and, in each case, all monies received and the right to receive monies thereunder, and (c) all right, title and interest of the IDB in and to all monies and securities from time to time held under the terms of this Indenture, and in any and all other property of every type and nature from time to time hereafter by delivery or by writing of any kind given, granted, pledged and assigned as and for additional security hereunder, by the IDB or by anyone in its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof; TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby given, granted, pledged and assigned, or agreed or intended so to be, unto the Trustee and its successors in said trust and to it and its assigns forever; IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of all Outstanding (as defined below) Securities without any priority of any such Security over any other such Security; PROVIDED, HOWEVER, that the right, title and interest of the Company in and to any Tax-Exempt Debt Service Reserve Account (as defined below), including any and all monies contained therein or hereafter delivered to the Trustee for deposit therein and, in each case, all monies received and the right to receive monies thereunder, shall be held in trust solely for the equal and proportionate benefit and security of the Holders from time to time of the Outstanding Securities for the benefit of whom such Tax-Exempt Debt Service Reserve Account was established; and PROVIDED FURTHER, HOWEVER, that if, after the right, title and interest of the Trustee in and to the Tax-Exempt Indenture Accounts shall have ceased, terminated and become void in accordance with Article XII, and the principal of and premium, if any, and interest on the Securities shall have been paid to the Holders thereof, then and in that case this Indenture and the estate and rights hereby granted shall cease, terminate and be void, and the Trustee shall cancel and discharge this Indenture and execute and deliver to the IDB and the Company such instruments as the IDB and the Company shall require to evidence the discharge hereof; otherwise this Indenture shall be and remain in full force and effect; and THE PARTIES HEREBY COVENANT AND AGREE AS FOLLOWS: ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions; Construction. (a) For all purposes of this Indenture, except as otherwise expressly provided in this Indenture or unless the context otherwise requires, all terms used herein shall have the meanings set 2 forth in Appendix A to the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among the Trustee, First Union National Bank of Georgia, as the Indenture Trustee referred to therein, Banque Paribas, as the Working Capital Facility Provider referred to therein, the IDB, the Company, Mobile Energy Services Holdings, Inc. and Bankers Trust (Delaware), as the Collateral Agent referred to therein. SECTION 1.2. Compliance Certificates and Opinions. Except as otherwise expressly provided by this Indenture, upon any application or request by either of the Mobile Energy Parties or the IDB to the Trustee to take any action under any provision of this Indenture, the Trustee shall be entitled to receive, upon its request, an Officer's Certificate of such Mobile Energy Party or the IDB (as the case may be) stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; (d) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with; and (e) in the case of an Officer's Certificate, a statement as to whether or not any Event of Default under this Indenture has occurred and is continuing. SECTION 1.3. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one (1) such Person, or that they be so certified or covered by only one (1) document, but one (1) such Person may certify or give an opinion with respect to some matters and one (1) or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one (1) or several documents. Any certificate or opinion of an officer of the Company, Mobile Energy or the IDB may be based, insofar as it relates to legal matters, upon an Opinion of Counsel or a certificate of counsel unless such officer knows or has reason to believe that such Opinion of Counsel or certificate with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of either of the Mobile Energy Parties or the IDB stating that the information with respect to such factual matters is in the possession of such 3 Mobile Energy Party or the IDB (as the case may be), unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two (2) or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one (1) instrument. SECTION 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one (1) or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Holders of Securities voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities duly called and held in accordance with the provisions of Article XIII, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record, or both are delivered to the Trustee and, when it is specifically required herein, to the IDB and either of the Mobile Energy Parties. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments and so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 9.1) conclusive in favor of the Trustee, the IDB and the Mobile Energy Parties, if made in the manner provided in this Section 1.4. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 13.6. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to such officer the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer, and where such execution is by an officer of a corporation or association or a member of a partnership or limited liability company, on behalf of such corporation, association, partnership or limited liability company, such certificate or affidavit shall also constitute sufficient proof of such Person's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient. (c) The principal amount and serial numbers of Securities held by any Person, and the date or dates of holding the same, shall be proven by the Security Register and the Trustee shall not be affected by notice to the contrary. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security, the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such action is made upon such Security. (e) Until such time as written instruments shall have been delivered with respect to the requisite percentage of principal amount of Securities for the action contemplated by such instruments, any such instrument executed and 4 delivered by or on behalf of a Holder of Securities may be revoked with respect to any or all of such Securities by written notice by such Holder or any subsequent Holder, proven in the manner in which such instrument was proven. (f) Securities of any series authenticated and delivered after any Act of Holders may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any action taken by such Act of Holders. If the IDB shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the IDB, to such action may be prepared and executed by the IDB and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. (g) The IDB may fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the IDB prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the thirtieth (30th) day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 10.1) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. SECTION 1.5. Notices, etc. to Trustee, IDB and Mobile Energy Parties. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder, by the IDB, by either of the Mobile Energy Parties or by an Authorized Agent shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to the Trustee at its Corporate Trust Office, or (b) the IDB by the Trustee, by any Holder, by either of the Mobile Energy Parties or by an Authorized Agent shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the IDB addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee, each Holder and the Mobile Energy Parties by the IDB for such purpose; (c) the Company by the Trustee, by the IDB, by any Holder, by Mobile Energy or by an Authorized Agent shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the Company addressed to it at 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338, together with a copy to it at P.O. Box 2747, 200 Bay Bridge Road, Mobile, Alabama 36652, or at any other address previously furnished in writing to the Trustee, the IDB, each Holder and Mobile Energy by the Company for such purpose, or (d) Mobile Energy by the Trustee, by the IDB, by any Holder, by the Company or by an Authorized Agent shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to Mobile Energy addressed to it at 900 Ashwood Parkway, Suite 450, Atlanta, Georgia 30338, or at any other address previously furnished in writing to the Trustee, the IDB, each Holder and the Company by Mobile Energy for such purpose. SECTION 1.6. Notices to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given 5 (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder, at its address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given. SECTION 1.7. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.8. Successors and Assigns. All covenants, agreements, representations and warranties in this Indenture by the Trustee and the IDB shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. SECTION 1.9. Severability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.10. Benefits of Indenture. Nothing in this Indenture or in the Securities, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.11. Governing Law. THIS INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ALABAMA, EXCEPT THAT SUCH LAWS SHALL NOT APPLY WITH RESPECT TO ANY COLLATERAL WHERE IT IS NECESSARY TO APPLY THE LAWS OF ANOTHER JURISDICTION TO PERFECT LIENS IN SUCH COLLATERAL RELATING TO DEBT ISSUED HEREUNDER AND EXCEPT THAT THE RIGHTS, DUTIES, IMMUNITIES AND STANDARDS OF CARE RELATING TO THE TRUSTEE AND ANY AUTHORIZED AGENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 1.12. Legal Holidays. In any case where any Redemption Date or Prepayment Date or the date of any Stated Maturity of any Security or of any installment of principal thereof or payment of interest thereon shall not be a Business Day, then (notwithstanding any other provision of this Indenture or such Security) payment of interest or principal, or premium, if any, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Redemption Date or Prepayment Date or the date of such Stated Maturity and, except as provided in the provisions herein or in the Series Supplemental Indenture establishing the terms of such Security, if such payment is timely made, no interest shall accrue for the period from and after such Redemption Date or Prepayment Date or the date of such Stated Maturity (as the case may be) to the date of such payment. SECTION 1.13. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one (1) and the same instrument. 6 SECTION 1.14. Amendment and Restatement. This Indenture amends and restates the 1984 Indenture, and the parties hereto hereby acknowledge, consent to, approve and ratify (i) the amendment and restatement of the 1984 Indenture, as effectuated by this Indenture, including the appointment of the Trustee as successor trustee to the trustee under the 1984 Indenture (provided that (A) the provisions of Article VIII of the 1984 Indenture shall survive with respect to the 1984 Bonds and (B) the trustee under the 1984 Indenture shall continue in such capacity with respect to the 1984 Bonds), (ii) the amendment and restatement of the 1984 Lease, as effectuated by the IDB Lease Agreement, (iii) the termination as of the date hereof of the Remarketing Agreement dated as of October 30, 1987 among the IDB, the Company (as assignee) and Goldman, Sachs & Co., as remarketing agent thereunder (subject to the survival of the provisions of Sections 4 and 5 thereof), and (iv) the termination of Scott's obligations under the 1984 Indenture, the 1984 Lease, and the 1984 Bonds and the fact that Scott shall have no obligations under this Indenture, the IDB Lease Agreement or the Securities; all notices with respect to the foregoing are hereby waived. SECTION 1.15. Survival of Assignment Agreement. Nothing contained herein (including Section 1.14) shall be deemed or construed to restrict, waive or otherwise limit or modify the rights and obligations of any party under the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), which agreement remains in full force and effect. ARTICLE II. THE SECURITIES SECTION 2.1. Form of Security to be Established by Series Supplemental Indenture. The Securities of each series shall be substantially in the form (not inconsistent with this Indenture, including Section 2.5 hereof) established in the Series Supplemental Indenture relating to the Securities of such series (except the 1995 Bonds, which shall be established pursuant to Section 2.17). SECTION 2.2. Form of Trustee's Authentication. The Trustee's certificate of authentication on all Securities shall be in substantially the following form: This Security is one of the Securities referred to in the within-mentioned Indenture. FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By____________________________ Authorized Trust Officer SECTION 2.3. Amount Unlimited; Issuable in Series; Limitations on Issuance. The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited. The provisions of this Section 2.3 shall not be deemed in any way to supersede the restrictions contained in Sections 4.16 and 4.17 of the IDB Lease Agreement. The Securities may be issued in one (1) or more series. There shall be established in one (1) or more Series Supplemental Indentures, prior to the issuance of Securities of any series (except the 1995 Bonds, which shall be established pursuant to Section 2.17): 7 (a) the title of the Securities of such series (which shall distinguish the Securities of such series from all other Securities) and the form or forms of Securities of such series; (b) any limit upon the aggregate principal amount of the Securities of such series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 2.7, 2.8, 2.9, 6.6 or 11.6 and except for Securities that, pursuant to Section 2.4, are deemed never to have been authenticated and delivered hereunder); (c) the date or dates on which the principal of the Securities of such series is payable, the amounts of principal payable on such date or dates and the Regular Record Dates for the determination of Holders to whom principal is payable; and the date or dates on or as of which the Securities of such series shall be dated, if other than as provided in Section 2.13; (d) the rate or rates at which the Securities of such series shall bear interest, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Regular Record Dates for the determination of Holders to whom interest is payable and the basis of computation of interest, if other than as provided in Section 2.13(b); (e) if other than as provided in Section 9.13(a), the place or places where (i) the principal of and premium, if any, and interest on Securities of such series shall be payable, (ii) Securities of such series may be surrendered for registration of transfer or exchange and (iii) notices and demands to or upon the IDB in respect of the Securities of such series and this Indenture may be served; (f) the price or prices at, the period or periods within, and the terms and conditions upon, which Securities of such series may be redeemed, in whole or in part, at the option of the IDB; (g) the obligation, if any, of the IDB to redeem, purchase or repay Securities of such series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which, the period or periods within which and the terms and conditions upon which Securities of such series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligations; (h) if other than denominations of $100,000 and integral multiples of $5,000 in excess thereof, the denominations in which Securities of such series shall be issuable; (i) if the Securities are to be issued in whole or in part in the form of one (1) or more global securities registered in the name of a clearing corporation or clearing agency registered under the Exchange Act, as depositary for such Securities, or a nominee of such clearing corporation or clearing agency, (i) the name of such depositary and any such nominee, (ii) any limitations on the rights of beneficial holders thereof to transfer or exchange the same or to obtain the registration of transfer thereof, (iii) any limitations on the rights of beneficial holders thereof to obtain certificates therefor in definitive form and (iv) any and all other matters incidental to such Securities; (j) any other terms of such series (which terms shall not be inconsistent with the provisions of this Indenture); and 8 (k) any trustees, authenticating or paying agents, warrant agents, transfer agents or registrars with respect to the Securities of such series. SECTION 2.4. Authentication and Delivery of Securities. Subject to Section 2.3 and to Sections 4.16 and 4.17 of the IDB Lease Agreement, at any time and from time to time after the execution and delivery of this Indenture, the IDB may deliver Securities of any series executed by an Authorized Officer of the IDB to the Trustee for authentication, together with an IDB Order for the authentication and delivery of such Securities, and the Trustee shall thereupon authenticate and make available for delivery such Securities in accordance with such IDB Order, without any further action by the IDB. No Security shall be secured by or entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication, in the form provided for herein, executed by the Trustee by the manual signature of any Authorized Trust Officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 9.1) shall be fully protected in relying upon: (a) an executed Series Supplemental Indenture with respect to the Securities of such series (other than the 1995 Bonds) and any amendment of the IDB Lease Agreement expressly providing that, for all purposes of this Indenture and the IDB Lease Agreement, the Tax-Exempt Project shall include any facilities being financed by the additional Securities and adjusting the payments under the IDB Lease Agreement to provide for payments by the Mobile Energy Parties of the amounts necessary to pay the principal of, premium, if any, and interest on such additional Securities; (b) an Officer's Certificate of the IDB certifying (i) as to resolutions of the IDB authorizing the issuance of such Securities, the execution and delivery of this Indenture (in the case of the 1995 Bonds) and the IDB Lease Agreement and (in the case of Securities other than the 1995 Bonds) the execution and delivery of the related Series Supplemental Indenture, (ii) that all conditions precedent under this Indenture to the Trustee's authentication and delivery of such Securities have been complied with and (iii) as to the incumbency of the persons named in such Officer's Certificate; (c) an Opinion of Counsel to the effect that (i) the form or forms and the terms of such Securities have been established by a Series Supplemental Indenture (or, in the case of the 1995 Bonds, by Section 2.17) as permitted by Sections 2.1 and 2.3 in accordance with the provisions of this Indenture, (ii) the Securities of such series, when authenticated and made available for delivery by the Trustee and issued by the IDB in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute legal, valid and binding obligations of the IDB, enforceable against the IDB in accordance with their terms, except as such enforceability (A) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights and remedies generally and (B) is subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law) and the discretion of the court before which proceedings may be brought and (iii) all laws of the States of Alabama and New York and the requirements of this Indenture and the IDB Lease Agreement, in each case in respect of the execution and delivery by the IDB of such Securities, have been complied with; 9 (d) an Opinion of Counsel of Bond Counsel to the effect that the exemption from Federal income tax of the interest on the 1995 Bonds and any additional Securities theretofore issued will not be adversely affected by the issuance of the additional Securities being issued; and (e) such other documents and evidence with respect to the IDB and the Mobile Energy Parties as the Trustee may reasonably request. Prior to the authentication and delivery of a series of Securities, the Trustee shall also receive such other funds, accounts, documents, certificates, instruments or opinions as may be required by the related Series Supplemental Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the IDB, and the IDB shall deliver such Security to the Trustee for cancellation as provided in Section 2.12 together with a written statement (which need not comply with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the IDB, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never have been or be entitled to the benefits hereof. SECTION 2.5. Form and Denominations. The Securities of each series shall be in registered form and may have such letters, numbers or other marks of identification and such legends or endorsements printed, lithographed, engraved, typewritten or photocopied thereon, as may be required to comply with any applicable law and the rules of any securities exchange (if any) upon which the Securities are to be listed or of any clearing corporation or clearing agency that is a Holder of such Securities in accordance with Section 2.3(i) or to conform to any usage in respect thereof, or as may, consistently herewith, be prescribed by the IDB or by the officers executing such Securities, such determination by said officers to be evidenced by their signing the Securities. The definitive Securities shall be printed, lithographed, engraved, typewritten, photocopied or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange upon which the Securities of such series are to be listed (if any) or of any clearing corporation or clearing agency that is a Holder of such Securities in accordance with Section 2.3(i), all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. All Securities of any one (1) series shall be substantially identical except as to denomination and except as may otherwise be provided herein or in the Series Supplemental Indenture setting forth the terms of the Securities of such series. All Securities in whole or in part in the form of one (1) or more global securities in accordance with Section 2.3(i) shall comply with the requirements of the clearing corporation or clearing agency with whom the registered form of such Security will be deposited. SECTION 2.6. Execution of Securities. The Securities shall be executed on behalf of the IDB by its president or any of its vice presidents and its secretary or assistant secretary under its seal reproduced thereon. The signature of any such officers on the Securities may be manual or facsimile, provided that any such signature shall be manually subscribed if so required by applicable Law. Securities bearing the manual or facsimile signatures of individuals who were at the time such signatures were affixed the proper officers of the IDB shall bind the IDB notwithstanding that such individuals or any of them have 10 ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. SECTION 2.7. Temporary Securities. Pending the preparation of definitive Securities of any series, the IDB may execute, and upon receipt of an IDB Order the Trustee shall authenticate and make available for delivery, temporary Securities of such series that are printed, lithographed, typewritten, photocopied or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the IDB will cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the Corporate Trust Office or at the Place of Payment, without charge to the Holder. Upon surrender for cancellation of any one (1) or more temporary Securities of any series, the IDB shall execute and the Trustee shall authenticate and make available for delivery, in exchange therefor, definitive Securities of such series of authorized denominations and of like tenor and aggregate principal amount. Until so exchanged such temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. SECTION 2.8. Registration, Transfer and Exchange. The IDB shall cause to be kept a register that, subject to such reasonable regulations as the IDB may prescribe, shall provide for the registration of Securities and for the registration of transfers and exchanges of Securities. This register and, if there shall be more than one (1) Security Registrar, the combined registers maintained by all such Security Registrars, are herein sometimes referred to as the "Security Register." The Trustee is hereby appointed as the initial "Security Registrar" for the purpose of registering Securities. If a Person other than the Trustee is appointed by the IDB as Security Registrar, the IDB will give the Trustee prompt notice of the appointment of the Security Registrar, and the Trustee shall have the right to inspect the Security Register at all reasonable times and to obtain copies thereof, and the Trustee shall have the right to rely upon an Officer's Certificate executed on behalf of the Security Registrar as to the names and addresses of the Holders of the Securities and the principal amounts and numbers of such Securities. At the option of any Holder, Securities of any series may be exchanged for other Securities of the same series to be registered in the name of such Holder, of authorized denominations and of like tenor, maturity and aggregate principal amount, upon surrender of the Securities to be exchanged at any office or agency maintained for such purpose pursuant to Section 9.13(a). Whenever any Securities are so surrendered for exchange, the IDB shall execute, and the Trustee shall authenticate and make available for delivery, the Securities that the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the IDB, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the IDB and the Security Registrar or any 11 transfer agent, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be required of any Holders participating in any transfer or exchange of Securities in respect of such transfer or exchange, but the Security Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities, other than exchanges pursuant to Section 2.7, 6.6 or 11.6 not involving any transfer. The Security Registrar shall not be required (a) to issue, register the transfer of or exchange any Security of any series during a period (i) beginning at the opening of business fifteen (15) days before the day of the mailing of a notice of redemption of Securities of such series selected for redemption under Section 6.2 or 7.2 and ending at the close of business on the day of such mailing and (ii) beginning on the Regular Record Date for the Stated Maturity of any installment of principal of or payment of interest on the Securities of such series and ending on the Stated Maturity of such installment of principal or payment of interest or (b) to issue, register the transfer of or exchange any Security selected pursuant to clause (i) above for redemption in whole or in part, except the unredeemed portion of any Security selected for redemption in part. Notwithstanding anything herein to the contrary, any transfer of the Securities of any series may be subject to restrictions, if any, set forth in the Series Supplemental Indenture relating to such series. SECTION 2.9. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee, or the Security Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and (b) there is delivered to the IDB, the Security Registrar and the Trustee evidence to their satisfaction of the ownership and authenticity thereof, and such security or indemnity as may be required by them to save each of them harmless, the IDB shall execute and upon the IDB's request the Trustee shall authenticate and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount, bearing a number not then outstanding. Notwithstanding the foregoing, in case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the IDB, upon satisfaction of the conditions set forth in clauses (a) and (b) of the immediately preceding paragraph, may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section 2.9, the IDB may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. Every new Security issued pursuant to this Section 2.9 in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the IDB, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the security and benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder (except as otherwise specifically provided in this Indenture and in the other Security Documents). The provisions of this Section 2.9 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. 12 SECTION 2.10. Payment of Principal and Interest; Principal and Interest Rights Preserved. Principal of or interest on any Security that is payable, and is punctually paid or duly provided for, at any Stated Maturity shall be paid to the Person in whose name that Security (or one (1) or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such principal or interest. Payment of principal of and interest on the Securities of any series shall be made at the Corporate Trust Office or at the Place of Payment (or, if (i) and for so long as any Outstanding Securities are not issued in the form of one or more global securities registered in the name of a clearing corporation or clearing agency registered under the Exchange Act, as depositary for such Securities, or a nominee of such clearing corporation or clearing agency and (ii) such office is not in the Borough of Manhattan, the City of New York, at either such office or an office to be maintained in such Borough), or by check or in another manner or manners if so provided in the Series Supplemental Indenture creating the Securities of such series (or, in the case of the 1995 Bonds, in Section 2.17). Any principal of or interest on any Security of any series that is payable, but is not punctually paid or duly provided for, at any Stated Maturity of an installment of principal or payment of interest shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder to the extent that such defaulted principal or interest may be paid by the IDB, at its election (at the direction of the Company) in each case, as provided in paragraph (a) or paragraph (b) below: (a) The IDB may elect to make payment of all or any portion of such defaulted principal or interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) in respect of which principal or interest is in default are registered at the close of business on a Special Record Date for the payment of such defaulted principal or interest, which shall be fixed in the following manner. The IDB shall notify the Trustee and the Paying Agent in writing of the amount of defaulted principal or interest proposed to be paid on each Security of such series and the date of the proposed payment, and concurrently there shall be deposited with the Trustee or the Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted principal or interest or there shall be made arrangements satisfactory to the Trustee or the Paying Agent for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted principal or interest as provided in this paragraph. Thereupon, the Trustee shall fix a Special Record Date for the payment of such defaulted principal or interest (together with other amounts payable with respect to such defaulted principal or interest) that shall not be more than fifteen (15) nor less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the IDB, the Company and the Security Registrar of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such defaulted principal or interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each Holder of a Security of such series at such Holder's address as it appears in the Security Register, not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such defaulted principal or interest and the Special Record Date therefor having been mailed as aforesaid, such defaulted principal or interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered on such Special Record Date. (b) The IDB may make, or cause to be made, payment of any defaulted principal or interest (together with other amounts payable with 13 respect to such defaulted interest) in any other lawful manner not inconsistent with the requirements of any securities exchange (if any) on which the Securities in respect of which principal or interest is in default may be listed, and upon such notice as may be required by such exchange, if, after notice given by the IDB or the Company to the Trustee of the proposed payment pursuant to this paragraph, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section 2.10, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security, and each such Security shall bear interest from whatever date shall be necessary so that neither gain nor loss in interest shall result from such registration of transfer, exchange or replacement. SECTION 2.11. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Person in whose name any Security is registered shall be deemed to be the owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Section 2.10) interest on such Security and (subject to Section 5.3) for all other purposes whatsoever, whether or not such Security be overdue, regardless of any notice to anyone to the contrary. SECTION 2.12. Cancellation. All Securities surrendered for payment, redemption, credit against any Sinking Fund payment or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee for cancellation. The IDB may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the IDB may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 2.12, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed and certification of their destruction delivered to the IDB unless, by IDB Request, the IDB otherwise directs. SECTION 2.13. Dating of Securities; Computation of Interest. (a) Except as otherwise provided in the Series Supplemental Indenture relating to the Securities of a series, each Security of such series shall be dated the date of its authentication. (b) Except as otherwise provided in the Series Supplemental Indenture relating to the Securities of a series, interest on the Securities of such series shall be computed on the basis of a 360-day year consisting of twelve 30-day months and, for any period shorter than a full calendar month, on the basis of the actual number of days elapsed in such period. SECTION 2.14. Source of Payments Limited; Rights and Liabilities of the Mobile Energy Parties. Except as otherwise specifically provided in this Indenture, the IDB Lease Agreement and the Guaranty, all payments of principal and premium, if any, and interest to be made in respect of the Securities and this Indenture shall be made only from the Tax-Exempt Indenture Securities Collateral, the payments therefrom and the income and proceeds received by the Trustee or the Collateral Agent and allocable to the Trustee therefrom pursuant to the Security Documents. Each Holder, by its acceptance of a Security, agrees that (a) it will look solely to the Tax-Exempt Indenture Securities Collateral, the payments therefrom and the income and proceeds received by the Trustee or the Collateral Agent and allocable to the Trustee therefrom to the extent available for distribution to such Holder as herein provided or provided in the Security Documents and the Guaranty and (b) recourse shall be limited in accordance with Article XIV. 14 SECTION 2.15. Parity of Securities. (a) Except as otherwise specifically provided in this Indenture and the other Security Documents, all Securities of a series issued and Outstanding hereunder rank on a parity with each other Security of the same series and with all Securities of each other series and each Security of a series shall be secured equally and ratably by this Indenture and the Security Documents with each other Security of the same series and with all Securities of each other series, without preference, priority or distinction of any one (1) thereof over any other by reason of difference in time of issuance or otherwise, and each Security of a series shall be entitled to the same benefits and security in this Indenture and the Security Documents as each other Security of the same series and with all Securities of each other series. (b) Notwithstanding anything herein to the contrary, the right, title and interest of the IDB in and to any Tax-Exempt Debt Service Reserve Account, including all monies contained therein or hereafter delivered to the Trustee for deposit therein and, in each case, all monies received and the right to receive monies thereunder, shall be held in a separate account in trust solely for the equal and proportionate benefit and security of the Holders from time to time of the Outstanding Securities for the benefit of whom such Tax-Exempt Debt Service Reserve Account was established. SECTION 2.16. Allocation of Principal and Interest. Each payment of principal of and premium, if any, and interest on each Security shall be applied, first, to the payment of accrued but unpaid interest on such Security (as well as any interest on overdue principal or, to the extent permitted by applicable Law, overdue interest) to the date of such payment, second, to the payment of the principal amount of and premium, if any, on such Security then due (including any overdue installment of principal) thereunder and, third, the balance, if any, to the payment of the principal amount of and premium, if any, on such Security remaining unpaid. SECTION 2.17. Authorization and Provisions for Issuance of 1995 Bonds; Application of Proceeds. (a) There is hereby created a series of Securities designated "The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995" (the "1995 Bonds"). Upon delivery of an IDB Order to the Trustee in accordance with the provisions of Section 2.4, the Trustee shall authenticate and deliver the 1995 Bonds. Such IDB Order shall specify the amount of the 1995 Bonds to be authenticated and the date on which such Securities are to be authenticated. (b) The 1995 Bonds shall be substantially in the form of Exhibit A and shall have and be subject to such other terms as provided in this Indenture. (c) Each of the 1995 Bonds shall bear interest on the unpaid principal amount thereof from time to time Outstanding from the date specified therein until such amount is paid in full at the rate of interest, and the principal amount of each of the 1995 Bonds shall be due and payable as, set forth in the form thereof. Payment of principal of and premium, if any, and interest on each of the 1995 Bonds shall be made, if the IDB (at the direction of the Company) so elects, by check mailed to the Holder at its registered address or otherwise as provided in Section 2.10 of this Indenture, except that the final payment of principal of any of the 1995 Bonds shall be made on the due date therefor to the accounts of the Holders thereof as such accounts shall appear in the Security Register, which shall be due and payable as set forth in the form thereof attached hereto. For so long as the 1995 Bonds are issued in the form of one (1) or more global 1995 Bonds, payment of principal of and premium, if any, and interest on such 1995 Bonds shall be made in immediately available funds by wire transfer to the clearing corporation or clearing agency acting as depositary for such global 1995 Bonds, or a nominee of such clearing corporation or clearing agency. Any other 15 Holder of $1,000,000 or more in aggregate principal amount of 1995 Bonds may, by delivery of a written notice to the Paying Agent, elect to have all such payments to such Holder made by wire transfer of immediately available funds to a designated account maintained in the United States (so long as the Paying Agent has received proper wire transfer instructions in writing by the Regular Record Date next preceding the date for such payment). The 1995 Bonds shall mature on the date set forth in the form thereof. (d)The 1995 Bonds are subject to optional redemption as set forth in the form thereof. (e) In accordance with the provisions of Section 6.3 of this Indenture, the 1995 Bonds are subject to extraordinary redemption under certain conditions, and mandatory sinking fund redemption, in each case on the terms set forth in the form thereof. (f) Pursuant to Section 4.28 of the IDB Lease Agreement, each of the Mobile Energy Parties has covenanted and agreed, for the benefit of the Holders of 1995 Bonds, to comply with and carry out all of the provisions of the Continuing Disclosure Agreement applicable to such Mobile Energy Party, and such covenant and agreement is incorporated herein by reference and pursuant to the assignment of the IDB's rights under the IDB Lease Agreement. Notwithstanding any other provision of this Indenture, the failure by either of the Mobile Energy Parties or the Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default under this Indenture; provided, however, that the Trustee may (and, at the request of any Participating Underwriter (as defined in the Continuing Disclosure Agreement) or the Holders of at least 25% in aggregate principal amount of Outstanding 1995 Bonds, shall) or any beneficial holder of a 1995 Bond may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause such Mobile Energy Party or the Trustee (as the case may be) to comply with its obligations under this Section 2.17(f). (g) The Trustee hereby covenants and agrees that any Holder of a 1995 Bond or an owner of a beneficial interest therein or any prospective investor of a 1995 Bond may, upon reasonable notice, inspect any of the Project Documents at the Corporate Trust Office of the Trustee. (h) Promptly upon receipt by the Trustee (on behalf of the IDB) of the proceeds from the sale of the 1995 Bonds, the Trustee shall (i) deposit any proceeds representing accrued interest into the Tax-Exempt Indenture Securities Interest Subaccount and apply such amount to the payment of interest on the 1995 Bonds on the first Interest Payment Date and (ii) make an irrevocable transfer of the balance of such proceeds to the trustee under the 1984 Indenture, to be applied to the payment of the 1984 Bonds, within the meaning of Article VIII of the 1984 Indenture and for all other purposes of the 1984 Indenture, and thereafter to the redemption of the 1984 Bonds. ARTICLE III. REPRESENTATIONS AND WARRANTIES The IDB represents and warrants, as of the Closing Date, to the Trustee as follows: SECTION 3.1. Organization, Power, Authority and Status of IDB. The IDB is a public corporation duly formed, validly existing and in good standing under the laws of the State of Alabama. The IDB has complied with all of the provisions of the constitution and laws of the State of Alabama, including the Alabama Act. 16 SECTION 3.2. Authorization; Enforceability; Execution and Delivery. (a) The IDB has all necessary power and authority to execute, deliver and perform its obligations under this Indenture, the Securities, the IDB Lease Agreement and each other Project Document to which it is a party, and any and all other agreements relating thereto. All action on the part of the IDB that is required for the authorization, execution, delivery and performance of this Indenture, the Securities and each other Project Document to which the IDB is a party has been duly and effectively taken. (b) This Indenture, the Securities and each other Project Document to which the IDB is a party has been duly executed and delivered by the IDB. Each of this Indenture, the Securities and each other Project Document to which the IDB is a party constitutes a legal, valid and binding obligation of the IDB, enforceable against it in accordance with the terms thereof, except as such enforceability (i) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws relating to or affecting the enforcement of creditors' rights and remedies generally and (ii) is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and the discretion of the court before which any proceeding therefor may be brought and to public policy or Federal or state laws that may limit rights to indemnification. SECTION 3.3. No Conflicts; Laws and Contracts; No Default. (a) Neither the execution and delivery of this Indenture, the Securities and each other Project Document to which the IDB is a party nor the consummation of any of the transactions contemplated hereby or thereby nor performance of or compliance with the terms and conditions hereof or thereof (i) conflicts or is inconsistent with or constitutes a default under or results in the violation of the provisions of the organizational documents of the IDB, or of any other Project Document or any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which the IDB is a party or by which the IDB or any of its property or assets is bound or to which either may be subject or (ii) results in the creation or imposition of any Liens on any of the property or assets of the IDB or (other than Permitted Liens) either of the Mobile Energy Parties, or results in the acceleration of any obligation of either of the Mobile Energy Parties. (b) Neither the IDB nor (to the knowledge of the IDB without independent investigation) any other party to a Project Document to which the IDB is a party, to the 1984 Indenture or to the 1984 Lease is in material default in the performance of any term, covenant or obligation under such Contract and no event has occurred that with the lapse of time, notice or both could result in a default thereunder; no material force majeure event has occurred and is continuing under any Project Document to which the IDB is a party; and (to the knowledge of the IDB without independent investigation) each such Project Document is in full force and effect. SECTION 3.4. Litigation. There are no claims, actions, suits, investigations or proceedings at law or in equity by or before any arbitrator or any Governmental Authority now pending or (to the knowledge of the IDB without independent investigation) threatened against the IDB, or any property or other assets or rights of the IDB with respect to this Indenture, any other Project Document to which the IDB is a party or the Energy Complex, that would reasonably be expected to adversely affect the transactions contemplated hereby, the validity of, or the power of the IDB to execute and deliver, this Indenture, the Securities or any other Project Document to which the IDB is a party or the right of the IDB to finance the Tax-Exempt Project. SECTION 3.5. Signed Certificates. Any certificate signed by any official of the IDB and delivered to the parties hereto shall be deemed a 17 representation and warranty by the IDB to the respective parties as to the statements made therein. ARTICLE IV. TAX-EXEMPT INDENTURE ACCOUNTS SECTION 4.1. Establishment of Tax-Exempt Indenture Securities Account. An account designated the "Tax-Exempt Indenture Securities Account" is hereby established and created with the Trustee. The following subaccounts of the Tax- Exempt Indenture Securities Account are hereby established and created with the Trustee: (a) "Tax-Exempt Indenture Securities Interest Subaccount"; (b) "Tax- Exempt Indenture Securities Principal Subaccount"; and (c) "Tax-Exempt Indenture Securities Redemption Subaccount." SECTION 4.2. Payments into Tax-Exempt Indenture Securities Account. The Tax-Exempt Indenture Securities Account shall be funded with (a) monies transferred by the Collateral Agent from the Revenue Account pursuant to Sections 3.11(e)(iii) of the Intercreditor Agreement, (b) monies transferred by the Collateral Agent from the Maintenance Reserve Account pursuant to Section 3.5(c) of the Intercreditor Agreement, (c) monies transferred by the Collateral Agent from the Distribution Account pursuant to Section 3.8(b) of the Intercreditor Agreement, (d) monies transferred by the Collateral Agent from the Subordinated Fee Account pursuant to Section 3.7(b) of the Intercreditor Agreement, (e) monies transferred by the Collateral Agent from the Subordinated Debt Account pursuant to Section 3.6(b) of the Intercreditor Agreement, (f) Loss Proceeds transferred by the Collateral Agent from the Loss Proceeds Account pursuant to Section 3.10 of the Intercreditor Agreement and (g) monies on deposit in the Mill Owner Maintenance Reserve Account used pursuant to the proviso contained in Section 4.29 of the IDB Lease Agreement. The Trustee shall deposit all monies received by it for (i) payment of interest on the Securities at Stated Maturity into the Tax-Exempt Indenture Securities Interest Subaccount, (ii) payment of principal of the Securities at Stated Maturity into the Tax-Exempt Indenture Securities Principal Subaccount and (iii) redemption of Securities other than at Stated Maturity into the Tax-Exempt Indenture Securities Redemption Subaccount, in each case as specified in the Officer's Certificate of the Company delivered pursuant to Section 3.11 of the Intercreditor Agreement (which the Company shall deliver to the Trustee) and in each case for disbursement in accordance with Section 4.3. SECTION 4.3. Application of Funds in Tax-Exempt Indenture Securities Account. (a) The Trustee is hereby authorized and directed to disburse from (i) the Tax-Exempt Indenture Securities Interest Subaccount, the amount required to pay interest on Securities when due (whether on an Interest Payment Date or at any other Stated Maturity, but not on any Redemption Date or Prepayment Date), (ii) the Tax-Exempt Indenture Securities Principal Subaccount, the amount required to pay principal of the Securities when due (whether on a Principal Payment Date or at any other Stated Maturity, but not on any Redemption Date or Prepayment Date) and (iii) the Tax-Exempt Indenture Securities Redemption Subaccount, the amount required to pay principal of and premium, if any, and interest on the Securities when due otherwise than at Stated Maturity (whether upon acceleration or on any Redemption Date or Prepayment Date); provided, however, that if there are insufficient monies in (A) the Tax-Exempt Indenture Securities Interest Subaccount to pay the interest then due on the Securities, then the Trustee shall, in the following order of priority: first, transfer monies on deposit in the Tax-Exempt Indenture Securities Redemption Subaccount and, second, transfer monies on deposit in the Tax-Exempt Indenture Securities Principal Subaccount to the Tax-Exempt Indenture Securities Interest Subaccount to be applied to make such payment, (B) the Tax-Exempt Indenture Securities Principal Subaccount to pay the principal then due on the Securities, then the Trustee shall transfer monies on deposit in the Tax-Exempt Indenture Securities Redemption Subaccount to the Tax-Exempt Indenture Securities Principal Subaccount 18 to be applied to make such payment and (C) the Tax-Exempt Indenture Securities Redemption Subaccount to pay the principal of and premium, if any, and interest on the Securities then due upon acceleration or on any Redemption Date or Prepayment Date, then the Trustee shall transfer monies on deposit in the Tax- Exempt Indenture Securities Principal Subaccount and the Tax-Exempt Indenture Securities Interest Subaccount (but only, in each case, to the extent such monies are in excess of the amount necessary for payment of principal of and interest on the Securities not being redeemed or prepaid) to be applied to make such payment. SECTION 4.4. Establishment of 1995 Bond Tax-Exempt Debt Service Reserve Account. (a) An account designated the "1995 Bond Tax-Exempt Debt Service Reserve Account" is hereby established and created with the Trustee for the benefit of the Holders of the 1995 Bonds. (b) The Tax-Exempt Debt Service Reserve Account Required Balance in respect of the 1995 Bond Tax-Exempt Debt Service Reserve Account shall be an amount equal to $5,908,000. The 1995 Bond Tax-Exempt Debt Service Reserve Account shall be funded on the Closing Date in an amount equal to such Tax-Exempt Debt Service Reserve Account Required Balance. SECTION 4.5. Payments into Tax-Exempt Debt Service Reserve Accounts. Subject to Section 4.7, each Tax-Exempt Debt Service Reserve Account (if any) shall be funded (a) with monies to be deposited therein on the date of original issuance of any Securities for whose benefit any such Tax-Exempt Debt Service Reserve Account was established and created, in accordance with the Series Supplemental Indenture establishing such Securities (except the 1995 Bonds, in which case in accordance with Section 4.4), and (b) with monies to be transferred thereto by the Collateral Agent pursuant to Section 3.11(g)(ii) of the Intercreditor Agreement, in the case of clauses (a) and (b) above, to the extent necessary so that the amount of monies, together with the Available Amount under any Reserve Account Letter of Credit, then on deposit in such Tax-Exempt Debt Service Reserve Account shall be equal to the Tax-Exempt Debt Service Reserve Account Required Balance in respect of such Tax-Exempt Debt Service Reserve Account. SECTION 4.6. Application of Funds in Tax-Exempt Debt Service Reserve Accounts. If, following the application of monies on deposit in the Tax-Exempt Indenture Securities Account in accordance with Section 4.3, amounts are due and owing in respect of principal of or premium, if any, or interest on any Securities for whose benefit a Tax-Exempt Debt Service Reserve Account was established and created, in accordance with the Series Supplemental Indenture establishing such Securities (except the 1995 Bonds, in which case in accordance with Section 4.4), the Trustee shall, in the following order of priority: first, apply monies then on deposit in such Tax-Exempt Debt Service Reserve Account; and, second, draw upon any Reserve Account Letter of Credit on deposit in such Tax-Exempt Debt Service Reserve Account pursuant to Section 4.7(d) in an amount up to the Available Amount thereunder and apply the monies in respect thereof, in each case, directly to the payment (to the extent necessary) of such amounts due and owing in respect of such Securities; provided, however, that, prior to a Trigger Event, if an Event of Default has occurred and is then continuing, the Trustee shall provide notice thereof to the Collateral Agent, and the Collateral Agent shall (to the extent necessary), in the following order of priority, transfer monies on deposit in the Distribution Account, the Subordinated Fee Account and the Subordinated Debt Account (including then Available Amounts under any Reserve Account Security on deposit therein) in accordance with and subject to Sections 3.8, 3.7 and 3.6, respectively, of the Intercreditor Agreement, to the Trustee for application to the payment of such amounts due and payable in respect of such Securities, prior to the application of monies pursuant to clauses first and second above. Notwithstanding anything in this Agreement or any other Financing Document to the contrary, the Trustee is hereby authorized and directed to transfer monies on deposit in any Tax-Exempt Debt Service Reserve 19 Account (together with then Available Amounts under any Reserve Account Letter of Credit deposited therein) into a segregated account to be held by the Trustee for the purpose of paying any amount required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of the Securities. The Company shall comply with Article IX of the Company's Tax and Non-Arbitrage Certification dated August 24, 1995. Unless the Trustee shall have received an Officer's Certificate of the Company, not later than thirty (30) days after each installment computation date (as defined in such Tax and Non-Arbitrage Certification), specifying the amount of such rebate, and the calculation thereof, that would be required to be so paid, the Trustee is hereby authorized and directed to employ such Person or Persons, which shall be expert in such matters, as it may reasonably select, for the purpose of making such calculations. SECTION 4.7. Reserve Account Letter of Credit. (a) Subject to Section 4.7(c), the IDB shall not be required at any time to deposit any monies into any Tax-Exempt Debt Service Reserve Account, and the Company shall be entitled from time to time to withdraw monies on deposit in such Tax-Exempt Debt Service Reserve Account, provided that and for so long as one (1) or more Reserve Account Letters of Credit having an Available Amount thereunder equal to the amount of such monies otherwise required to be and not so deposited or the amount of such monies so withdrawn (as the case may be) shall have been delivered to the Trustee, at or prior to such time, for deposit into such Tax-Exempt Debt Service Reserve Account. At the time of any such deposit, the Trustee shall be entitled to receive, and (subject to Section 9.1) shall be fully protected in relying upon, an Opinion of Counsel to the effect that such Reserve Account Letter of Credit (i) is permitted by this Section 4.7 and has been delivered in accordance with the provisions hereof, (ii) has been duly authorized, executed and delivered by the provider thereof and (iii) constitutes a legal, valid and binding obligation of such provider, enforceable against such provider in accordance with its terms, except as such enforceability (A) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights and remedies generally as such laws would apply in the event of a bankruptcy, insolvency or reorganization of, or other similar occurrence with respect to, such provider and (B) is subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law) or other customary qualifications and limitations. The Company may from time to time, at its discretion, replace or reduce the Available Amount (in whole or in part) under any Reserve Account Letter of Credit on deposit in any Tax-Exempt Debt Service Reserve Account with one (1) or more other Reserve Account Letters of Credit having an Available Amount thereunder, or with monies in an amount, equal to the Available Amount so replaced or reduced. (b) Each Reserve Account Letter of Credit on deposit in any Tax-Exempt Debt Service Reserve Account shall provide that not less than forty-five (45) days prior to the occurrence of a Termination Event with respect to such Reserve Account Letter of Credit, the provider thereof shall deliver written notice to the Trustee and the Company of such occurrence. The Company shall provide notice to the Trustee of the occurrence of any Credit Standard Event or Default Event within three (3) Business Days of its actual or constructive knowledge of the event giving rise to such occurrence. (c) If (in lieu of any monies required to be deposited into, or in replacement of monies or one (1) or more other Reserve Account Letters of Credit on deposit in, any Tax-Exempt Debt Service Reserve Account) any Reserve Account Letter of Credit is on deposit in such Tax-Exempt Debt Service Reserve Account pursuant to Section 4.7(a), then, immediately upon the occurrence of a Required Deposit Event with respect to such Reserve Account Letter of Credit, the Company agrees to deposit into such Tax-Exempt Debt Service Reserve Account an amount of monies equal to the Required Deposit with respect to such Required Deposit Event. 20 (d) If the Company fails to make any Required Deposit pursuant to Section 4.6(c) as and when due, then the Trustee shall, and is hereby authorized and directed to, draw upon any such Reserve Account Letter of Credit in an amount equal to the amount of such Required Deposit that the Company so failed to deposit; provided, however, that, if a Required Deposit Event occurs at a time when more than one (1) Reserve Account Letter of Credit is on deposit in such Tax-Exempt Debt Service Reserve Account, the Trustee may elect, subject to Section 4.6, the order in which the Trustee shall draw upon such Reserve Account Letters of Credit. Any amounts drawn by the Trustee under any Reserve Account Letter of Credit on deposit in any Tax-Exempt Debt Service Reserve Account shall be deposited into such Tax-Exempt Debt Service Reserve Account. The Company's obligations under Section 4.7(c) shall be satisfied to the extent of any such deposit. SECTION 4.8. Investment of Monies in the Tax-Exempt Indenture Accounts. (a) Amounts deposited in the Tax-Exempt Indenture Accounts, at the written request and direction of the Company, shall be invested by the Trustee in Permitted Investments. Such Permitted Investments shall mature in such amounts and not later than such times as may be necessary to provide monies when needed to make payments from such monies as provided in this Indenture. Net interest or gain received from such Permitted Investments shall remain in the respective subaccounts of the Tax-Exempt Indenture Securities Account and in each Tax-Exempt Debt Service Reserve Account (if any) pending application as provided in this Indenture, provided that (i) to the extent that monies on deposit in any Tax- Exempt Debt Service Reserve Account (together with then Available Amounts under any Reserve Account Letter of Credit deposited therein) exceed the Tax-Exempt Debt Service Reserve Account Required Balance therefor, such monies shall be transferred to the Collateral Agent for deposit into the Revenue Account and (ii) net interest on monies deposited into the Tax-Exempt Indenture Securities Account Principal Subaccount shall be transferred to the Tax-Exempt Indenture Securities Account Interest Subaccount immediately prior to each Monthly Transfer Date. In the event monies are required for payment of any amounts to be paid by the Trustee pursuant to Article VI in respect of any series of Securities and for any payment of the principal of or premium, if any, or interest on any series of Securities, the Trustee shall, at the written request and direction of the Company, sell such Permitted Investments as required to restore to cash such amounts as are needed for any such payments. Absent written instructions from the Company, the Trustee shall invest the amounts held in the Tax-Exempt Indenture Securities Account and each Tax-Exempt Debt Service Reserve Account in Permitted Investments described in clause (a) of the definition thereof. All such Permitted Investments shall be made in the name of the Trustee (it being understood and agreed that the Trustee shall not be responsible for losses in respect thereof) and shall be made in such manner as to preserve the Lien of this Indenture thereon. The Trustee shall maintain records reflecting the interest of each Tax-Exempt Indenture Account in such Permitted Investments. (b) In computing the amount in any Tax-Exempt Indenture Account (or any other separate account or fund created under the provisions of, and for any purpose provided in, this Indenture), each Permitted Investment on deposit therein shall be valued at the fair value thereof, including accrued interest thereon. On the Business Day immediately preceding each Monthly Transfer Date and the date of any withdrawal of monies on deposit in any Tax-Exempt Indenture Account, the Trustee shall so value each Permitted Investment on deposit in such Tax-Exempt Indenture Account and, promptly thereafter, shall notify the Company, the Collateral Agent and the Independent Engineer as to the amount of any deficiency or surplus in such Tax-Exempt Indenture Account as of such date based upon such valuation. (c) In addition to the records referenced above, the Trustee shall keep and retain or cause to be kept and retained, until at least six (6) years after the discharge and retirement of the Securities, whether at maturity, redemption or acceleration, the following records with respect to Permitted Investments: (i) 21 purchase price, (ii) purchase date, (iii) type of investment, (iv) accrued interest paid, (v) interest rate (if applicable), (vi) principal amount, (vii) maturity date, (viii) interest payment date (if applicable), (ix) date of liquidation and (x) receipt upon liquidation. If any investment is retained following the date the last Security is retired, the records required to be kept by the Trustee shall include the fair value of such investment on the date the last Security is retired. Amounts shall be segregated wherever held in order to maintain the foregoing records. SECTION 4.9. Monies to be Held in Trust. All monies required to be deposited with or paid to the Trustee for the account of any Tax-Exempt Indenture Account under any provision of this Indenture and all investments made therewith, and all investments made therewith, and all monies withdrawn from any Tax-Exempt Indenture Account and held by the Trustee or any Paying Agent, shall be held by the Trustee or the Paying Agent in trust, and while so held shall be held in trust for the Holders of the Securities. SECTION 4.10. Dominion and Control. The IDB hereby transfers, assigns and sets over all of its right, title and interest in and to all amounts deposited or held in any Tax-Exempt Indenture Account and grants the Trustee (acting on behalf of the Holders of the Securities) sole dominion and control over such amounts. Neither the Mobile Energy Parties nor the IDB shall have the right to withdraw monies from any Tax-Exempt Indenture Account hereunder. ARTICLE V. COVENANTS The IDB hereby covenants and agrees that so long as this Indenture is in effect and any Securities remain Outstanding: SECTION 5.1. Payment of Principal, Premium, if any, and Interest. The IDB shall duly and punctually pay, or cause to be paid, the principal of and premium, if any, and interest on, and all other amounts payable in respect of, the Securities of each series in accordance with their terms and the terms of this Indenture and (other than in the case of the 1995 Bonds) of the related Series Supplemental Indenture, provided that the principal of and premium, if any, and interest on the Securities are payable by the IDB solely and only from the Tax-Exempt Indenture Securities Collateral. The Securities are not general obligations of the IDB but are limited obligations payable solely and only from the Tax-Exempt Indenture Securities Collateral. SECTION 5.2. Performance of Covenants by IDB. The IDB covenants and agrees that it will faithfully perform at all times any and all covenants, undertakings and provisions contained in this Indenture, in any and every Security executed, authenticated and delivered hereunder and in all of its proceedings pertaining hereto, and that it will diligently enforce the performance of any and all covenants, undertakings and provisions of the Mobile Energy Parties contained in the IDB Lease Agreement. SECTION 5.3. Rights Under IDB Lease Agreement. The IDB Lease Agreement sets forth the covenants and obligations of the IDB and the Mobile Energy Parties, including provisions to the effect that, subsequent to the issuance of the Securities and prior to the payment in full or provision for payment thereof in accordance with the provisions hereof, the IDB Lease Agreement (except as expressly provided therein) may not be effectively terminated, amended, supplemented, waived or otherwise modified without the concurring written consent of the Trustee, and reference is hereby made to the IDB Lease Agreement for a detailed statement of such covenants and obligations of the Mobile Energy Parties, and the IDB agrees that the Trustee in its name or (to the extent required by Law) in the name of the IDB, may enforce all rights of the IDB and 22 all obligations of the Mobile Energy Parties, under and pursuant to the IDB Lease Agreement for and on behalf of the Holders of Securities, whether or not the IDB is in default hereunder. The IDB shall cooperate with the Trustee in enforcing the obligations of the Mobile Energy Parties to pay or cause to be paid all amounts payable by the Mobile Energy Parties under the IDB Lease Agreement. SECTION 5.4. Arbitrage and Tax Covenants. The IDB shall not knowingly use or permit the use of any proceeds of Securities or any other funds of the IDB, directly or indirectly, to acquire any securities or obligations, and shall not knowingly use or permit the use of any revenues of the IDB from the IDB Lease Agreement in any manner, and shall not knowingly take or permit to be taken any other action or actions, that would cause any Security to be an "arbitrage bond" within the meaning of Section 148 of the Code, or that would otherwise cause interest on the Securities to become subject to Federal income tax. The IDB, at the direction of the Company, shall comply with all applicable provisions of Section 148 of the Code. The IDB shall at all times do and perform all acts reasonably requested by the Company or the Trustee and things permitted by Law and necessary or desirable in order to assure that interest paid by the IDB on the Securities shall, for the purposes of Federal income tax, be exempt from all income taxation under any valid provision of Law. SECTION 5.5. No Disposition of Tax-Exempt Indenture Securities Collateral. Except as permitted by this Indenture, the IDB Lease Agreement, the Intercreditor Agreement, the Mortgage, the Security Agreement or the Recognition Agreement relating to the 1995 Bonds, the IDB shall not sell, lease, pledge, assign or otherwise encumber or dispose of its interest in the Tax-Exempt Indenture Securities Collateral and will promptly pay or cause to be discharged (but solely from the Tax-Exempt Indenture Securities Collateral), or make adequate provision in the judgment of the Trustee to discharge, any lien or charge on any part thereof not permitted hereby. SECTION 5.6. Access to Books. All books and documents in the possession of the IDB relating to the Tax-Exempt Project, the revenues of the IDB from the IDB Lease Agreement, and the Tax-Exempt Indenture Securities Collateral shall at all reasonable times be open to inspection by such accountants or other agencies as the Trustee may from time to time designate. SECTION 5.7. Covenant to Perform Further Acts. The IDB covenants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better pledging unto the Trustee all and singular the rental payments under the IDB Lease Agreement and any other income, monies, rights and properties pledged hereby to the payment of the principal of and interest and premium, if any, on the Securities. SECTION 5.8. Enforcement of Duties and Obligations of Mobile Energy Parties. The IDB shall take all legally available action to cause the Mobile Energy Parties to fully perform all duties and acts and fully comply with the covenants of the Mobile Energy Parties imposed by the Lease Documents in the manner and at the times provided therein. So long as no Event of Default hereunder shall have occurred and be continuing, the IDB may exercise all its rights under the Lease Documents, but the IDB shall not amend any of the same so as to diminish the amounts payable thereunder or otherwise so as to adversely affect the IDB's ability to perform its covenants under this Indenture. SECTION 5.9. Further Assurances. The IDB shall not enter into any Contract or take any action by which the rights of the Trustee or the Holders may be impaired and shall, from time to time, execute and deliver such further 23 instruments and take such further action as may be required to carry out the purposes of this Indenture. SECTION 5.10. Filing and Recording. The IDB, at the expense of the Company, shall cause all documents, statements, memoranda or other instruments to be registered, filed or recorded in such manner and at such places as may be required by law fully to protect the security of the Holders and the right, title and interest of the Trustee in and to any monies or securities held hereunder or any part thereof (including any refilings, continuation statements or such other documents as may be required). SECTION 5.11. Trustee's Obligations. (a) The Trustee covenants and agrees that, as assignee of the rights of the IDB under the IDB Lease Agreement, it will not suffer, permit or take any action or do anything or fail to take any action or fail to do anything that may result in the termination of the IDB Lease Agreement prior to its stated expiration date so long as any Security is Outstanding; that it will fulfill its obligations (as assignee of the IDB) and will require the Mobile Energy Parties to perform punctually the duties and obligations of the Mobile Energy Parties under the IDB Lease Agreement and will otherwise administer the IDB Lease Agreement in accordance with its terms and assure the continued ownership, operation, management, repair and maintenance of the Tax-Exempt Project by the Company and the Company's payment of the rental payments thereunder and the costs and expenses of ownership, operation, management, repair and maintenance of the Tax-Exempt Project, all in accordance with the terms of the IDB Lease Agreement; that (as assignee of the IDB) it will not terminate the IDB Lease Agreement or cause it to be terminated except in strict accordance with the terms thereof; that it will not agree to any termination, amendment, supplement, waiver or other modification of or to the IDB Lease Agreement except by supplemental Contract duly executed by the Mobile Energy Parties and the IDB and upon the further terms and conditions set forth in Article XI of this Indenture; and that (as assignee of the IDB), except as expressly provided in the IDB Lease Agreement and herein, it will not agree to any abatement, reduction, abrogation, waiver, diminution or other modification in any manner or to any extent whatsoever of the obligation of the Mobile Energy Parties or any successor under the IDB Lease Agreement to pay the rental payments to meet its other obligations as provided in the IDB Lease Agreement. (b) The Trustee covenants and agrees that it will undertake to enforce to the extent reasonably practicable and necessary for and on behalf of the IDB the obligations of the Mobile Energy Parties to the IDB and the Trustee under the IDB Lease Agreement. (c) The IDB covenants that it will promptly notify the Trustee of any actual or alleged Event of Default, whether by the IDB or the Mobile Energy Parties, of which it is aware, and will further notify the Trustee at least thirty (30) days before the proposed date of effectiveness thereof of any proposed termination or amendment of the IDB Lease Agreement. ARTICLE VI. REDEMPTION AND PREPAYMENT OF SECURITIES SECTION 6.1. Applicability of Article. Securities of any series that are subject to redemption or prepayment before their Stated Maturity (or, if the principal of the Securities of any series is payable in installments, the Stated Maturity of the final installment of the principal thereof) shall be redeemed or prepaid in accordance with their terms and (except as otherwise specified in the Series Supplemental Indenture creating such series) in accordance with this Article VI. 24 SECTION 6.2. Election to Redeem or Prepay; Notice to Trustee. The election or requirement of the IDB to redeem or prepay any Securities otherwise than through a Sinking Fund shall be evidenced by an IDB Order. If the IDB determines (at the direction of the Company) or is required to redeem or prepay any Securities, the IDB (or the Company on behalf of the IDB) shall, at least fifteen (15) days prior to the date upon which notice of redemption or prepayment is required to be given to the Holders pursuant to Section 6.4 hereof (unless a shorter notice period shall be satisfactory to the Trustee), deliver to the Trustee an IDB Order specifying the date on which such redemption or prepayment shall occur (a "Redemption Date" or "Prepayment Date," as the case may be) and the series and principal amount of Securities to be redeemed or prepaid. In the case of any redemption or prepayment of Securities (a) prior to the expiration of any restriction on such redemption or prepayment provided in the terms of such Securities, the Series Supplemental Indenture relating thereto or elsewhere in this Indenture or (b) pursuant to an election of the IDB (at the direction of the Company) that is subject to a condition specified in the terms of such Securities or in the Series Supplemental Indenture relating thereto, the IDB (or the Company on behalf of the IDB) shall furnish the Trustee with an Officer's Certificate and Opinion of Counsel evidencing compliance with such restriction or condition. SECTION 6.3. Optional Redemption; Extraordinary Redemption; Prepayment; Selection of Securities to Be Redeemed or Prepaid. (a) The Securities of any series shall be subject to redemption from time to time at the option of the IDB (at the direction of the Company) only as provided in the terms of such Securities or in the Series Supplemental Indenture relating thereto. (b) Unless otherwise provided in the terms of such Securities or in a Series Supplemental Indenture, all Outstanding Securities shall be redeemed prior to maturity, as a whole, at a redemption price equal to the principal amount thereof, together with any interest on the principal amount of the Securities accrued to the Redemption Date, upon an Event of Loss or an Event of Eminent Domain if (i) the determination is made in accordance with Section 3.10(c) of the Intercreditor Agreement that neither the Energy Complex nor any portion thereof can be rebuilt, repaired, restored or replaced with a Replacement Facility (subject to the conditions specified in the Intercreditor Agreement) or that the Loss Proceeds with respect thereto, together with Additional Available Proceeds, are not sufficient to permit such rebuilding, repair, restoration or replacement or (ii) if (A) the monies on deposit in the Loss Proceeds Account, including all Additional Available Proceeds, are sufficient to redeem all Senior Debt, (B) all or substantially all of the Energy Complex is destroyed or otherwise rendered unfit for normal use or is the subject of a compulsory transfer or taking or transfer under threat of a compulsory transfer or taking, (C) the Company elects not to rebuild, repair, restore or replace the Energy Complex and (D) the Company provides an Officer's Certificate to the Trustee and the Collateral Agent certifying that the Company is not otherwise required under the Master Operating Agreement or the Lease to rebuild, repair, restore or replace the Energy Complex, or to apply Loss Proceeds to the rebuilding, repairing, restoration or replacement of the Energy Complex (which certification shall be confirmed by an Opinion of Counsel to such effect). All Loss Proceeds received by the Trustee from the Collateral Agent pursuant to Section 6.2(a) of the Intercreditor Agreement with respect to such Event of Loss or Event of Eminent Domain (as the case may be) shall be deposited into the Tax-Exempt Indenture Securities Redemption Subaccount and applied by the Trustee to the redemption of all Outstanding Securities pursuant to this Section 6.3(b). Any redemption pursuant to this Section 6.3(b) shall be made within ninety (90) days after the receipt by the Trustee of the Excess Loss Proceeds from the Collateral Agent. (c) The Outstanding Securities shall be partially redeemed, ratably among, and by lot within, all outstanding series and maturities, prior to maturity at a redemption price equal to the principal amount thereof, together 25 with any interest on the principal amount of the Outstanding Securities accrued to the Redemption Date, upon completion of the rebuilding, repair, restoration or replacement of the Energy Complex following an Event of Loss or an Event of Eminent Domain where a determination is made that the Energy Complex or any portion thereof can be rebuilt, repaired, restored or replaced with a Replacement Facility and that the Company has sufficient monies available for such rebuilding, repair, restoration or replacement. The foregoing provisions of this Section 6.3(c) may be altered in a Series Supplemental Indenture, but such altered provisions shall not be effective while any Securities Outstanding as of the date of such Series Supplemental Indenture remain outstanding. The aggregate amount of Securities to be redeemed shall be equal to the Tax-Exempt Indenture Distribution Amount transferred to the Trustee for such purpose pursuant to Section 6.2(b)(iii) of the Intercreditor Agreement. All Excess Loss Proceeds so transferred to the Trustee shall be deposited into the Tax-Exempt Indenture Securities Redemption Subaccount and applied by the Trustee to the redemption of such Securities pursuant to this Section 6.3(c); provided, however, that, to the extent that any of such Excess Loss Proceeds is transferred to the Trustee pursuant to clause (B) of the last sentence of Section 6.2(b) of the Intercreditor Agreement, the Trustee shall deposit such Excess Loss Proceeds into the Tax-Exempt Indenture Securities Principal Subaccount to be applied to the payment or redemption of Securities at the earliest date permitted by the terms thereof. Any redemption pursuant to this Section 6.3(c) shall be made within ninety (90) days after the receipt by the Trustee of such Excess Loss Proceeds (other than any such Excess Loss Proceeds transferred to the Indenture Securities Principal Subaccount). (d) Except as otherwise specified herein, in the terms of the Securities of any series or in the Series Supplemental Indenture relating to such Securities, if less than all the Securities of such series are to be redeemed or prepaid pursuant to Section 6.3(a), the particular Securities of such series to be redeemed or prepaid shall be selected by the Trustee from the Outstanding Securities of such series not previously called for redemption or prepayment in whole, by such method (including by lot) as the Trustee shall deem fair and appropriate. (e) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption or prepayment and, in the case of any Securities to be redeemed or prepaid in part, the principal amount thereof to be redeemed or prepaid. (f) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption or prepayment of Securities shall relate, in the case of any Securities redeemed or prepaid or to be redeemed or prepaid only in part, to the portion of the principal amount of such Securities that has been or is to be redeemed or prepaid. SECTION 6.4. Notice of Redemption or Prepayment. Except as otherwise specified in the Series Supplemental Indenture relating to the Securities of a series, or in the terms of the Securities of any series, to be redeemed or prepaid, notice of redemption or prepayment (including any Sinking Fund redemption pursuant to Article VII hereof) shall be given in the manner provided in Section 1.6 to the Holders of Securities of such series to be redeemed or prepaid at least thirty (30) days but not more than sixty (60) days prior to the Redemption Date or Prepayment Date (as the case may be). All notices of redemption or prepayment shall state: (a) the Redemption Date or Prepayment Date (as the case may be); (b) the premium payable on redemption or prepayment, if any; 26 (c) if less than all the Outstanding Securities of any series are to be redeemed or prepaid in whole, (i) the particular Securities of such series to be redeemed or prepaid in whole, (ii) the portion of the principal amount of each Security of such series to be redeemed or prepaid in part and (iii) that, on and after the Redemption Date or Prepayment Date (as the case may be), upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the remaining unpaid principal amount thereof will be issued; (d) that on the Redemption Date or Prepayment Date (as the case may be), interest on the Securities of such series to be redeemed or prepaid will cease to accrue on and after such date; (e) the Place or Places of Payment where such Securities are to be surrendered for payment of the amount in respect of such redemption or prepayment; and (f) that such redemption is for a Sinking Fund, if such is the case. In addition to the notice described above, each notice of redemption shall be sent two (2) Business Days prior to such notice by telecopy or telefax to the registered securities depository holding any global securities if the Securities are in book-entry form, and each of the registered securities depositaries then in the business of holding substantial amounts of obligations similar to the Securities (such depositaries as of the date hereof consisting of The Depository Trust Company, New York, New York, Midwest Securities Trust Company, Chicago, Illinois and Philadelphia Depository Trust Company, Philadelphia, Pennsylvania) and to two (2) or more national information services that disseminate notices of redemption of obligations such as the Securities (such as Financial Information, Inc.'s Financial Daily Called Bond Service, Kenny Information Service's Called Bond Service, Bloomberg Financial Markets Commodities News, Moody's Municipal and Government Called Bond Record and Standard & Poor's Called Bond Service). Notice of redemption of Securities to be redeemed at the election of the IDB shall be given by the Trustee in the name of the IDB and at the expense of the Company. The Company shall provide the Trustee with a copy of the form of notice of redemption or prepayment of the Securities at the time the Company directs the IDB with respect to such redemption or prepayment pursuant to Section 6.2 hereof. SECTION 6.5. Securities Payable on Redemption Date or Prepayment Date. Notice of redemption or prepayment (as the case may be) having been given as aforesaid, and the conditions, if any, set forth in such notice having been satisfied, the Securities or portions thereof so to be redeemed or prepaid shall, on the Redemption Date or Prepayment Date (as the case may be), become due and payable, and from and after such date such Securities or portions thereof shall cease to bear interest. Upon surrender of any such Security for redemption or prepayment in accordance with such notice, an amount in respect of such Security or portion thereof shall be paid as provided therein; provided, however, that any payment of interest on any Security the Stated Maturity of which payment is on or prior to the Redemption Date or Prepayment Date (as the case may be) shall be payable to the Holder of such Security, or one (1) or more Predecessor Securities, registered as such at the close of business on the related Regular Record Date according to the terms of such Security and subject to the provisions of Section 2.10. If any Security called for redemption or prepayment shall not be so paid upon surrender thereof for redemption or repayment (as the case may be), the principal of and premium, if any, and interest on such Security shall, until paid, bear interest from the Redemption Date or the Prepayment Date (as the case may be) at the rate prescribed in the Security. 27 SECTION 6.6. Securities Redeemed or Prepaid in Part. Any Security that is to be redeemed or prepaid only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Mobile Energy Parties shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities of the same series, of any authorized denomination requested by such Holder and of like tenor and in aggregate principal amount equal to and in exchange for the remaining unpaid principal amount of the Security so surrendered. SECTION 6.7. Determination of Taxability. In the case of the 1995 Bonds and any other Securities (excluding any Securities in respect of which no opinion of Bond Counsel was delivered at the time of original issuance to the effect that interest thereon is exempt from Federal income taxation), if the Trustee receives written notice from any Holder or beneficial holder of a Security to the effect that (i) such Holder or beneficial holder of a Security has been notified in writing by the Internal Revenue Service that it proposes to include the interest on any such Security in the gross income of such Holder or beneficial holder, which the Trustee determines may lead to a Determination of Taxability (for any of the reasons described in the definition thereof, or because of institution of proceedings against such Holder or beneficial holder or otherwise) and (ii) such Holder or beneficial holder will afford the Trustee the opportunity to contest the same in accordance with the procedures set forth in the definition of Determination of Taxability, either directly or in the name of such Holder or beneficial holder, and until a conclusion of any appellate review, if sought, and the Trustee has received a copy of the notice described in clause (i), then the Trustee shall promptly give notice thereof to the Mobile Energy Parties, the IDB, the Collateral Agent and the Indenture Trustee and to each Holder and each beneficial holder of Securities. The Trustee shall thereafter coordinate any similar requests or notices it may receive or may have received from other Holder or beneficial holders of Securities and shall monitor the progress of any administrative proceedings or litigation with respect thereto. ARTICLE VII. SINKING FUNDS SECTION 7.1. Applicability of Article. The provisions of this Article VII shall be applicable to any sinking fund for the retirement of the Securities of any series except as otherwise specified in the Series Supplemental Indenture creating the Securities of such series or in the terms of the Securities of any series. SECTION 7.2. Sinking Funds for Securities. Any Series Supplemental Indenture may provide for a sinking fund for the retirement of the Securities of the series created thereby (hereinafter called a "Sinking Fund") in accordance with which the IDB will be required to redeem on the dates set forth therein (hereinafter called "Sinking Fund Redemption Dates") Securities of principal amounts set forth therein (hereinafter called "Sinking Fund Requirements"). Except as otherwise specified in the Series Supplemental Indenture relating to the Securities of a series (except the 1995 Bonds, in which case in Section 2.17), the particular Securities of such series, if any, to be redeemed through a Sinking Fund shall be selected in the manner provided in Section 6.3(d), and notice of such redemption shall be given in the manner provided in Section 6.4. 28 ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES SECTION 8.1. Events of Default. The term "Event of Default," whenever used herein, shall mean any of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or come about or be affected by operation of law, or be pursuant to or in compliance with any applicable Law), and such event shall continue to be an Event of Default if and for so long as it shall not have been remedied: (a) the IDB shall fail to pay any principal of or premium, if any, or interest on any Security when the same becomes due and payable, whether by scheduled maturity or required prepayment or by acceleration or otherwise, for fifteen (15) or more days; or (b) an "Event of Default" under the IDB Lease Agreement shall have occurred and be continuing; or (c) the IDB shall fail to perform or observe any material covenant or agreement to be performed or observed by it under the provisions of this Indenture (other than those referred to in Section 8.1(a)) and such failure shall continue uncured for thirty (30) or more days after the IDB and the Company have been given notice in writing of such failure; provided, however, that if (and for so long as a representative of the IDB certifies (or, in lieu thereof, an Authorized Officer of the Company provides an Officer's Certificate certifying) that) (i) such failure is capable of being remedied and the IDB or the Company is diligently attempting to remedy such failure and (ii) no other Event of Default has occurred and is continuing, then the IDB or the Company, as applicable, may continue to effect such cure of the default for an additional one hundred eighty (180) days. SECTION 8.2. Enforcement of Remedies. (a) If one (1) or more Events of Default shall have occurred and be continuing, then: (i) in the case of an Event of Default described in Section 8.1(b) that arises from an "Event of Default" under the IDB Lease Agreement described in Section 7.1(n) thereof (an "Automatic Acceleration Default"), the entire principal amounts of the Securities Outstanding, all interest accrued and unpaid thereon, and all premium and other amounts payable under the Securities and this Indenture, if any, shall automatically become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived; or (ii) (A) in the case of an Event of Default described in Section 8.1(a), upon the direction of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Outstanding Securities or (B) in the case of an Event of Default described in Section 8.1(b) that arises from an "Event of Default" under the IDB Lease Agreement described in Sections 7.1(b) through (m), (o) or (p) thereof, upon the direction of the Holders of not less than thirty-three and one-third percent (331/3%) in aggregate principal amount of the Outstanding Securities, the Trustee shall, by notice to the IDB (with a copy to each of the Mobile Energy Parties), declare the entire principal amounts of the Securities Outstanding, all interest accrued and unpaid thereon, and all premium and other amounts payable under the Securities and this Indenture, if any, to be due and payable, whereupon the same shall become due and payable without presentment, demand, protest or further notice of any kind, all of which are to the extent permitted by law hereby waived. 29 (b) If an Event of Default occurs and is continuing and is known to a Responsible Officer of the Trustee, the Trustee shall mail to each Holder a notice of such Event of Default within thirty (30) days after the occurrence thereof. Except in the case of an Event of Default in payment of principal of or premium, if any, or interest on any Security, the Trustee may withhold the notice to the Holders if and for so long as a committee of its Responsible Officers in good faith determines that withholding such notice is in the interest of the Holders. In addition, if the Event of Default described in Section 8.1(a) shall have occurred and be continuing, the Trustee may accelerate the maturity of the Securities as provided in Section 8.2(a)(ii) notwithstanding the absence of direction from the Holders if in the judgment of the Trustee such action is necessary to protect the interests of the Holders. (c) At any time after the principal of the Securities shall have become due and payable upon an acceleration as provided herein, and before any judgment or decree for the payment of the money so due, or any portion thereof, shall be entered, such declaration and its consequences shall be deemed to be rescinded and annulled if: (i) there shall have been paid to or deposited with the Trustee a sum sufficient to pay (A) all overdue installments of interest on the Securities, (B) the principal of and premium, if any, on any Securities that have become due otherwise than by such declaration of acceleration and interest thereon at the respective rates provided in the Securities for late payments of principal or premium, (C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the respective rates provided in the Securities for late payments of interest, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, the IDB and their agents and counsel; and (ii) all Events of Default, other than the non-payment of the principal of the Securities that has become due solely by such acceleration, have been cured or waived as provided in Section 8.7. No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon. SECTION 8.3. Specific Remedies. If any Event of Default shall have occurred and be continuing and an acceleration shall have occurred pursuant to Section 8.2, subject to the provisions of Sections 8.2, 8.5, 8.6 and 8.15, the Trustee, by such officer or agent as it may appoint, may deliver notice to the Collateral Agent in accordance with the Intercreditor Agreement requesting that the Collateral Agent sell, without recourse, for cash, or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Collateral Agent in its discretion may determine, the Shared Collateral as an entirety, or in such portions as the Holders of a majority in aggregate principal amount of the Securities then Outstanding shall request by an Act of Holders, or, in the absence of such request, as the Trustee in its discretion shall deem expedient in the interest of the Holders, at public or private sale. SECTION 8.4. Judicial Proceedings Instituted by Trustee. (a) Trustee May Bring Suit. If there shall exist an Event of Default, then the Trustee, in its own name, and as trustee of an express trust, subject to the provisions of Sections 2.14 and 8.2, shall be entitled and empowered to institute any suits, 30 actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on the Securities, and may prosecute any such claim or proceeding to judgment or final decree, and may enforce any such judgment or final decree and collect the monies adjudged or decreed to be payable in any manner provided by law, whether before or after or during the pendency of any proceedings for the enforcement of the Lien of this Indenture, or of any of the Trustee's rights or the rights of the Holders under this Indenture, and such power of the Trustee shall not be affected by any sale hereunder or by the exercise of any other right, power or remedy for the enforcement of the provisions of this Indenture or for the foreclosure of the Lien hereof. (b) Trustee May Recover Unpaid Indebtedness after Sale of Collateral. Subject to Section 2.14, in the case of a sale of the Tax-Exempt Indenture Securities Collateral and of the application of the proceeds of such sale to the payment of the indebtedness secured by this Indenture, the Trustee, in its own name, and as trustee of an express trust, shall be entitled and empowered, by any appropriate means, legal, equitable or otherwise, to enforce payment of, and to receive all amounts then remaining due and unpaid upon, all or any of the Securities, for the benefit of the Holders thereof, and upon any other portion of such indebtedness remaining unpaid, with interest at the rates specified in the respective Securities on the overdue principal of and premium, if any, and (to the extent that payment of such interest is legally enforceable) on the overdue installments of interest. (c) Recovery of Judgment Does Not Affect Lien of Indenture or Other Rights. No recovery of any such judgment or final decree by the Trustee and no levy of any execution under any such judgment upon any of the Tax-Exempt Indenture Securities Collateral, or upon any other property, shall in any manner or to any extent affect the Lien of this Indenture upon any of the Tax-Exempt Indenture Securities Collateral, or any rights, powers or remedies of the Trustee, or any liens, rights, powers or remedies of the Holders, but all such liens, rights, powers or remedies shall continue unimpaired as before. (d) Trustee May File Proofs of Claim; Appointment of Trustee as Attorney-in-Fact in Judicial Proceedings. The Trustee in its own name, or as trustee of an express trust, or as attorney-in-fact for the Holders, or in any one (1) or more of such capacities (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand for the payment of overdue principal, premium, if any, or interest), shall be entitled and empowered to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Holders (whether such claims be based upon the provisions of the Securities or of this Indenture) allowed in any equity, receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization or any other judicial proceedings relating to the IDB, either of the Mobile Energy Parties or any obligor on the Securities, the creditors of the IDB, or any such obligor, the Tax-Exempt Indenture Securities Collateral or any other property of the IDB, either of the Mobile Energy Parties or any such obligor and any receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. The Trustee is hereby irrevocably appointed (and the successive respective Holders of the Securities, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) the true and lawful attorney-in-fact of the respective Holders, with authority to (i) make and file in the respective names of the Holders (subject to deduction from any such claims of the amounts of any claims filed by any of the Holders themselves) any claim, proof of claim or amendment thereof, debt, proof of debt or amendment thereof, petition or other document in any such proceedings and to 31 receive payment of any amounts distributable on account thereof, (ii) execute any such other papers and documents and to do and perform any and all such acts and things for and on behalf of such Holders, as may be necessary or advisable in order to have the respective claims of the Trustee and of the Holders against the IDB, either of the Mobile Energy Parties or any such obligor, the Tax-Exempt Indenture Securities Collateral or any other property of the IDB, the Mobile Energy Parties or any such obligor allowed in any such proceeding and (iii) receive payment of or on account of such claims and debt; provided, however, that nothing contained in this Indenture shall be deemed to give to the Trustee any right to accept or consent to any plan of reorganization or otherwise by action of any character in any such proceeding to waive or change in any way any right of any Holder. Any monies collected by the Trustee under this Section 8.4 shall be applied as provided in Section 8.11. (e) Trustee Need Not have Possession of Securities. All proofs of claim, rights of action and rights to assert claims under this Indenture or under any of the Securities may be enforced by the Trustee without the possession of the Securities or the production thereof at any trial or other proceedings instituted by the Trustee. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Securities and it shall not be necessary to make any such Holders parties to such proceedings. (f) Suit to Be Brought for Ratable Benefit of Holders. Any suit, action or other proceeding at law, in equity or otherwise that shall be instituted by the Trustee under any of the provisions of this Indenture shall be for the equal, ratable and common benefit of all the Holders, subject to the provisions of this Indenture. (g) Trustee May Be Restored to Former Position and Rights in Certain Circumstances. In case the Trustee shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee, then and in every such case the IDB, the Mobile Energy Parties and the Trustee shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of the Trustee shall continue as if no such proceedings had been taken. SECTION 8.5. Holders May Demand Enforcement of Rights by Trustee. If an Event of Default shall have occurred and shall be continuing, the Trustee shall, upon the written request of the Holders of a majority in aggregate principal amount of the Securities then Outstanding and upon the offering of indemnity as provided in Section 9.3(e), but subject in all cases to the provisions of Section 8.3, proceed to institute one (1) or more suits, actions or proceedings at law, in equity or otherwise, or take any other appropriate remedy, to enforce payment of the principal of or premium, if any, or interest on the Securities, to foreclose the Lien of this Indenture or to deliver notice to the Collateral Agent in accordance with the Intercreditor Agreement requesting that the Collateral Agent foreclose the Lien of the other Security Documents or to sell the Shared Collateral under a judgment or decree of a court or courts of competent jurisdiction or under the power of sale herein granted, or take such other appropriate legal, equitable or other remedy, as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights or powers of the Trustee or the Holders, or, in case such Holders shall have requested a specific method of enforcement permitted hereunder, in the manner requested, provided that such action shall not be otherwise than in accordance with Law and the provisions of this Indenture, and the Trustee, subject to such indemnity provisions, shall have the right to decline to follow any such request if the Trustee in good faith shall determine that the suit, proceeding or exercise of the remedy so requested would involve the Trustee in personal liability or expense. 32 SECTION 8.6. Control by Holders. Subject to the Intercreditor Agreement, the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any Law or with this Indenture and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. SECTION 8.7. Waiver of Past Events of Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may on behalf of the Holders of all Securities waive any past Event of Default and its consequences, except that only the Holders of all Securities affected thereby may waive an Event of Default (a) in the payment of the principal of or premium, if any, or interest on, or other amounts due under, any Security then Outstanding or (b) in respect of a covenant or provision hereof that under Article XI cannot be modified or amended without the consent of the Holder of each Security Outstanding affected. Upon any such waiver such Event of Default shall cease to exist and shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. SECTION 8.8. Holder May Not Bring Suit Except Under Certain Conditions. A Holder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise for the foreclosure of the Lien of this Indenture, for the appointment of a receiver or for the enforcement of any other remedy under or upon this Indenture, unless: (a) such Holder previously shall have given written notice to the Trustee of a continuing Event of Default; (b) the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Outstanding Securities shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 9.3(e); (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for sixty (60) days after receipt of such notice, request and offer of indemnity; and (d) no direction inconsistent with such written request has been given to the Trustee during such sixty (60)-day period by the Holders of a majority in principal amount of Outstanding Securities. It is understood and intended that no one (1) or more of the Holders shall have any right in any manner whatever hereunder or under the Securities to (i) surrender, impair, waive, affect, disturb or prejudice the Lien of the Security Documents or the Lease Documents on any property subject thereto or the rights of the Holders of any other Securities, (ii) obtain or seek to obtain priority or preference over any other such Holder or (iii) enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all the Holders subject to the provisions of this Indenture. SECTION 8.9. Undertaking to Pay Court Costs. All parties to this Indenture, and each Holder by such Holder's acceptance of a Security, shall be deemed to have agreed that any court may in its discretion require, in any suit, action or proceeding for the enforcement of any right or remedy under this Indenture, or in any suit, action or proceeding against the Trustee for any action taken or omitted by it as Trustee hereunder, the filing by any party litigant in such suit, action or proceeding of an undertaking to pay the costs of such suit, action or proceeding, and that such court may, in its discretion, assess reasonable costs, including reasonable attorneys' fees, against any party 33 litigant in such suit, action or proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 8.9 regarding such agreement by the parties to this Indenture and each Holder shall not apply to (a) any suit, action or proceeding instituted by the Trustee, (b) any suit, action or proceeding instituted by any Holder or group of Holders holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities or (c) any suit, action or proceeding instituted by any Holder for the enforcement of the payment of the principal of or premium, if any, or interest on any of the Securities, on or after the respective due dates expressed therein. SECTION 8.10. Right of Holders to Receive Payment Not to Be Impaired. Anything in this Indenture or in the Intercreditor Agreement to the contrary notwithstanding, the right of any Holder to receive payment of the principal of and premium, if any, and interest on such Security, on or after the respective due dates expressed in such Security (or, in case of redemption, on the Redemption Date fixed for such Security), or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 8.11. Application of Monies Collected by Trustee. Any monies collected or to be applied by the Trustee pursuant to this Article VIII in respect of the Securities of a series, together with any other monies that may then be held by the Trustee under any of the provisions of this Indenture as security for the Securities of such series (other than as set forth in the Intercreditor Agreement and other than monies at the time required to be held for the payment of specific Securities of such series at their Stated Maturities or at a time fixed for the redemption thereof) shall be applied in the following order from time to time, on the date or dates fixed by the Trustee and, in the case of a distribution of such monies on account of principal, premium, if any, or interest, upon presentation of the Outstanding Securities of such series, and stamping thereon of payment, if only partially paid, and upon surrender thereof, if fully paid: FIRST: to the payment of any amount required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of Securities; SECOND: to the payment of all taxes, assessments or liens prior to the Lien of the Security Documents, except those subject to which any sale shall have been made, all reasonable costs and expenses of collection, including the reasonable costs and expenses of handling the Tax-Exempt Indenture Securities Collateral (other than the Shared Collateral) and of any sale thereof pursuant to the provisions of the Security Documents, and to the payment of all amounts due the Trustee or any predecessor Trustee under Section 9.7 and to the payment of all amounts due the IDB under Article VI of the IDB Lease Agreement; THIRD: in case the unpaid principal amount of the Outstanding Securities of such series or any of them shall not have become due, to the payment of any interest in default, in the order of the maturity of the payments thereof, with interest at the rates specified in the respective Securities of such series in respect of overdue payments (to the extent that payment of such interest shall be legally enforceable) on the payments of interest then overdue; FOURTH: in case the unpaid principal amount of any of but not all the Outstanding Securities of such series shall have become due, first to the payment of accrued interest on all Outstanding Securities of such series in the order of the maturity of the payments thereof, with interest at the respective rates specified in the Securities of such series for overdue payments of principal, premium, if any, and (to the extent that 34 payment of such interest shall be legally enforceable) interest then overdue, and next to the payment of the unpaid principal amount of all Securities then due; FIFTH: in case the unpaid principal amount of all the Outstanding Securities of such series shall have become due, to the payment of the whole amount then due and unpaid upon the Outstanding Securities of such series for principal, premium, if any, and interest, together with interest at the respective rates specified in the Securities of such series for overdue payments on principal, premium, if any, and (to the extent that payment of such interest shall be legally enforceable) interest then overdue; and SIXTH: in case the unpaid principal amount of all the Outstanding Securities of such series shall have become due, and all of the Outstanding Securities of such series shall have been fully paid, any surplus then remaining shall be paid to the Collateral Agent (to be applied pursuant to the terms and conditions of the Intercreditor Agreement), or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct; provided, however, that all payments in respect of the Securities of a series to be made pursuant to clauses "THIRD" through "FIFTH" of this Section 8.11 shall be made ratably to the Holders of Securities of such series entitled thereto, without discrimination or preference, based upon the ratio of the unpaid principal amount of the Securities of such series in respect of which such payments are to be made held by each such Holder to the unpaid principal amount of all Securities of such series. SECTION 8.12. Securities Held by Certain Persons Not to Share in Distribution. Any Securities known to a Responsible Officer of the Trustee to be owned or held by, or for the account or benefit of, the IDB or either of the Mobile Energy Parties or an Affiliate thereof, shall not be entitled to share in any payment or distribution provided for in this Article VIII until all Securities held by other Persons have been indefeasibly paid in full. SECTION 8.13. Waiver of Appraisement, Valuation, Stay, Right to Marshaling. To the full extent it may lawfully do so, the IDB and each of the Mobile Energy Parties, for itself and for any other Person who may claim through or under it, hereby: (a) agrees that neither it nor any such Person will set up, plead, claim or in any manner whatsoever take advantage of any appraisal, valuation, stay, extension or redemption Laws, now or hereafter in force in any jurisdiction that may delay, prevent or otherwise hinder (i) the performance or enforcement or foreclosure of this Indenture and the other Security Documents, (ii) the sale of any of the Tax-Exempt Indenture Securities Collateral or (iii) the putting of the purchaser or purchasers thereof into possession of such Tax-Exempt Indenture Securities Collateral immediately after the sale thereof; (b) waives all benefit or advantage of any such Laws; (c) consents and agrees that the Collateral may be sold by the Collateral Agent as an entirety or in parts; and (d) waives and releases all rights to have the Tax-Exempt Indenture Securities Collateral marshaled upon any foreclosure, sale or other enforcement of this Indenture. 35 SECTION 8.14. Remedies Cumulative; Delay or Omission Not a Waiver. To the extent permitted by law, each and every right, power and remedy herein specifically given to the Trustee shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Trustee and the exercise or the beginning of the exercise of any right, power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy, and no delay or omission by the Trustee in the exercise of any right, power or remedy or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the IDB or either of the Mobile Energy Parties or to be an acquiescence therein. SECTION 8.15. Intercreditor Agreement. Simultaneously with the execution and delivery of this Indenture, the Trustee (on behalf of itself and all Holders of any of the Outstanding Securities and all future Holders of Securities) and the IDB shall enter into the Intercreditor Agreement. Notwithstanding any other provision of this Indenture to the contrary, all rights, powers and remedies available to the Holders of any of the Outstanding Securities, and all future Holders of any of the Securities or the Trustee, with respect to the Shared Collateral, or otherwise pursuant to the Security Documents and the Lease Documents, shall be subject to the Intercreditor Agreement, including, in all cases, the ability to enforce any remedy other than remedies specified in Section 8.2 and Section 8.10 of this Indenture. To the extent that the Collateral Agent has been authorized to exercise any such rights, powers and remedies under the Intercreditor Agreement, any right given to the Trustee hereunder to exercise any remedy with respect to the Shared Collateral shall, during such time as the Intercreditor Agreement is in effect, be a right of the Trustee to direct the Collateral Agent to take such action to the extent set forth in the Intercreditor Agreement. ARTICLE IX. THE TRUSTEE SECTION 9.1. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. 36 (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this Section 9.1(c) shall not be construed to limit the effect of Section 9.1(a); (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 9.1. SECTION 9.2. Notice of Events of Defaults. In addition to its obligation to give notice to Holders as provided in Section 1.6, as promptly as practicable after, and in any event within thirty (30) days after, the occurrence of any Event of Default hereunder, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such Event of Default hereunder known to the Trustee, unless such Event of Default shall have been cured or waived; provided, however, that, except in the case of an Event of Default in the payment of the principal of or premium, if any, or interest on any Security, or in the payment of any Sinking Fund Requirement, the Trustee shall be protected in withholding such notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interest of the Holders. SECTION 9.3. Certain Rights of Trustee. Except as otherwise provided in Section 9.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the purported proper party or parties; (b) any request or direction of either of the Mobile Energy Parties or the IDB mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or a Mobile Energy Request or Mobile Energy Order or an IDB Request or IDB Order (as the case may be), and any resolution of the Board of Directors of either of the Mobile Energy Parties or the IDB may be sufficiently evidenced by a Board Resolution of such Mobile Energy Party or the IDB (as the case may be); 37 (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of either of the Mobile Energy Parties or of the IDB; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of either of the Mobile Energy Parties or the IDB personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be charged with knowledge of any Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of such Event of Default or (ii) written notice of such Event of Default shall have been given to the Trustee by either of the Mobile Energy Parties, by the IDB or by any Holder. SECTION 9.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, the Tax- Exempt Indenture Securities Collateral or the Securities, except that the Trustee hereby represents and warrants that this Indenture has been executed and delivered by one (1) of its officers who is duly authorized to execute and deliver such document on its behalf. The Trustee shall not be accountable for the use or application by either of the Mobile Energy Parties or the IDB of the Securities or the proceeds thereof. SECTION 9.5. May Hold Securities. The Trustee, any Paying Agent, Security Registrar or Authenticating Agent, or any Affiliate thereof, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Section 9.12, may otherwise deal with the Mobile Energy Parties and the IDB with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent. SECTION 9.6. Funds May Be Held by Trustee or Paying Agent. Any monies received by the Trustee or any Paying Agent shall, until used or applied as 38 herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. Neither the Trustee nor the Paying Agent shall have any liability for interest upon any such monies. Amounts so received, at the written request and direction of the Company, shall be invested by the Trustee in Permitted Investments. Such investments shall mature in such amounts and not later than such times as may be necessary to provide monies when needed to make payments from such monies as provided in the Indenture. SECTION 9.7. Compensation, Reimbursement and Indemnification. Each of the Mobile Energy Parties agrees: (a) to pay, or cause to be paid, to each of the Trustee and any Authorized Agent from time to time reasonable compensation for all services rendered by it hereunder; (b) to reimburse, or cause to be reimbursed, each of the Trustee and any Authorized Agent upon its request for all expenses, disbursements and advances incurred or made by it in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable of its own negligence, willful misconduct or bad faith; and (c) to indemnify, or cause to be indemnified, each of the Trustee, any predecessor Trustee and any Authorized Agent for, and to hold it harmless against, any loss, liability or expense incurred without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. As security for the performance of the obligations of the Mobile Energy Parties and the IDB under this Section 9.7, the Trustee shall have a Lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust under Section 12.3. SECTION 9.8. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder that shall be a bank or trust company, organized and doing business under the laws of the United States of America or of any State thereof, authorized under such laws to exercise corporate trust powers, having (or whose obligations are unconditionally guaranteed by a corporation having) a combined capital and surplus of at least $500,000,000, which bank or trust company is subject to supervision or examination by Federal or state authority and does not provide credit or credit enhancement to either of the Mobile Energy Parties. If such bank or trust company publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.8, the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.8, it shall resign immediately in the manner and with the effect hereinafter specified in this Article IX. SECTION 9.9. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article IX shall become effective until the acceptance of appointment by the successor Trustee as provided in Section 9.10. (b) The Trustee may resign at any time by giving written notice thereof to the IDB, the Mobile Energy Parties and to the Holders of Securities in the 39 manner provided in Section 1.6. If an instrument of acceptance by a successor Trustee shall not have been delivered to the IDB, the Mobile Energy Parties and the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Holder who has been a bona fide holder of a Security for at least six (6) months may, subject to Section 8.9, on behalf of such Holder and all others similarly situated, petition any such court for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Securities, delivered to the Trustee, the IDB and the Mobile Energy Parties. (d) If at any time: (i) the Trustee shall cease to be eligible under Section 9.8 and shall fail to resign after written request therefor by any such Holder or the Company, or (ii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the IDB may remove the Trustee by Board Resolution or (B) subject to Section 8.9, any Holder who has been a bona fide holder of a Security for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the IDB shall promptly appoint by Board Resolution a successor Trustee, which shall be reasonably acceptable to the Company. If no successor Trustee shall have been so appointed by the IDB, or by the Holders, and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide holder of a Security for at least six (6) months may, subject to Section 8.9, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The IDB or the Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the IDB and the Company fail to give such notice within ten (10) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. SECTION 9.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the IDB, the retiring Trustee and each of the Mobile Energy Parties an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee but, on request of the IDB or of the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument prepared by either of the Mobile Energy Parties transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor 40 Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its Lien, if any, provided for in Section 9.7. Upon request of any such successor Trustee, the IDB and the Mobile Energy Parties shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article IX. SECTION 9.11. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such successor Trustee shall be otherwise qualified and eligible under this Article IX, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 9.12. Preferential Collection of Claims Against any Obligor. (a) Subject to Section 9.12(b), if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of any obligor (as defined in Section 9.12(c)) on the Securities within three (3) months prior to a default (as defined in Section 9.12(c)) or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually and the Holders of the Securities: (i) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three (3) month period and valid as against any obligor on the Securities and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (ii) of this Section 9.12(a), or from the exercise of any right of set-off that the Trustee could have exercised if a petition in bankruptcy had been filed by or against any such obligor upon the date of such default; and (ii) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three (3) month period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of any obligor on the Securities and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: (A) to retain for its own account (1) payments made on account of any such claim by any Person (other than an obligor on the Securities) who is liable thereon, (2) the proceeds of the bona fide sale of any such claim by the Trustee to a third person and (3) distributions made in cash, securities or other property in respect of claims filed against such obligor in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law; 41 (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three (3) month period; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three (3) month period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default (as defined in Section 9.12(c)) would occur within three (3) months; or (D) to receive payment on any claim referred to in paragraph (B) or (C) above, against the release of any property held as security for such claim as provided in paragraph (B) or (C) above (as the case may be), to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D) of the immediately preceding paragraph, property substituted after the beginning of such three (3) month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such clauses is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee and the Holders in such manner that the Trustee and the Holders realize, as a result of payments from such special account and payments of dividends on claims filed against the obligor on the Securities in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from such obligor of the funds and property in such special account and before crediting to the respective claims of the Trustee and the Holders dividends on claims filed against such obligor in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, whether such distribution is made in cash, securities or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceedings for reorganization is pending shall have jurisdiction (1) to apportion between the Trustee and the Holders in accordance with the provisions of this paragraph, the funds and property held in such special account and proceeds thereof, or (2) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee and the Holders with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. 42 Any Trustee that has resigned or been removed after the beginning of such three (3) month period shall be subject to the provisions of this subsection as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three (3) month period, it shall be subject to the provisions of this Section 9(a) if and only if the following conditions exist: (x) the receipt of property or reduction of claim, which would have given rise to the obligation to account if such Trustee had continued as Trustee, occurred after the beginning of such three (3) month period; and (y) such receipt of property or reduction of claim occurred within three (3) months after such resignation or removal. (b) There shall be excluded from the operation of Section 9.12(a) a creditor relationship arising from: (i) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one (1) year or more at the time of acquisition by the Trustee; (ii) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving the property that shall at any time be subject to the Lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advances and of the circumstances surrounding the making thereof is given to the Holders at the time and in the manner provided in this Indenture; (iii) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; (iv) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction (as defined in Section 9.12(c)); (v) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act that is directly or indirectly a creditor of an obligor upon the securities; or (vi) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations that fall within the classification of self-liquidating paper (as defined in Section 9.12(c)). (c) For the purposes of this Section 9.12 only: (i) The term "default" means any failure to make payment in full of the principal of or interest on any of the Securities when and as such principal or interest becomes due and payable; (ii) The term "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven (7) days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and (iii) The term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation that is made, drawn, negotiated or incurred by any obligor on the Securities for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and that is secured by documents evidencing title to, possession of or a lien upon, the goods, wares or merchandise or the 43 receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with such obligor arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. SECTION 9.13. Maintenance of Offices and Agencies. (a) There shall at all times be maintained an office or agency where Securities may be presented or surrendered for registration of transfer or exchange and for payment of principal, premium, if any, and interest, and where notices and demands to or upon the Trustee in respect of the Securities or this Indenture may be served (i) in the borough of Manhattan, the City of New York, if, and for so long as, any Outstanding Securities are not issued in the form of one or more global Securities registered in the name of a clearing corporation or clearing agency registered under the Exchange Act, as depositary for such Securities, or a nominee of such clearing corporation or clearing agency and (ii) in such Place of Payment (which may be the office or agency maintained pursuant to Section 9.13(a)(i), if any), and such additional Places of Payment, if any, as shall be specified for the Securities of any series in the related Series Supplemental Indenture or in the terms of such Securities. Except as otherwise provided in the related Series Supplemental Indenture or in the terms of the Securities of any series, such office or agency shall be initially at the office of the Trustee specified in the first paragraph of this Indenture. Written notice of the location of each of such other office or agency and of any change of location thereof shall be given by the IDB to the Trustee and by the Trustee to the Holders in the manner specified in Section 1.6. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations, surrenders and demands may be made and notices may be served at the Corporate Trust Office. (b) There shall at all times be a Security Registrar and a Paying Agent (which may be the Trustee) appointed by the IDB hereunder (which shall be reasonably acceptable to the Company). In addition, at any time when any Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to the Securities of one (1) or more series that shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issuance, exchange, registration of transfer or partial redemption thereof or pursuant to Section 2.7 or 2.9, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder (it being understood that wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent). If an appointment of an Authenticating Agent with respect to the Securities of one (1) or more series shall be made pursuant to this Section 9.13(b), the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: 44 This Security is one of the Securities referred to in the within-mentioned Indenture. FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By________________________________________ Authenticating Agent By________________________________________ Authorized Signatory Any Authorized Agent shall be a bank or trust company, shall be a Person organized and doing business under the laws of the United States or any state thereof, having a combined capital and surplus of at least $500,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by Federal or state authorities. If such Authorized Agent publishes reports of its condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.13, the combined capital and surplus of such Authorized Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authorized Agent shall cease to be eligible in accordance with the provisions of this Section 9.13, such Authorized Agent shall resign immediately in the manner and with the effect specified in this Section 9.13. The Trustee at its office specified in the first paragraph of this Indenture, is hereby appointed as Paying Agent and Security Registrar hereunder. (c) Any Paying Agent (other than the Trustee) from time to time appointed hereunder shall execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 9.13, that such Paying Agent will: (i) hold all sums held by it for the payment of principal of and premium, if any, and interest on the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (ii) give the Trustee within five (5) days thereafter notice of any default by any obligor upon the Securities in the making of any such payment of principal, premium, if any, or interest; and (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Notwithstanding any other provision of this Indenture, any payment required to be made to or received or held by the Trustee may, to the extent authorized by written instructions of the Trustee, be made to or received or held by a Paying Agent in the Borough of Manhattan, the City of New York, for the account of the Trustee. (d) Any Person into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any Person succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor 45 corporation is otherwise eligible under this Section 9.13, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor Person. (e) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the IDB and the Mobile Energy Parties. The IDB may, and at the request of the Trustee shall, at any time, terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 9.13 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the IDB shall promptly appoint one (1) or more qualified successor Authorized Agents approved by the Trustee and the Mobile Energy Parties to perform the functions of the Authorized Agent that has resigned or whose agency has been terminated or that shall have ceased to be eligible under this Section 9.13. The Company shall give written notice of any such appointment to all Holders as their names and addresses appear on the Security Register. SECTION 9.14. Co-Trustee or Separate Trustee. (a) If at any time or times it shall be necessary, prudent or desirable in order to conform to any Law of any jurisdiction in which property shall be held subject to the Lien of this Indenture or the other Security Documents, or the Trustee shall be advised by counsel satisfactory to it that it is so necessary or prudent in the interest of the Holders, or the Holders of a majority in principal amount of Outstanding Securities shall in writing so request, the Trustee, the IDB and the Mobile Energy Parties shall execute and deliver all instruments and agreements necessary or proper to constitute another bank or trust company or one (1) or more Persons approved by the Trustee either to act as co-trustee or co-trustees of all or any part of the Tax-Exempt Indenture Securities Collateral (other than the Shared Collateral) jointly with the Trustee originally named herein or any successor or successors, or to act as separate trustee or trustees of all or any such property. In the event the IDB or the Mobile Energy Parties shall have not joined in the execution of such instruments and agreements within ten (10) days after the receipt of a written request from the Trustee so to do, or in case an Event of Default with respect to the Securities of a series shall have occurred and be continuing, the Trustee may act under the foregoing provisions of this Section 9.14 without the concurrence of either of the IDB or the Mobile Energy Parties; and the IDB and the Mobile Energy Parties hereby appoint the Trustee as agent and attorney to act under the foregoing provisions of this Section 9.14 in either of such contingencies. (b) Every additional trustee hereunder shall, to the extent permitted by law, be appointed and act, and such additional trustee and its successors shall act, subject to the following provisions and conditions, namely: (i) the Securities shall be authenticated and delivered, and all powers, duties, obligations and rights conferred upon the Trustee in respect of the custody, control and management of monies, papers or securities, shall be exercised, solely by the Trustee (or, in the case of authentication and delivery of Securities, by any Authenticating Agent); (ii) all rights, powers, duties and obligations conferred or imposed upon the Trustee or the additional trustee or trustees shall be conferred or imposed upon and exercised or performed by the Trustee or the Trustee and such additional trustee or trustees jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee or trustees; 46 (iii) no power given hereby to, or which it is provided hereby may be exercised by, any such additional trustee or trustees, shall be exercised hereunder by such additional trustee or trustees, except jointly with, or with the consent in writing of, the Trustee, anything herein contained to the contrary notwithstanding; (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (v) the IDB and the Trustee, at any time, by an instrument in writing, executed by them jointly, may remove any such additional trustee, and in that case, by an instrument in writing executed by them jointly, may appoint a successor or successors to such additional trustee or trustees (as the case may be), anything herein contained to the contrary notwithstanding. In the event that the IDB shall have joined in the execution of any such instrument within ten (10) days after the receipt of a written request from the Trustee to do so, the Trustee shall have the power to remove any such additional trustee and to appoint a successor additional trustee without the concurrence of the IDB, the IDB hereby appointing the Trustee its agent and attorney to act for it in such connection in such contingency. In the event that the Trustee alone shall have appointed an additional trustee or trustees or co-trustee or co-trustees as above provided, it may at any time, by an instrument in writing, remove any such additional trustee or co-trustee, the successor to any such trustee or co-trustee so removed to be appointed by the IDB and the Trustee, or by the Trustee alone, as hereinbefore in this Section 9.14 provided. SECTION 9.15. Taxes. Any United States withholding taxes imposed with respect to payments made to a Holder of a Security shall be the sole responsibility of such Holder and therefore no Holder shall have the right to have any payment to it "grossed-up" for, or paid free of, any such withholding taxes. ARTICLE X. HOLDERS' LISTS AND REPORTS BY TRUSTEE, IDB AND MOBILE ENERGY PARTIES SECTION 10.1. IDB to Furnish Trustee Names and Addresses of Holders. The IDB will furnish or cause to be furnished to the Trustee semiannually, between April 1 and April 15 and between October 1 and October 15, in each year, and at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the IDB of any such request, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders, in each case as of a date not more than fifteen (15) days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Security Registrar or is otherwise furnished a copy of the Security Register, no such list need be furnished. SECTION 10.2. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders (i) contained in the most recent list furnished to the Trustee as provided in Section 10.1 and (ii) received by the Trustee in its capacity as Security Registrar, if so acting. The Trustee may destroy any list furnished to it upon receipt of a new list so furnished. (b) If three (3) or more Holders (hereinafter referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six (6) months preceding the date of such application, and such 47 application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication that such applicants propose to transmit, then the Trustee shall, within five (5) Business Days after the receipt of such application, at its election, either: (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 10.2(a), or (ii) inform such applicants as to the approximate number of Holders of Securities whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 10.2(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appears in the information preserved at the time by the Trustee in accordance with Section 10.2(a), a copy of the form of proxy or other communication that is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five (5) days after such tender, the Trustee shall mail to such applicants, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. In such case, the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the IDB, the Mobile Energy Parties and the Trustee that none of the IDB, the Mobile Energy Parties and the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 10.2 (b), regardless of the source from which such information was derived. SECTION 10.3. Reports by Trustee. (a) Within sixty (60) days after May 1 in each year, commencing with May 1996, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, a brief report dated as of such May 1 with respect to (but if no such event has occurred within the one (1) year period ending such May 1, no report need be transmitted): (i) any change to its eligibility under Section 9.8; (ii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) that remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities, on the trust estate or any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than one-half of one percent (1/2 of 1%) of the principal amount of the Securities Outstanding on the date of such report; (iii) the amount, interest rate and maturity date of all other indebtedness owing by an obligor on the Securities within the meaning of the Trust Indenture Act to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor 48 relationship arising in any manner described in Section 9.12(b)(ii), (iii), (iv) or (vi); (iv) any change to the property and funds physically in the possession of the Trustee (as such) on the date of such report; (v) any release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) that the Trustee has not previously reported; (vi) any additional issue of Securities that the Trustee has not previously reported; and (vii) any action taken by the Trustee in the performance of its duties hereunder that it has not previously reported and that in its opinion materially affects the Securities of any series, except action in respect of an Event of Default, notice of which has been or is to be withheld by the Trustee in accordance with Section 9.2. (b) The Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, a brief report with respect to: (i) the release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) unless the fair value of such property is less than ten percent (10%) of the principal amount of Securities Outstanding at the time of such release, or such release and substitution, such report to be transmitted within ninety (90) days after such release or release and substitution; and (ii) the character and amount of any advances (and if the Trustee elects so to state the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to Section 10.3(a) (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities of any series, on property or funds held or collected by it as Trustee, and that it has not previously reported pursuant to this Section 10.3(b), except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate ten percent (10%) or less of the principal amount of Securities Outstanding at such time, such report to be transmitted within ninety (90) days after such advance. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which the Securities are listed. The IDB will notify the Trustee when the Securities of any series are listed on any stock exchange. SECTION 10.4. Reports by the IDB and Mobile Energy Parties. Each of the IDB and the Mobile Energy Parties will: (a) file with the Trustee, within fifteen (15) days after it is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) that the IDB or either of the Mobile Energy Parties may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act; (b) file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such additional 49 information, documents and reports with respect to compliance by the IDB and the Mobile Energy Parties with the conditions and covenants of this Indenture, as may be required by such rules and regulations; (c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within thirty (30) days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Mobile Energy Parties pursuant to Section 10.4 (a) and (b) as may be required by rules and regulations prescribed from time to time by the SEC. ARTICLE XI. SUPPLEMENTAL INDENTURES AND AMENDMENTS TO IDB LEASE AGREEMENT SECTION 11.1. Supplemental Indentures Without Consent of Holders. Without the consent of the Holders of any Securities, the IDB and the Trustee, at any time and from time to time, may enter into one (1) or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: (a) to establish the form and terms of Securities of any series permitted by Sections 2.1 and 2.3 and to provide for the sale, authentication and delivery of additional Securities and refunding Securities and the disposition of the proceeds from the sale thereof, in the manner and to the extent authorized by this Indenture; or (b) to grant to or confer upon the Holders or the Trustee for the benefit of the Holders any additional rights, remedies, powers or authorities or security that may lawfully be granted to or conferred upon the Holders or the Trustee; or (c) to evidence the succession of a new Trustee hereunder or a co-trustee or separate trustee pursuant to Section 9.14; or (d) to add to the covenants of the IDB, for the benefit of the Holders, or to surrender any right or power herein conferred upon the IDB; or (e) to convey, transfer and assign to the Trustee, and to subject to the Lien of this Indenture, additional properties or assets, and to correct or amplify the description of any property at any time subject to the Lien of this Indenture or to assure, convey and confirm unto the Trustee any property subject or required to be subject to the Lien of this Indenture; or (f) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to qualify or continue the qualification of this Indenture (including any supplemental indenture) under the Trust Indenture Act or to maintain any exemption therefrom, or under any similar Federal statute hereafter enacted, or to permit the qualification of any Securities for sale under the securities laws of any of the States of the United States, and to add to this Indenture such other provisions as may be expressly permitted by the Trust Indenture Act, or under any similar Federal statute hereafter enacted, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereafter enacted; or 50 (g) to permit or facilitate the issuance of Securities in uncertificated form or to provide for the cessation thereof; or (h) to cure any ambiguity, inconsistency or formal defect or omission, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not be inconsistent with this Indenture, shall not impair the security for the Securities and shall not adversely affect the interest of the Holders of any series; or (i) to secure or maintain the rating for any Securities from any Rating Agency; or (j) to cure any defect in the Indenture that would, if not cured, cause the interest on any Securities (excluding any Securities in respect of which no opinion of Bond Counsel was delivered at the time of original issuance to the effect that interest thereon is exempt from Federal income taxation) to be included in gross income of the Holders thereof for Federal income tax purposes. SECTION 11.2. Supplemental Indenture With Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding, considered as one (1) class, by Act of such Holders delivered to the IDB, the Mobile Energy Parties and the Trustee, the IDB, when authorized by Board Resolutions, may, and the Trustee, subject to Sections 11.3 and 11.4, shall, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture; provided, however, that if there shall be Securities of more than one (1) series Outstanding hereunder and if a proposed supplemental indenture shall directly affect the rights of the Holders of one (1) or more, but less than all, of such series, then the consent only of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one (1) class, shall be required; provided further, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security directly affected thereby: (a) change the Stated Maturity of any Security (or, if the principal thereof is payable in installments, the Stated Maturity of any such installment), or of any payment of interest thereon, or the dates or circumstances of payment of premium, if any, on any Security, or change the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any Security or the premium, if any, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment of principal or interest on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date) or such payment of premium, if any, on or after the date such premium becomes due and payable or change the dates or the amounts of payments to be made through the operation of the Sinking Fund in respect of such Securities, if any; or (b) permit the creation of any Lien prior to or pari passu with the Lien of the Security Documents with respect to any of the Tax-Exempt Indenture Securities Collateral, or terminate the Lien of the Security Documents on any Tax-Exempt Indenture Securities Collateral or deprive any Holder of the security afforded by the Lien of the Security Documents, except to the extent expressly permitted by this Indenture or any of the Security Documents; or (c) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such 51 supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or reduce the requirements of Section 13.4 for quorum or voting; or (d) modify any of the provisions of Section 3.2 or Section 8.7 (except to increase the percentage of the principal amount of the Outstanding Securities required to waive past defaults) or of this Section 11.2 (except to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby). A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture that has expressly been included solely for the benefit of one (1) or more particular series of Securities, or that modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. Upon receipt by the Trustee of Board Resolutions of the IDB and such other documentation as the Trustee may reasonably require and upon the filing with the Trustee of evidence of the Act of such Holders, the Trustee shall join in the execution of such supplemental indenture or other instrument (as the case may be), subject to the provisions of Sections 11.3 and 11.4. It shall not be necessary for any Act of Holders under this Section 11.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 11.3. Documents Affecting Immunity or Indemnity. If in the opinion of the IDB or the Trustee any document required to be executed by it pursuant to the terms of Section 11.2 affects any interest, right, duty, immunity or indemnity in favor of the IDB or the Trustee under this Indenture, the IDB or the Trustee (as the case may be), may in its discretion decline to execute such document. SECTION 11.4. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any Series Supplemental Indenture or other supplemental indenture permitted by this Article XI or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to section 9.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and will not adversely affect the exemption of interest on the Securities from Federal income taxation. SECTION 11.5. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article XI, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 11.6. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article XI may, and if required by the IDB or the Company shall, bear a notation in form approved by the IDB, the Company and the Trustee as to any matter provided for in such supplemental indenture; and, in such case, suitable notation may be made upon Outstanding Securities after proper presentation and demand. If the IDB shall so determine, new Securities so modified as to conform, in the opinion of the IDB and the Trustee, to any such 52 supplemental indenture may be prepared and executed by the IDB and authenticated and delivered by the Trustee in exchange for Outstanding Securities. SECTION 11.7. Supplements and Amendments to IDB Lease Agreement Without Consent of Holders. Without the consent of the Holders of any Securities, the IDB and the Trustee, at any time and from time to time, may enter into such amendments and supplements to the IDB Lease Agreement as therein permitted, for any of the following purposes: (a) to grant to or confer upon the Holders or the Trustee for the benefit of the Holders any additional rights, remedies, powers or authorities or security that may lawfully be granted to or conferred upon the Holders or the Trustee; or (b) to correct any description of the Tax-Exempt Project, to add to the covenants of the Mobile Energy Parties, for the benefit of the Holders, or to surrender any right or power herein conferred upon the Mobile Energy Parties; or (c) to cure any ambiguity, inconsistency or formal defect or omission, or to make any other provisions with respect to matters or questions arising under the IDB Lease Agreement, provided such action shall not be inconsistent with the IDB Lease Agreement, shall not impair the security in the Securities and shall not adversely affect the interest of the Holders of any Securities; or (d) to secure or maintain the rating for any Securities from any Rating Agency; or (e) to cure any defect in the IDB Lease Agreement that would, if not cured, cause the interest on any Securities (excluding any Securities in respect of which no opinion of Bond Counsel was delivered at the time of original issuance to the effect that interest thereon is exempt from Federal income taxation) to be included in gross income of the Holders thereof for Federal income tax purposes; or (f) to provide for the issuance of additional Securities pursuant to Article III. Before the IDB shall enter into, and the Trustee shall consent to, any supplement or amendment to the IDB Lease Agreement pursuant to this Section 11.8, there shall have been delivered to the IDB and the Trustee an Opinion of Counsel of Bond Counsel stating that such supplement or amendment is authorized or permitted by this Indenture and the Alabama Act, complies with their respective terms, will, upon the execution and delivery thereof, be valid and binding upon the IDB and the Company in accordance with its terms (subject to customary exceptions) and will not adversely affect the exemption of interest on the Securities from Federal income taxation. SECTION 11.8. Supplements and Amendments to IDB Lease Agreement With Consent of Holders. Except for supplements and amendments provided for in Section 11.7, the IDB and the Trustee shall not consent to any supplement or amendment to the IDB Lease Agreement unless approved by the Holders of not less than a majority in aggregate principal amount of the Securities in the manner provided for in Section 11.2; provided, however, that unless approved in writing by Holders of all Outstanding Securities, nothing herein shall permit, or be construed to permit, any change in the obligations of the Company under Section 4.1(a) of the IDB Lease Agreement. 53 ARTICLE XII. SATISFACTION AND DISCHARGE SECTION 12.1. Satisfaction and Discharge of Securities. (a) Except as otherwise provided with respect to the Securities of any series in the Series Supplemental Indenture relating thereto, or in the terms of the Securities of any series, the Securities of such series shall, prior to the Stated Maturity thereof (or, if principal is payable in installments, the Stated Maturity of the final installment of principal thereof), on the ninety-first (91st) day after the date of the deposit referred to in paragraph (i) below, be deemed to have been paid for all purposes of this Indenture, and the entire indebtedness of the IDB and the Mobile Energy Parties in respect thereof shall be deemed to have been satisfied and discharged, upon satisfaction of the following conditions: (i) the IDB shall have irrevocably deposited or caused to be deposited with the Trustee, in trust, specifically pledged as security for and dedicated solely for the benefit of the Holders of Securities of such series (A) monies in an amount that shall be sufficient, (B) U.S. Government Obligations, the payment of interest and principal on which when due, without any regard to reinvestment thereof, will provide monies that shall be sufficient or (C) any combination of clause (A) and (B) above that shall be sufficient, in each case, in the opinion of a firm of independent certified public accountants of recognized national standing expressed in a written certification thereof delivered to the Trustee, to pay when due the principal of and premium, if any, and interest due and to become due on the Securities of such series, whether at Stated Maturity or upon redemption, acceleration or otherwise; (ii) if any such deposit of monies or U.S. Government Obligations shall have been made prior to the Stated Maturity (or, if principal is payable in installments, the Stated Maturity of the final installment of principal) or Redemption Date or Prepayment Date of such Securities, the IDB shall have delivered to the Trustee an IDB Order stating that such monies shall be held by the Trustee, in trust, as provided in Section 12.3; (iii) if the IDB has deposited or caused to be deposited monies or U.S. Government Obligations (or a combination thereof) to pay or discharge the principal of and premium, if any, and interest on the Outstanding Securities of such series to and including a Redemption Date on which all of the Outstanding Securities of such series are eligible for optional redemption and on which all of the Outstanding Securities of such series are to be redeemed, such Redemption Date shall be irrevocably designated by a Board Resolution of the IDB delivered to the Trustee on or prior to the date of such deposit of such monies or U.S. Government Obligations, and such Board Resolution shall be accompanied by an irrevocable IDB Request that the Trustee give notice of such redemption in the name and at the expense of the Company not less than thirty (30) nor more than sixty (60) days prior to such redemption in accordance with Section 6.4; (iv) the IDB shall have delivered, or cause to be delivered, to the Trustee an Opinion of Counsel to the effect that (A) the trust resulting from such deposit does not constitute an investment company under the Investment Company Act of 1940 and (B) the Holders shall have a perfected security interest under applicable Law in the monies and U.S. Government Obligations so deposited; (v) no Event of Default, or event that with notice, lapse of time or both would become an Event of Default (including by reason of such deposit), in any case arising pursuant to Section 8.1(a) or, if arising from an "Event of Default" under the IDB Lease Agreement described in 54 Section 7.1(n) thereof, Section 8.1(b) with respect to the Securities of such series shall have occurred and be continuing on the date of deposit or during the period ending on the ninety-first (91st) day after such date; (vi) the IDB shall have delivered, or caused to be delivered, to the Trustee an Opinion of Counsel to the effect that (A) based upon (1) a change in the applicable Federal income tax law since the date of this Indenture (or a change in the official interpretation thereof) or (2) the receipt by the Company from, or the publishing by, the Internal Revenue Service of a ruling on which such counsel is relying for the opinion contemplated herein, the Holders of Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of the deposit, defeasance and discharge pursuant to this Section 12.1(a) and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred and (B) the deposit, defeasance and discharge pursuant to this Section 12.1(a) will not adversely affect the exemption of interest on the Securities from Federal income taxation; and (vii) there shall have been delivered to the Trustee an Officer's Certificate of the IDB and each of the Mobile Energy Parties and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the Securities of such series have been complied with; provided, however, that if each of the conditions set forth in this Section 12.1(a) shall have been satisfied with respect to the Outstanding Securities of any series, but the ninety-one (91) day period referenced above shall not have elapsed, the Securities of such series shall nevertheless be deemed to have been paid for all purposes of this Indenture on the date of the deposit referred to in paragraph (i) above if the IDB shall have delivered, or caused to be delivered, to the Trustee an opinion of qualified nationally recognized bankruptcy counsel acceptable to the Trustee to the effect that the use by the Trustee of such monies in accordance with this Indenture would not constitute an avoidable preference or be subject to the provisions of Sections 544 and 547, would not be recoverable under Section 550 and would not be subject to the provisions of Section 362(a), in each case of the Bankruptcy Code or similar laws of the United States of America or the State of Alabama, if a Bankruptcy Event in respect of the Person making such deposit were to occur. Upon satisfaction of the aforesaid conditions with respect to the Securities of any series, the Trustee shall, upon receipt of an IDB Request, acknowledge in writing that the Securities of such series are deemed to have been paid for all purposes of this Indenture and that the entire indebtedness of the IDB and the Mobile Energy Parties in respect thereof is deemed to have been satisfied and discharged. In the event that Securities that shall be deemed to have been paid as provided in this Section 12.1(a) do not mature and are not to be redeemed within the sixty (60) day period commencing on the date of the deposit with the Trustee of monies, the IDB or the Mobile Energy Parties shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Securities, to the Holders of such Securities to the effect that such Securities are deemed to have been paid and the circumstances thereof. Notwithstanding the satisfaction and discharge of any Securities as aforesaid, (i) the rights of Holders of Securities of such series to receive, solely from the trust funds described in paragraph (i) of this Section 12.1(a), payment of the principal of and premium, if any, and interest on the Securities of such series on the Stated Maturity thereof (to and including the Redemption 55 Date, if any, designated pursuant to paragraph (iii) of this Section 12.1(a)) and (ii) the rights and obligations of the Holders of Securities of such series, the IDB, the Mobile Energy Parties and the Trustee in respect of the Securities of such series under Sections 2.7, 2.8, 2.9, 2.10, 2.11, 2.12 and 2.15, Article VI (in the case of redemption as contemplated by paragraph (iii) of this Section 12.1(a), to the extent Article VI applies to the redemption to be made on such Redemption Date), Sections 9.3(e) and 9.7 and this Article XII shall survive. (b) If (i) each of the conditions set forth in paragraphs (i), (ii), (iii), (iv) and (v) of Section 12.1(a) shall have been satisfied with respect to the Outstanding Securities of any series, but the conditions set forth in paragraphs (vi) and (vii) thereof are not satisfied and (ii) the IDB shall have delivered to the Trustee (A) an Opinion of Counsel to the effect that the Holders of such series will not recognize income, gain or loss for Federal income tax purposes as a result of the deposit, defeasance and discharge pursuant to this Section 12.1(b) and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred and (B) an Officer's Certificate of the IDB and each of the Mobile Energy Parties and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance of the Securities of such series pursuant to this Section 12.1(b) have been complied with, then: (A)with respect to the Securities of such series, the IDB and the Mobile Energy Parties shall be released from their covenants and other obligations contained in Articles IV (other than Section 4.3) and VIII of the IDB Lease Agreement and Section 2.15 of this Indenture and all their obligations under the other Security Documents, and may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant or obligation whether directly or indirectly, by reason of any reference elsewhere herein to any other provision of this Indenture or any other document and any failure to comply with any such covenant shall not constitute an Event of Default with respect to the Securities of such series; (B)the occurrence of any event specified in any of paragraphs (b) through (m), (o) or (p) of Section 7.1 of the IDB Lease Agreement shall not constitute an Event of Default under the IDB Lease Agreement and shall not result in an Event of Default pursuant to Section 8.1(b) with respect to the Securities of such series; (C)the Securities of such series shall thereafter be deemed not to be "Outstanding" solely for purposes of determining whether or not the Holders of the requisite aggregate principal amount of Securities have concurred in any Act under this Indenture with respect to any covenant or obligation from which the Mobile Energy Parties have been released pursuant to paragraph (A) above, or with respect to any event that shall have ceased to be an Event of Default with respect to Securities of such series pursuant to paragraph (B) above (or the consequences thereof); and (D)the Securities of such series shall cease to be secured by or to be entitled to any benefit under the Security Documents or any other Lien upon any Collateral, including any monies, security or other property held by the Trustee (other than monies and U.S. Obligations deposited with the Trustee pursuant to paragraph (i) of Section 12.1(a) in respect of Securities of such series and interest and other amounts earned and received thereon); provided, however, that the provisions of this Section 12.1(b) shall not be deemed to relieve the IDB or the Mobile Energy Parties of its obligations with respect to the payment of the principal of and premium, if any, and interest on 56 the Outstanding Securities of such series. In respect of the foregoing, it is understood and agreed that: (1) satisfaction by the IDB of the conditions necessary to achieve the consequences specified in this Section 12.1(b) with respect to any series of Securities shall not be construed to preclude the IDB from achieving the consequences specified in Section 12.1(a) with respect to such Securities at a later date upon satisfaction of the conditions set forth in Section 12.1(a); and (2) if at any time the only Outstanding Securities are Securities with respect to which the conditions described in this Section 12.1(b) have been satisfied, the Trustee shall, upon receipt of an IDB Request, take the actions specified in the last paragraph of Section 12.2 notwithstanding the failure to satisfy and discharge the Indenture as provided in Section 12.2. (c) For purposes of this Section 12.1, if the IDB, the Mobile Energy Parties, or any of them, shall incur any Debt and all or any portion of the proceeds thereof are concurrently applied to make a deposit pursuant to paragraph (i) of Section 12.1(a) in respect of any series of Securities (or to acquire U.S. Government Obligations that are concurrently so deposited), whether for purposes of Section 12.1(a) or 12.1(b), then any Event of Default that would arise as a result of such incurrence or as a result of any Lien granted to secure such Debt shall not constitute an Event of Default with respect to the Securities of such series; provided, however, that if, on or before the ninety-first (91st) day after the date of such deposit any of the applicable conditions under Section 12.1(a) or (b), as the case may be, required to be satisfied on such date or during the period ending on such date are not satisfied, then any such Event of Default shall be deemed to have occurred at the time and to the extent such Event of Default would have occurred without regard to this Section 12.1(c). (d) Notwithstanding anything herein to the contrary, if, at any time after a Security would be deemed to have been paid for purposes of this Indenture, and, if such is the case, the IDB and the Company's indebtedness in respect thereof would be deemed to have been satisfied and discharged, pursuant to this Section 12.1 (without regard to provisions of this paragraph), the Trustee or any Paying Agent, as the case may be, shall be required to return the monies or U.S. Government Obligations, or combination thereof, deposited with it to the IDB or either of the Mobile Energy Parties or any Affiliate thereof or its representatives under any applicable Federal or state bankruptcy, insolvency or other similar Law such Security shall thereupon be deemed retroactively not to have been paid and any satisfaction and discharge of the Company's indebtedness in respect thereof shall retroactively be deemed not have been effected, and such Security shall be deemed to remain Outstanding. SECTION 12.2. Satisfaction and Discharge of Indenture. This Indenture shall upon an IDB Request, a Company Request and a Mobile Energy Request cease to be of further effect (except as hereinafter expressly provided), and the Trustee, at the expense of the Company, shall execute proper instruments prepared by the Company and the IDB acknowledging satisfaction and discharge of this Indenture, when: (a) either (i) all Securities theretofore authenticated and delivered (other than (A) Securities that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.9 and (B) Securities deemed to have been paid in accordance with Section 12.1) have been delivered to the Trustee for cancellation; or 57 (ii) all Securities not theretofore delivered to the Trustee for cancellation shall be deemed to have been paid in accordance with Section 12.1; (b) all other sums due and payable hereunder have been paid; and (c) the IDB and the Mobile Energy Parties have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Upon satisfaction of the aforesaid conditions, the Trustee shall, upon receipt of an IDB Request, Company Request and Mobile Energy Request, acknowledge in writing the satisfaction and discharge of this Indenture. Notwithstanding the satisfaction and discharge of this Indenture as aforesaid, if at the time of such satisfaction and discharge any Securities are deemed to have been paid in accordance with Section 12.1, but have not actually been fully paid, then the rights and obligations of the IDB, the Mobile Energy Parties and the Trustee in respect of such Securities shall survive to the extent provided in Section 12.1 until all such Securities have actually been repaid in full. Upon satisfaction and discharge of this Indenture as provided in this Section 12.2, the Trustee shall assign, transfer and turn over to or upon the order of the Company, any and all monies, securities and other property then held by the Trustee for the benefit of the Holders other than monies and U.S. Government Obligations deposited with the Trustee pursuant to Section 12.1 and interest and other amounts earned or received thereon. SECTION 12.3. Application of Trust Money. The monies deposited with the Trustee pursuant to Section 12.1 and all monies received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 12.1 shall not be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest on the Securities or portions of principal amount thereof in respect of which such deposit was made. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations deposited pursuant to Section 12.1 or the interest and principal received in respect of such obligations other than any such tax, fee or other charge payable by or on behalf of Holders. ARTICLE XIII. MEETINGS OF HOLDERS OF SECURITIES; ACTION WITHOUT MEETING SECTION 13.1. Purposes for Which Meetings May Be Called. A meeting of Holders of Securities of one (1) or more, or all, series, may be called at any time and from time to time pursuant to this Article XIII to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of such series. SECTION 13.2. Call, Notice and Place of Meetings. (a) The Trustee may at any time call a meeting of Holders of one (1) or more, or all, series of Securities for any purposes specified in Section 13.1, to be held at such time and at such place in the Borough of Manhattan, The City of New York, or at such other place, as the Trustee shall determine. Notice of every such meeting, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner 58 provided in Section 1.6, not less than twenty (20) nor more than sixty (60) days prior to the date fixed for the meeting. (b) If the Trustee shall have been requested to call a meeting of the Holders of Securities of one (1) or more, or all, series, by the IDB, by the Company, by Mobile Energy or by the Holders of ten percent (10%) in aggregate principal amount of the Outstanding Securities of such series (or, in the case of a meeting of the Holders of the Securities of all series, ten percent (10%) in aggregate principal amount of the Outstanding Securities of all series, considered as one (1) class), by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first mailing of the notice of such meeting within twenty-one (21) days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the IDB, the Mobile Energy Parties or such Holders (as the case may be) may determine the time and the place in the Borough of Manhattan, the City of New York, or in such other place as the IDB, Mobile Energy Parties or such Holders (as the case may be) shall determine, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in Section 13.2(a). (c) Any meeting of Holders of Securities of one (1) or more, or all, series shall be valid without notice if the Holders of all Outstanding Securities of such series are present in person or by proxy and the Trustee is present, or if notice is waived in writing before or after the meeting by the Holders of all Outstanding Securities of such series, or by such of them as are not present at the meeting in person or by proxy. SECTION 13.3. Persons Entitled to Vote at Meetings. To be entitled to vote at any meeting of Holders of Securities of one (1) or more, or all, series, a Person shall be (a) a Holder of one (1) or more Outstanding Securities of such series or (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one (1) or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to attend any meeting shall be the Holders described above and any proxies of such Holders and their respective counsel, any representatives of the Trustee and its counsel and any representatives of the IDB, the Mobile Energy Parties and their respective counsels. SECTION 13.4. Quorum; Action. The Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of the series with respect to which a meeting shall have been called as hereinbefore provided, considered as one (1) class, shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting that this Indenture expressly provides may be taken by the Holders of a specified percentage that is less than a majority in principal amount of the Outstanding Securities of such series, considered as one (1) class, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series, considered as one (1) class, shall constitute a quorum. In the absence of a quorum, the meeting may be adjourned for a period of not less than ten (10) days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than ten (10) days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Except as provided in Section 13.5(e), notice of the reconvening of any adjourned meeting shall be given as provided in Section 13.2(a), except that such notice need be given only once not less than five (5) days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series that shall constitute a quorum. 59 Except as limited by Section 11.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Securities of the series with respect to which such meeting shall have been called, considered as one (1) class; provided, however, that, except as so limited, any resolution with respect to any action that this Indenture expressly provides may be taken by the Holders of a specified percentage that is less than a majority in principal amount of the Outstanding Securities of such series, considered as one (1) class, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of such series, considered as one (1) class. Any resolution passed or decision taken at any meeting of Holders of Securities duly held in accordance with this Section 13.4 shall be binding on all the Holders of Securities of the series with respect to which such meeting shall have been held, whether or not present or represented at the meeting. SECTION 13.5. Attendance at Meetings; Determination of Voting Rights; Conduct and Adjournment of Meetings. (a) Attendance at meetings of Holders of Securities may be in person or by proxy, and, to the extent permitted by law, any such proxy shall remain in effect and be binding upon any future Holder of the Securities with respect to which it was given, unless and until specifically revoked by the Holder or future Holder of such Securities before being voted. (b) Notwithstanding any other provision of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard to proof of the holding of such Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 1.4 and the appointment of any proxy shall be proved in the manner specified in Section 1.4. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 1.4 or other proof. (c) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the IDB, by either of the Mobile Energy Parties or by Holders of Securities as provided in Section 13.2(b), in which case the IDB, such Mobile Energy Party or the Holders of Securities of the series calling the meeting (as the case may be) shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series represented at the meeting, considered as one (1) class. (d) At any meeting each Holder of an Outstanding Security of any series or such Holder's proxy shall be entitled to one (1) vote for each $1,000 original principal amount of Securities of such series held or represented by such Holder, and each Holder of any such Security or such Holder's proxy shall be entitled to divide the votes carried by such Security, casting some for and some against a particular action, as such Holder sees fit; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security or proxy. 60 (e) Any meeting duly called pursuant to Section 13.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series represented at the meeting, considered as one (1) class; and the meeting may be held as so adjourned without further notice. SECTION 13.6. Counting Votes and Recording Action of Meetings. The vote upon any resolution submitted to any meeting of Holders of Securities shall be by written ballots on which shall be subscribed the signatures of the Holders of Outstanding Securities or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities, of the series with respect to which the meeting shall have been called, held or represented by them. The permanent chairman of the meeting shall appoint two (2) inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in quadruplicate of all votes cast at the meeting. A record, at least in quadruplicate, of the proceedings of each meeting of Holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one (1) or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that such notice was given as provided in Section 13.2 and, if applicable, Section 13.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one (1) such copy shall be delivered to each of the Mobile Energy Parties, one such copy shall be delivered to the IDB and another to the Trustee to be preserved by the Trustee, the last to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 13.7. Action Without Meeting. In lieu of the vote of Holders of Securities at a meeting as hereinbefore contemplated in this Article XIII, any request, demand, authorization, direction, notice, consent, waiver or other action may be made, given or taken by Holders of Securities by written instruments as provided in Section 1.4. ARTICLE XIV. LIMITED OBLIGATIONS OF IDB AND LIMITED RECOURSE SECTION 14.1. Limited Obligations of IDB. (a) THE SECURITIES ARE LIMITED OBLIGATIONS OF THE IDB PAYABLE SOLELY FROM THE REVENUES AND RECEIPTS DERIVED FROM, AND CERTAIN ACCOUNTS CREATED UNDER, THE IDB LEASE AGREEMENT, THIS INDENTURE AND THE INTERCREDITOR AGREEMENT. THE SECURITIES SHALL NOT CONSTITUTE AN INDEBTEDNESS OR OTHER LIABILITY OF THE STATE OF ALABAMA, THE CITY OF MOBILE, ALABAMA OR ANY POLITICAL SUBDIVISION OF THE STATE OF ALABAMA. NEITHER THE FULL FAITH OR CREDIT OF THE STATE OF ALABAMA OR THE CITY OF MOBILE, ALABAMA, NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF ALABAMA, NOR THE IDB, WILL BE PLEDGED TO THE PAYMENT OF THE SECURITIES OR THE INTEREST THEREON, AND THE ISSUANCE OF THE SECURITIES WILL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE STATE OF ALABAMA, THE CITY OF MOBILE, ALABAMA OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF ALABAMA TO APPLY MONEY FOR, OR TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATEVER TO THE PAYMENT OF, THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE SECURITIES. THE IDB HAS NO TAXING POWER. (b) No covenant or agreement contained in the Securities or in this Indenture shall be deemed to be the covenant or agreement of any official, officer, agent, employee or attorney of the IDB in his individual capacity, and neither the members of the IDB nor any official executing the Securities shall be personally liable on the Securities or subject to any personal liability or accountability by reason of the issuance thereof. 61 SECTION 14.2. Limited Recourse. Satisfaction of the obligations of the Mobile Energy Parties (including pursuant to the Guaranty) under this Indenture and the IDB Lease Agreement for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be had solely from the assets of the Mobile Energy Parties. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in Article VIII of the IDB Lease Agreement) or of the stockholders of Mobile Energy, other than their respective interests in the Tax-Exempt Indenture Securities Collateral, if any, (b) any Member (other than Mobile Energy as provided in Article VIII of the IDB Lease Agreement) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, Southern) and in the event of any non-performance by either of the Mobile Energy Parties of its obligation to make rental payments under the IDB Lease Agreement, or any part thereof, or for any claim based thereon or otherwise in respect thereof, no judgment for any deficiency upon the obligations of either of the Mobile Energy Parties under this Indenture or the IDB Lease Agreement, for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be obtainable by the Holders, the IDB, the Trustee or the Collateral Agent against any Member or any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, Southern). Notwithstanding anything in this Article XIV to the contrary, (i) satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company, (ii) nothing contained herein or in the Securities shall limit or otherwise prejudice in any way the right of the Trustee, the IDB, the Collateral Agent or any Holder to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party or limit or otherwise prejudice in any way the right of the Holders, the IDB, the Trustee or the Collateral Agent to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Tax-Exempt Indenture Securities Collateral granted hereunder or under the Security Documents and (iii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud or wilful misrepresentations, including those contained in Officer's Certificates issued from time to time. 62 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed, and their seals to be hereunto affixed and attested, by their respective officers thereunto duly authorized as of the day and year first above written. [SEAL] THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, Attest: ALABAMA /s/ By: /s/ Name: Clarence M. Boll, Jr. Title: Vice President of the Board of Directors [SEAL] FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee Attest: /s/ By: /s/ Name: Doug Milner Title: Assistant Vice President STATE OF ) ) ss.: COUNTY OF ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Clarence M. Boll, Jr. whose name as Vice Chairman of The Industrial Development Board of the City of Mobile, Alabama, a public corporation organized under the laws of the State of Alabama, is signed to the foregoing Amended and Restated Trust Indenture and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. Given under my hand and seal this the 17 day of August, 1995. /s/ (seal) Notary Public STATE OF New York ) ) ss.: COUNTY OF New York ) I, the undersigned Notary Public in and for said County in said State, hereby certify that R. Douglas Milner whose name as Assistant Vice President of First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America, is signed to the foregoing Amended and Restated Lease and Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said national banking association. Given under my hand and seal this the 23rd day of August, 1995. /s/ (seal) Notary Public EXHIBIT A [FORM OF 1995 BOND] [Unless this Security is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the issuer hereof or its agent for registration of transfer, exchange or payment, and any Security of this series issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] UNITED STATES OF AMERICA STATE OF ALABAMA THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA SOLID WASTE REVENUE REFUNDING BONDS (MOBILE ENERGY SERVICES COMPANY, L.L.C. PROJECT) SERIES 1995 No. R- CUSIP No. 607168AY7 Principal Amount Maturity Date Dated Date Interest Rate $85,000,000.00 January 1, 2020 August 1, 1995 6.95% THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA, a public corporation organized and existing under the laws of the State of Alabama (herein called the "Issuer," which term includes any permitted successor or assign under the Indenture referred to below), for value received, hereby promises to pay to [CEDE & CO.], or its registered assigns, solely from the funds provided therefor as hereinafter set forth, the Principal Amount set forth above on the Maturity Date set forth above (subject to any right of redemption), and to pay interest on the Principal Amount set forth above at the Interest Rate set forth above from the most recent Interest Payment Date to which interest has been paid or duly provided for, or if no interest has been paid or duly provided for, from August 1, 1995, semi-annually on January 1 and July 1 in each year, commencing on January 1, 1996, until the Principal Amount set forth above is paid in full or payment therefor is duly provided for. Any payment of principal, any payment of premium, and, to the extent permitted by applicable Law, any payment of interest not punctually paid or duly provided for shall continue to bear interest at a rate equal to the Interest Rate set forth above plus two percent (2%). The principal, premium, if any, and interest so payable on any payment date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered in the Security Register at the close of business on the Regular Record Date for such payment of principal or interest, which shall be the preceding December 15 and June 15, respectively, provided that interest payable on the Maturity Date set forth above shall be payable to the Person to whom the principal hereof shall be payable. Any such principal or interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) was registered in the Security Register at the close of business on the Regular Record Date therefor, and may be paid to the Person in whose name this Security is registered at the close of business on a Special Record Date for the payment of such defaulted principal or interest to be fixed by the Trustee referred to below, notice of which shall be given to the Holder hereof to be mailed not less than ten (10) days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of A-1 any securities exchange (if any) on which this Security may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. All payments in respect of this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of debts, in immediately available funds. Interest on this Security shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period shorter than a full calendar month, on the basis of the actual number of days elapsed in such period. Principal of and interest on this Security payable on the Maturity Date set forth above shall be paid upon presentation and surrender of this Security at the office of the Paying Agent. Payments of principal of and interest on this Security shall be made, so long as this Security is issued in the form of a global security, in immediately available funds by wire transfer or, if this Security is not held in the form of a global security, by check mailed on or prior to the date for such payment to the address of the Holder entitled thereto as such address appears on the Security Register; provided, however, that if this Security is not held in the form of a global security, any Holder of $1,000,000 or more in aggregate principal amount of Securities of this series may, by delivery of a written request to the Paying Agent, elect to have all such payments to such Holder made by wire transfer of immediately available funds to a designated account maintained in the United States (so long as the Paying Agent has received proper wire transfer instructions in writing by the Regular Record Date next preceding the date for such payment). The provisions of this Security are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. This Security shall not be entitled to any benefit under the Indenture, or be valid or become obligatory for any purpose, until FIRST UNION NATIONAL BANK OF GEORGIA, the Trustee under the Indenture, or its successor thereunder or an Authenticating Agent on behalf thereof, shall have authenticated the form of certificate endorsed hereon or an alternative certificate of authentication provided for in the Indenture. A-2 IN WITNESS WHEREOF, The Industrial Development Board of the City of Mobile, Alabama has caused this Security to be signed in its name by its President or Vice President, by the signature or a facsimile thereof, attested by its Secretary by the signature or a facsimile thereof. Dated: THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA [Seal] By: Name: Title: Attest: By: Secretary TRUSTEE'S AUTHENTICATION CERTIFICATE This Security is one of the Securities referred to in the within-mentioned Indenture. FIRST UNION NATIONAL BANK OF GEORGIA, as Trustee By: Authorized Trust Officer A-3 [REVERSE] UNITED STATES OF AMERICA STATE OF ALABAMA THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA SOLID WASTE REVENUE REFUNDING BONDS (MOBILE ENERGY SERVICES COMPANY, L.L.C. PROJECT) SERIES 1995 This Security is one of an authorized issue of Securities of the Issuer, known as its Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995, to be issued under an Amended and Restated Trust Indenture, dated as of August 1, 1995 (as the same may be amended, modified and supplemented, the "Indenture"), between the Issuer and First Union National Bank of Georgia, as trustee (the "Trustee"). Capitalized terms used herein, but not otherwise defined herein, shall have the meanings assigned thereto in the Indenture. As provided in the Indenture, the aggregate principal amount of Securities that may be issued thereunder is unlimited. The Securities of this series are limited in principal amount to $85,000,000. All Securities shall be secured equally and ratably with one another (except as to any Tax-Exempt Debt Service Reserve Account or Sinking Fund established in accordance with the Indenture for the benefit of any particular series). Reference is hereby made to the Indenture for a description of the nature of the Securities, the respective rights of the Holders, the Trustee, and the Issuer in respect of the Securities, and the terms upon which the Securities are to be authenticated and delivered. The terms of the Securities include those stated in the Indenture. The Indenture amends and restates the 1984 Indenture, and the proceeds of the Securities of this series will be used to pay and redeem the outstanding 1984 Bonds issued under the 1984 Indenture. Proceeds of the 1984 Bonds were used to refinance the 1983 Bonds, the proceeds of which were used to finance the cost of acquisition and construction of the Tax-Exempt Project. The Tax-Exempt Project is leased to Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), pursuant to an Amended and Restated Lease and Agreement, dated as of August 1, 1995 (the "IDB Lease Agreement"), among the Issuer, the Company and Mobile Energy Services Holdings, Inc., an Alabama corporation ("Mobile Energy"), as guarantor of the Company's obligations thereunder. Pursuant to the IDB Lease Agreement (which amends and restates the 1984 Lease), the Company has agreed to lease the Tax- Exempt Project, and make rental payments therefor, by paying to the Trustee for the account of the Issuer an amount equal to the principal of and premium, if any, and interest on the Securities of this series when due. By acceptance of the Securities of this series, the initial Holder hereof hereby acknowledges, consents to, approves and ratifies the amendment and restatement of the 1984 Indenture and the 1984 Lease, as effectuated by the Indenture and the IDB Lease Agreement, respectively. The principal of, premium, if any, and interest on this Security are payable only from, and secured by, the Tax-Exempt Indenture Securities Collateral, and all payments of principal and interest shall be made in accordance with the terms of the Indenture. The Securities, and the rights of the Holders in respect of the Shared Collateral, are subject to the terms of an Intercreditor and Collateral Agency Agreement, dated as of August 1, 1995 (the "Intercreditor Agreement"), among Bankers Trust (Delaware), as collateral agent, the Trustee (on behalf of the Holders of the Securities), First Union National Bank of Georgia, as trustee (on behalf of the holders of the securities issued under a Trust Indenture, dated as of August 1, 1995, with the Company and Mobile Energy), Banque A-4 Paribas, as the Working Capital Provider, the Issuer, the Company and Mobile Energy, to which reference is hereby made. As provided in Section 6.3(b) of the Indenture, all Outstanding Securities shall be subject to redemption in whole prior to the Maturity Date set forth on the face of this Security at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest thereon, if any, to the Redemption Date, if an Event of Loss or an Event of Eminent Domain shall occur and, subject to the terms of the Intercreditor Agreement, the Energy Complex is not rebuilt, repaired, restored or replaced. Pursuant to Section 6.3(c) of the Indenture, the Outstanding Securities shall be subject to partial redemption, ratably among, and by lot within, all outstanding series and maturities, prior to the Maturity Date set forth on the face of this Security at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest thereon, if any, to the Redemption Date, if (i) an Event of Loss or an Event of Eminent Domain shall occur, to the extent of any Excess Loss Proceeds and provided, subject to certain exceptions described in the Intercreditor Agreement, that such Excess Loss Proceeds exceed $3,000,000 and (ii) the Energy Complex or a portion thereof is rebuilt, repaired, restored or replaced. The aggregate amount of Securities to be so redeemed will equal the amount made available to the Trustee for such purpose pursuant to the Intercreditor Agreement, which, subject to certain exceptions, will equal the ratable share of the Securities of this series (based upon the principal amount of Securities and Indenture Securities then Outstanding and the Working Capital Facility Commitment under the Working Capital Facility, as further described in the Intercreditor Agreement) of the amount by which all of the Loss Proceeds in respect of such Event of Loss or Event of Eminent Domain exceeds the total cost of rebuilding, repairing, restoring or replacing the Energy Complex. Securities of this series shall be subject to mandatory sinking fund redemption in part, prior to maturity, by lot, on January 1, 2017 and on January 1 of each year thereafter to and including January 1, 2020, at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest thereon, if any, to the Redemption Date, according to the schedule set forth below: Redemption Date Principal Amount (January 1,) to be Redeemed 2017.........................................$13,700,000 2018......................................... 22,400,000 2019......................................... 23,750,000 2020*........................................ 25,150,000 - --------------- * Final Maturity The Securities of this series shall be subject to redemption at the option of the Issuer (at the direction of the Company) in the event of a Determination of Taxability with respect to the Securities of this series, in whole (or in part if in the opinion of Bond Counsel redemption of a portion of the Securities of this series would result in the interest on the Securities of this series outstanding thereafter remaining exempt from federal income taxation) on a date specified by the Issuer (or the Company on behalf of the Issuer), which date shall not be more than one hundred eighty (180) days following such Determination of Taxability, at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus accrued interest thereon, if any, to the Redemption Date. Any such redemption of less than all of the Securities of this series shall be by lot or by such other method, and in such amounts and/or in such manner, as the Trustee, with the advice of Bond Counsel, shall deem proper. A-5 If the Trustee receives written notice from the Holder or any beneficial holder hereof to the effect that (i) such Holder or beneficial holder has been notified in writing by the Internal Revenue Service that it proposes to include the interest on this Security in the gross income of such Holder or beneficial holder, which the Trustee determines may lead to a Determination of Taxability (for any of the reasons described in the definition thereof, because a proceeding has been instituted against such Holder or otherwise) and (ii) such Holder or beneficial holder will afford the Trustee the opportunity to contest the same in accordance with the procedures set forth in the Indenture, either directly or in the name of such Holder or beneficial holder, and until a conclusion of any appellate review, if sought, and the Trustee has received a copy of the notification described in clause (i) above, then the Trustee shall promptly give notice thereof to the Company, Mobile Energy, the Issuer, the Collateral Agent and the Indenture Trustee and to each other Holder and beneficial holder of the Securities of this series. The Trustee shall thereafter coordinate any similar requests or notices it may receive or may have received from other Holders or beneficial holders of the Securities of this series and shall monitor the progress of any administrative proceedings or litigation with respect thereto. If a Determination of Taxability thereafter occurs and the Company directs the Issuer to redeem the Securities of this series, in whole or in part, the Trustee shall make demand for prepayment and give notice of the redemption of the appropriate amount of the Securities of this series, the Redemption Date to be no later than the date specified above. In taking any action or making any determination in this regard, the Trustee may rely upon a favorable opinion of Bond Counsel. Securities of this series shall be subject to redemption prior to the Maturity Date set forth on the face of this Security at the option of the Issuer (at the direction of the Company), in whole or in part (if in part, by lot or by such other method as the Trustee shall deem fair or appropriate), on or after January 1, 2005 at any time upon thirty (30) days' notice at the following redemption prices, plus accrued interest on the principal amount of such Security, if any, to the Redemption Date: Period During Which Redeemed Redemption (both dates inclusive) Price January 1, 2005 through December 31, 2005...........102% January 1, 2006 through December 31, 2006...........101% January 1, 2007 and thereafter......................100% Notice of any redemption of Securities will be given at least thirty (30) but not more than sixty (60) days prior to the Redemption Date. The Indenture contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver or direction shall be conclusive and binding upon the Holder, and all future Holders, of this Security and of any Security issued upon the transfer hereof whether or not citation of such consent or waiver is made upon this Security. As more fully described therein, the Indenture and the IDB Lease Agreement permit, with certain exceptions, the amendment thereof and of the rights and obligations of the Issuer, the Company, Mobile Energy and the Holders of the Securities thereunder, at any time with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding and, in certain cases, without any consent or other action by Holders of the Securities. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Indenture, upon the A-6 occurrence and during the continuance of an Event of Default as provided in the Indenture. The Securities of this series are issuable only as registered bonds without coupons in denominations of $100,000 and integral multiples of $5,000 in excess thereof. This Security is transferable as prescribed in the Indenture by the registered owner hereof, in person or by attorney duly authorized, at an office or agency of the Trustee, upon surrender and cancellation of this Security and thereupon a new registered Security or Securities of the same series for a like principal amount, in authorized denominations, will be issued to the transferee in exchange therefor, as provided in the Indenture. The Issuer and the Trustee shall deem and treat the Person in whose name this Security is registered as the absolute owner for the purpose of receiving payment of or on account of the principal due hereof and interest due hereon and for all other purposes. Registered Securities of this series shall be exchangeable at such offices or agencies of the Trustee for registered Securities of other authorized denominations having the same aggregate principal amount, in the manner and upon the conditions prescribed in the Indenture. No service charge shall be required of any Holder in connection with any transfer or exchange, but the Security Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Notwithstanding any provision of the Indenture, neither the Issuer nor the Trustee shall be required to register the transfer of or exchange of any Securities of this series during the period (i) beginning at the opening of business fifteen (15) days before the day of the mailing of a notice of redemption of Securities of this series under the Indenture and ending on the close of business on the day of such mailing and (ii) beginning on the Regular Record Date for the Stated Maturity of principal of or interest on the Securities of this series and ending on the Stated Maturity of such payment, or to register the transfer or exchange any Securities of this series so selected for redemption in whole or in part, except the unredeemed portion of any Security of this series selected for redemption in part. The Holder hereof, by the acceptance of this Security, agrees that each payment received by it hereunder shall be applied in the manner set forth in Section 2.16 of the Indenture. This Security is a global security within the meaning of the Indenture and is registered in the name of a depositary or its nominee with respect to the Securities of this series. This Security is exchangeable for other Securities of this series registered in the name of a Person other than such depositary or its nominee only if (i) the Issuer advises the Trustee in writing that such depositary is no longer willing or able to discharge properly its responsibilities as depositary with respect to the Securities of this series and is unable to locate a qualified successor, (ii) the Issuer, at its option elects to terminate the book-entry system through such depositary with respect to the Securities of this series and (iii) after the occurrence of an Event of Default, beneficial owners of the Securities of this series holding interests representing an aggregate principal amount of the Securities of this series of not less than a majority in principal amount of the Securities of this series represented by this global security advise the Trustee through such depositary in writing that the continuation of a book-entry system through such depositary (or any successor thereto) with respect to the Securities of this series is no longer in such beneficial owners' best interest. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ALABAMA. THE SECURITIES OF THIS SERIES WILL BE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM THE REVENUES AND RECEIPTS DERIVED FROM, AND CERTAIN ACCOUNTS CREATED UNDER, THE IDB LEASE AGREEMENT, THE INDENTURE AND THE INTERCREDITOR AGREEMENT. THE SECURITIES OF THIS SERIES WILL NOT CONSTITUTE AN INDEBTEDNESS OR OTHER LIABILITY OF THE STATE OF ALABAMA, THE CITY OF MOBILE, ALABAMA OR ANY POLITICAL SUBDIVISION OF THE STATE OF ALABAMA. NEITHER THE FULL FAITH OR CREDIT OF THE STATE OF ALABAMA OR THE CITY OF MOBILE, ALABAMA, NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF ALABAMA, NOR THE ISSUER, WILL BE PLEDGED TO THE PAYMENT OF THE SECURITIES OF THIS SERIES, OR THE PREMIUM, IF ANY, OR THE INTEREST THEREON, AND THE ISSUANCE OF THE SECURITIES A-7 OF THIS SERIES WILL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE STATE OF ALABAMA, THE CITY OF MOBILE, ALABAMA, OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF ALABAMA TO APPLY MONEY FOR, OR TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATEVER TO THE PAYMENT OF, THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE SECURITIES OF THIS SERIES. THE ISSUER HAS NO TAXING POWER. Satisfaction of the obligations of the Company and Mobile Energy (including pursuant to the Guaranty) under the Indenture and the IDB Lease Agreement for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be had solely from the assets of the Company or (except to the extent provided in the Guaranty) Mobile Energy. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in the Guaranty) or of the stockholders of Mobile Energy, other than their respective interests in the Tax-Exempt Indenture Securities Collateral, if any, (b) any Member (other than Mobile Energy as provided in the Guaranty) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than Mobile Energy and, in respect of any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, Southern) and in the event of any non-performance by either of the Company or Mobile Energy of its obligation to make rental payment under the IDB Lease Agreement, or any part thereof, or for any claim based thereon or otherwise in respect thereof, no judgment for any deficiency upon the obligations of either of the Company or Mobile Energy under the Indenture or the IDB Lease Agreement, for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be obtainable by the Holders, the Issuer, the Trustee or the Collateral Agent against any Member (other than Mobile Energy as provided in the Guaranty) or any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, Southern). Notwithstanding anything in this Security to the contrary, (i) satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company, (ii) nothing contained herein or in the Securities shall limit or otherwise prejudice in any way the right of the Trustee, the Issuer, the Collateral Agent or any Holder to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party or limit or otherwise prejudice in any way the right of the Holders, the Issuer, the Trustee or the Collateral Agent to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Tax-Exempt Indenture Securities Collateral granted hereunder or under the Security Documents and (iii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud or willful misrepresentations, including those contained in Officer's Certificates issued from time to time. A-8 ABBREVIATIONS The following abbreviations when used in the inscription on the face of this instrument shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT ___________________ (Cust) (Minor) under Uniform Gift to Minors Act --------------------------------------- (State) Additional abbreviations may also be used though not in the above list - ----------------- A-9 FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto Social Security Number or Other Identifying Number of Assignee (Please print or typewrite name and address, including zip code of Assignee) the written Security and all rights thereunder, hereby irrevocably constituting and appointing ________________________ attorney to transfer such Security on the books of the Issuer, with full power of substitution in the premises. Dated: NOTICE: The signature to this assignment must correspond with the name as written upon the first page of the within instrument in every particular, without alteration or enlargement or any change whatsoever. A-10 EX-4.5 6 Exhibit 4.5 - ------------------------------------------------------------------------------- AMENDED AND RESTATED LEASE AND AGREEMENT dated as of August 1, 1995 among MOBILE ENERGY SERVICES COMPANY, L.L.C., MOBILE ENERGY SERVICES HOLDINGS, INC. and THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA - ------------------------------------------------------------------------------- THIS INSTRUMENT AMENDS AND RESTATES THE LEASE AND AGREEMENT DATED AS OF DECEMBER 1, 1984, AND RECORDED AT BOOK 2702, PAGE 434, IN THE PROBATE OFFICE OF MOBILE COUNTY, ALABAMA, AS AMENDED BY AMENDMENT NO. 1 TO SUCH LEASE AND AGREEMENT DATED AS OF NOVEMBER 8, 1994 RECORDED AT BOOK 4221, PAGE 31 AND BY AMENDMENT NO. 2 TO SUCH LEASE AND AGREEMENT DATED AS OF DECEMBER 9, 1994. THIS INSTRUMENT DOES NOT INCREASE THE AMOUNT OF SECURED INDEBTEDNESS OR EXTEND THE MATURITY DATE OF THE LEASE AND AGREEMENT HEREBY AMENDED AND RESTATED. ACCORDINGLY, THIS INSTRUMENT IS EXEMPT FROM THE PAYMENT OF MORTGAGE PRIVILEGE TAXES. THE TAX-EXEMPT INDENTURE (REFERRED TO HEREIN) APPEARS AS EXHIBIT __ TO THE UCC-1 BEING FILED IN THE OFFICE OF THE JUDGE OF PROBATE OF MOBILE COUNTY, ALABAMA SIMULTANEOUSLY HEREWITH. TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1 Definitions; Construction................................... 2 SECTION 1.2 Compliance Certificates and Opinions........................ 2 SECTION 1.3 Form of Documents Delivered to IDB or Tax-Exempt Indenture Trustee................................ 3 SECTION 1.4 Notices, etc. to IDB, Tax-Exempt Indenture Trustee and Mobile Energy Parties................. 4 SECTION 1.5 Waiver of Notice............................................ 4 SECTION 1.6 Effect of Headings and Table of Contents.................... 5 SECTION 1.7 Successors and Assigns...................................... 5 SECTION 1.8 Severability Clause......................................... 5 SECTION 1.9 Benefits of Agreement....................................... 5 SECTION 1.10 Governing Law............................................... 5 SECTION 1.11 Execution in Counterparts................................... 5 SECTION 1.12 Projections................................................. 5 SECTION 1.13 Duration of Agreement....................................... 6 SECTION 1.14 Assignment by IDB........................................... 6 SECTION 1.15 Mobile Energy Parties' Performance Under Tax-Exempt Indenture........................................ 6 SECTION 1.16 Amounts Remaining in Tax-Exempt Indenture Accounts.................................................... 7 SECTION 1.17 Delegation of Duties by IDB................................. 7 SECTION 1.18 Supplements and Amendments.................................. 7 SECTION 1.19 Filing of Financing Statements.............................. 7 SECTION 1.20 Approval of Tax-Exempt Indenture............................ 7 SECTION 1.21 Further Assurances.......................................... 7 SECTION 1.22 Rights Not Extinguished..................................... 8 SECTION 1.23 Mortgage and Security Interest.............................. 8 ARTICLE II. ISSUANCE OF TAX-EXEMPT BONDS; LEASE OF TAX-EXEMPT PROJECT TO COMPANY; RELATED OBLIGATIONS SECTION 2.1 Issuance of Tax-Exempt Bonds; Deposit of Proceeds................................................. 8 SECTION 2.2 Issuance of Additional Tax-Exempt Indenture Securities.................................................. 8 SECTION 2.3 Lease of Tax-Exempt Project and Leased Land; Option to Purchase.......................................... 9 SECTION 2.4 Disbursement of Tax-Exempt Indenture Securities Proceeds......................................... 10 SECTION 2.5 Payments for Tax-Exempt Project by Company; Obligation Absolute......................................... 10 SECTION 2.6 Source of Payments Limited; Rights and Liabilities of Mobile Energy Parties........................ 12 ARTICLE III. REPRESENTATIONS AND WARRANTIES SECTION 3.1 Representations by Mobile Energy Parties.................... 13 SECTION 3.2 Representations by IDB...................................... 18 ARTICLE IV. COVENANTS SECTION 4.1 Payment of Principal, Premium, if any, and Interest; Mobile Energy as Guarantor.................... 19 SECTION 4.2 Maintenance of Insurance.................................... 19 SECTION 4.3 Reporting Requirements...................................... 20 SECTION 4.4 Maintenance of Existence and Governmental Approvals; Rate Regulation.................................. 22 SECTION 4.5 Nature of Business.......................................... 23 SECTION 4.6 Operation and Maintenance................................... 23 SECTION 4.7 Compliance with Law and Organizational Documents................................................... 23 SECTION 4.8 Prohibition on Fundamental Changes and Disposition of Assets....................................... 23 SECTION 4.9 Transactions with Affiliates................................ 24 SECTION 4.10 Amendments to Project Documents............................. 25 SECTION 4.11 Performance Under Project Contracts......................... 25 SECTION 4.12 Annual Budget............................................... 26 SECTION 4.13 Insurance Reports........................................... 27 SECTION 4.14 Liens....................................................... 27 SECTION 4.15 Investments................................................. 27 SECTION 4.16 Indebtedness................................................ 27 SECTION 4.17 Debt for Modifications; Replacement Debt; Refunding Debt.............................................. 27 SECTION 4.18 Application of Proceeds from Sale of Tax-Exempt Bonds and First Mortgage Bonds................... 30 SECTION 4.19 Restricted Payments......................................... 31 SECTION 4.20 Casualty Proceeds; Eminent Domain Proceeds.................. 32 SECTION 4.21 Benefit Plan Liabilities.................................... 32 SECTION 4.22 Maintenance of Tax-Exempt Project; Remodeling............... 33 SECTION 4.23 IDB's Access to Project..................................... 33 SECTION 4.24 Tax Covenants............................................... 33 SECTION 4.25 Company to Pursue Remedies Against Contractors.............. 34 SECTION 4.26 Assignment, Sale, Leasing................................... 35 SECTION 4.27 Past Due Payments........................................... 35 SECTION 4.28 Continuing Disclosure Agreement............................. 35 SECTION 4.29 Mill Owner Maintenance Reserve Account...................... 35 ARTICLE V. PREPAYMENT OF RENTAL PAYMENTS; DETERMINATION OF TAXABILITY SECTION 5.1 Mandatory Prepayments....................................... 36 SECTION 5.2 Optional Prepayments........................................ 36 SECTION 5.3 Determination of Taxability................................. 36 ARTICLE VI. OTHER AGREEMENTS AND COVENANTS SECTION 6.1 Agreements of Parties....................................... 36 SECTION 6.2 Indemnification............................................. 37 SECTION 6.3 Payment of Expenses; Obligations under Tax-Exempt Indenture........................................ 38 SECTION 6.4 Financing Statements........................................ 39 SECTION 6.5 Limited Liability of IDB.................................... 39 SECTION 6.6 Recording and Filing; Further Instruments................... 39 ARTICLE VII. EVENTS OF DEFAULT; REMEDIES SECTION 7.1 Events of Default........................................... 40 SECTION 7.2 Enforcement of Remedies..................................... 43 SECTION 7.3 Remedies Cumulative; Delay or Omission Not a Waiver...................................................... 44 SECTION 7.4 Reimbursement of Attorneys' Fees............................ 44 SECTION 7.5 Waiver of Breach............................................ 45 SECTION 7.6 Unforeseen Requirements..................................... 45 SECTION 7.7 Intercreditor Agreement..................................... 45 ARTICLE VIII. GUARANTY SECTION 8.1 Guaranty of Payment and Performance......................... 46 SECTION 8.2 Continuance and Acceleration of Guaranteed Obligations upon Certain Events............................. 46 SECTION 8.3 Recovered Payments.......................................... 46 SECTION 8.4 Evidence of Guaranteed Obligations.......................... 47 SECTION 8.5 Binding Nature of Certain Adjudications..................... 47 SECTION 8.6 Nature of Mobile Energy's Obligations....................... 47 SECTION 8.7 No Release of Mobile Energy................................. 47 SECTION 8.8 Certain Waivers............................................. 48 SECTION 8.9 Independent Credit Evaluation............................... 48 SECTION 8.10 Subordination of Rights Against Company, Other Guarantors and Collateral............................. 49 SECTION 8.11 Payments by Mobile Energy................................... 49 SECTION 8.12 Continuance of Guaranty; Survival........................... 50 SECTION 8.13 Assignments and Participations; Assignments................. 50 SECTION 8.14 Benefit and Enforcement..................................... 50 ARTICLE IX. LIMITED RECOURSE............................................ 50 Appendix A DEFINED TERMS Schedule 4.2 INSURANCE POLICIES Exhibit A TAX-EXEMPT PROJECT AND LEASED LAND AMENDED AND RESTATED LEASE AND AGREEMENT, dated as of August 1, 1995, among MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), its principal office and mailing address being at 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338, MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation ("Mobile Energy"), its principal office and mailing address being at 900 Ashwood Parkway, Suite 450, Atlanta, Georgia 30338, and THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA, a public corporation organized under the laws of the State of Alabama (the "IDB"), its principal office and mailing address being at 451 Government Street, Mobile, Alabama 36602. W I T N E S S E T H: WHEREAS, the IDB is a public corporation organized under the laws of the State of Alabama under the Alabama Act (as defined below); and the IDB is authorized and empowered, under the Alabama Act, to issue bonds for, and to acquire, construct, enlarge, improve, equip, maintain, lease and dispose of, projects, which are defined to include any land and any building or other improvement thereon, and all real and personal properties deemed necessary in connection therewith, suitable for use by, among other things, any industry for the manufacturing, processing or assembling of any agricultural, manufactured or mineral products and facilities for or useful in the control, reduction, abatement or prevention of pollution of air or water or both and to sell and lease the same to others for such rentals or payments and on such terms and conditions as the IDB may deem advisable; WHEREAS, the IDB, by due corporate action, previously (a) authorized the financing of the cost of the acquisition and construction of the Tax-Exempt Project (as defined below) and the leasing thereof to a predecessor-in-interest of the Company and (b) issued and sold $112,300,000 principal amount of the 1983 Bonds (as defined below) to provide funds for and toward the costs thereof; WHEREAS, the IDB, by due corporate action, previously (a) authorized the refunding of the 1983 Bonds and (b) issued and sold $93,000,000 principal amount (of which $85,000,000 principal amount are currently outstanding) of the 1984 Bonds (as defined below) pursuant to the 1984 Indenture (as defined below) to provide funds for the costs of refunding the 1983 Bonds; WHEREAS, the IDB, by due corporate action, has authorized the execution, delivery and performance by it of this Agreement and has authorized the payment of the 1984 Bonds, within the meaning of Article VIII of the 1984 Indenture and for all other purposes of the 1984 Indenture, and the redemption of the 1984 Bonds thereafter; and, upon such payment and in connection therewith, (a) the 1984 Lease (as defined below) shall be deemed to be amended and restated in its entirety as and by this Agreement, (b) the 1984 Indenture shall be deemed to be amended and restated in its entirety as and by the Tax-Exempt Indenture (as defined below) and (c) the Tax-Exempt Bonds (as defined below) shall be issued to so pay and refund the 1984 Bonds; WHEREAS, the IDB may from time to time issue additional bonds, debentures, promissory notes or other evidences of indebtedness in one (1) or more series in accordance with the terms of the Tax-Exempt Indenture; WHEREAS, the Company has duly authorized the execution, delivery and performance by it of this Agreement to secure the Tax-Exempt Indenture Securities (as defined below); WHEREAS, Mobile Energy will benefit from the Tax-Exempt Project and from the sale of the Tax-Exempt Indenture Securities and the use of the net proceeds therefrom as contemplated by the Tax-Exempt Indenture and has duly authorized the execution, delivery and performance by it of this Agreement; and WHEREAS, Mobile Energy wishes to provide its guaranty to secure the Guaranteed Obligations (as defined below), including the payment of all rental payments hereunder. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1 Definitions; Construction. (a) For all purposes of this Agreement, except as otherwise expressly provided in this Agreement or unless the context otherwise requires, all terms used herein shall have the meanings ascribed thereto in Appendix A. SECTION 1.2 Compliance Certificates and Opinions. Except as otherwise expressly provided by this Agreement, upon any application or request by either of the Mobile Energy Parties to the IDB or the Tax-Exempt Indenture Trustee to take any action under any provision of this Agreement or the Tax-Exempt Indenture, the Tax-Exempt Indenture Trustee shall be entitled to receive upon its request an Officer's Certificate of such Mobile Energy Parties or the IDB (as the case may be) stating that all conditions precedent, if any, provided for in this Agreement or the Tax-Exempt 2 Indenture (as the case may be) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of documents is specifically required by any provision of this Agreement or the Tax-Exempt Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement or the Tax-Exempt Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; (d) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with; and (e) in the case of an Officer's Certificate, a statement as to whether or not any Event of Default under this Agreement or the Tax-Exempt Indenture has occurred and is continuing. SECTION 1.3 Form of Documents Delivered to IDB or Tax- Exempt Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one (1) such Person, or that they be so certified or covered by only one (1) document; but one (1) such Person may certify or give an opinion with respect to some matters and one (1) or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one (1) or several documents. Any certificate or opinion of an officer of the Company or of Mobile Energy may be based, insofar as it relates to legal matters, upon an Opinion of Counsel or a certificate of counsel unless such officer knows or has reason to believe that such Opinion of Counsel or certificate with respect to the matters upon which such officer's certificate or opinion is based is erroneous. Any such 3 Opinion of Counsel or certificate may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of either of the Mobile Energy Parties stating that the information with respect to such factual matters is in the possession of such Mobile Energy Party, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two (2) or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one (1) instrument. SECTION 1.4 Notices, etc. to IDB, Tax-Exempt Indenture Trustee and Mobile Energy Parties. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement to be made upon, given or furnished to, or filed with, (a) the IDB by the Tax-Exempt Indenture Trustee, by either of the Mobile Energy Parties or by an Authorized Agent shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the IDB addressed to it at the address specified in the first paragraph of this Agreement or at any other address previously furnished in writing to the Tax-Exempt Indenture Trustee and the Mobile Energy Parties by the IDB for such purpose. (b) the Tax-Exempt Indenture Trustee, by the IDB, by either of the Mobile Energy Parties or by an Authorized Agent shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to the Tax-Exempt Indenture Trustee at its Corporate Trust Office, or (c) the Company, by the IDB, by the Tax-Exempt Indenture Trustee, by Mobile Energy or by an Authorized Agent shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Agreement, together with a copy to it at P.O. Box 2747, 200 Bay Bridge Road, Mobile, Alabama 36652, or at any other address previously furnished in writing to the IDB, the Tax-Exempt Indenture Trustee and Mobile Energy by the Company for such purpose, or (d) Mobile Energy by the IDB, by the Tax-Exempt Indenture Trustee, by the Company or by an Authorized Agent 4 shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to Mobile Energy addressed to it at the address of its principal office specified in the first paragraph of this Agreement or at any other address previously furnished in writing to the IDB, the Tax-Exempt Indenture Trustee and the Company by Mobile Energy for such purpose. SECTION 1.5 Waiver of Notice. Where this Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. SECTION 1.6 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.7 Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the IDB and the Mobile Energy Parties shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. SECTION 1.8 Severability Clause. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.9 Benefits of Agreement. Nothing in this Agreement, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Tax- Exempt Indenture Trustee and the Holders of Tax-Exempt Indenture Securities, any benefit or any legal or equitable right, remedy or claim under this Agreement. SECTION 1.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA, EXCEPT THAT SUCH LAWS SHALL NOT APPLY WITH RESPECT TO ANY COLLATERAL WHERE IT IS NECESSARY TO APPLY THE LAWS OF ANOTHER JURISDICTION TO PERFECT LIENS IN SUCH COLLATERAL RELATING TO DEBT ISSUED UNDER ANY OTHER FINANCING DOCUMENTS. SECTION 1.11 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one (1) and the same instrument. 5 SECTION 1.12 Projections. All projections contemplated herein (including projections prepared in connection with the determination of any Revenue Sufficiency Certification, Senior Debt Service Coverage Ratio, Senior Debt Service Requirement or Total Debt Service Coverage Ratio for a period that includes, or consists entirely of, future periods) shall be prepared by the Company in good faith based upon assumptions reasonably believed by the Company to be consistent with the Project Documents and the historical operating results of the Energy Complex as adjusted by reasonable assumptions as to future operating results; provided, however, that all projections prepared by the Company in connection with the determination of Senior Debt Service Coverage Ratios pursuant to Section 4.19(b) shall assume that (a) the Company shall receive no revenues under the Tissue Mill Energy Services Agreement upon the occurrence and during the continuation of an ESA Blockage Event with respect to the Tissue Mill Owner, the Tissue Mill Energy Services Agreement or the Tissue Mill and (b) the Company shall receive no revenues under the Paper Mill Energy Services Agreement upon the occurrence and during the continuation of an ESA Blockage Event with respect to the Paper Mill Owner, the Paper Mill Energy Services Agreement or the Paper Mill. SECTION 1.13 Duration of Agreement. This Agreement shall become effective upon its execution and delivery and, subject to the other provisions hereof, shall expire at 11:59 p.m. on December 1, 2019 (provided that (a) the amount of monies on deposit in the Tax-Exempt Indenture Securities Account at such time is equal to the aggregate amount of principal of and premium, if any, and interest on the Outstanding Tax-Exempt Indenture Securities to be due on the final Principal Payment Date therefor, (b) all other amounts are paid hereunder and (c) the Mobile Energy Parties have satisfied all of their other obligations under this Agreement, the Tax-Exempt Indenture and the other Lease Documents), except that (i) the provisions of Section 6.2 shall survive the termination of this Agreement, (ii) the provisions of Section 2.3(b) shall survive such termination so long as necessary for the Company to exercise the option to purchase set forth therein and (iii) the provisions of Sections 4.22 and 4.24 shall survive such termination so long as necessary to maintain the exclusion from gross income for Federal income tax purposes of interest on the Tax-Exempt Indenture Securities. SECTION 1.14 Assignment by IDB. The IDB hereby notifies the Mobile Energy Parties, and the Mobile Energy Parties acknowledge and agree, that all the IDB's right, title and interest in this Agreement have been assigned to the Tax-Exempt Indenture Trustee and pledged by the IDB under the Tax-Exempt Indenture as security for, and for the benefit of the Holders of, the Tax-Exempt Indenture Securities, except that the IDB retains (but without prejudice to the assignment of such right, title and interest to the Tax-Exempt Indenture Trustee, including the ability of the Tax- Exempt Indenture Trustee to exercise fully and independently its 6 rights with respect thereto) equally but severally with the Tax- Exempt Indenture Trustee such right, title and interest to receive indemnity against claims and payment of its fees and expenses, to receive notices, information and reports, to give consents and approvals and to enforce covenants of the Mobile Energy Parties in furtherance of the Alabama Act. In furtherance of such assignment and pledge, the IDB hereby unconditionally directs the Mobile Energy Parties to make, and the Mobile Energy Parties hereby covenant to make, all rental payments hereunder directly to the Collateral Agent in accordance with the Lease Documents. In addition, in order to further secure the payment of the Tax-Exempt Indenture Securities and to further secure the performance of all covenants in the Tax-Exempt Indenture and the Tax-Exempt Indenture Securities, the Company hereby pledges to the Tax-Exempt Indenture Trustee, and grants to the Tax-Exempt Indenture Trustee a security interest in, for the benefit of the Holders of the Tax-Exempt Indenture Securities, all right, title and interest of the Company in and to the Tax-Exempt Indenture Accounts and all monies contained therein or hereafter delivered to the Tax-Exempt Indenture Trustee for deposit therein and, in each case, all monies received and the right to receive monies thereunder. SECTION 1.15 Mobile Energy Parties' Performance Under Tax-Exempt Indenture. The Mobile Energy Parties agree, for the benefit of the Holders of Tax-Exempt Indenture Securities, to do and perform all acts and things contemplated in the Tax-Exempt Indenture to be done or performed by them and hereby authorize and direct the Tax-Exempt Indenture Trustee to do and perform all things that it is required to do on behalf of the Mobile Energy Parties under the Tax-Exempt Indenture. SECTION 1.16 Amounts Remaining in Tax-Exempt Indenture Accounts. It is agreed by the parties hereto that any amounts remaining in the Tax-Exempt Indenture Accounts upon the termination of this Agreement, after payment in full of all Outstanding Tax- Exempt Indenture Securities and the charges and expenses of the Tax-Exempt Indenture Trustee, its Authorized Agents and the IDB, shall be disposed of in accordance with the terms of the Tax-Exempt Indenture. SECTION 1.17 Delegation of Duties by IDB. It is agreed that under the terms of this Agreement, the IDB has delegated certain of its duties hereunder to the Mobile Energy Parties and that under the terms of the Tax-Exempt Indenture the IDB has delegated certain of its duties thereunder to the Tax-Exempt Indenture Trustee. With respect to such duties, the IDB shall have the right at all times to act in reliance on the authorization, representation or certification of an Authorized Officer of the Mobile Energy Parties or an Authorized Agent of the Tax-Exempt Indenture Trustee. 7 SECTION 1.18 Supplements and Amendments. Subsequent to the issuance of Tax-Exempt Indenture Securities and prior to the payment in full of all Tax-Exempt Indenture Securities (or provision for the payment thereof having been made in accordance with the provisions of the Tax-Exempt Indenture), this Agreement may be amended, supplemented waived or otherwise modified only in the manner provided by Sections 11.7 and 11.8 of the Tax-Exempt Indenture, and this Agreement may not be effectively terminated, amended, supplemented, waived or otherwise modified without the concurring written consent of the Tax-Exempt Indenture Trustee, given in accordance with the provisions of the Tax-Exempt Indenture or this Agreement, except as permitted herein or in the Tax-Exempt Indenture. SECTION 1.19 Filing of Financing Statements. The Mobile Energy Parties shall cause all Financing Statements and any other documents, statements, memoranda or other instruments as may be required to be registered, filed or recorded as provided in Section 5.10 of the Tax-Exempt Indenture to be so registered, filed or recorded, all as contemplated thereby, and the IDB agrees to cooperate with the Mobile Energy Parties in executing any such Financing Statements, documents, statements, memoranda or other instruments. SECTION 1.20 Approval of Tax-Exempt Indenture. The Mobile Energy Parties have reviewed, and hereby approve, the Tax- Exempt Indenture and the form of Tax-Exempt Bonds and covenant that they will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Tax- Exempt Indenture, in the Tax-Exempt Indenture Securities authenticated and delivered thereunder and in all proceedings of the IDB pertaining thereto, on their part to be observed or performed, whether express or implied. SECTION 1.21 Further Assurances. The Mobile Energy Parties shall, at their expense, promptly and duly execute, acknowledge and deliver to the Tax-Exempt Indenture Trustee and to the IDB, as appropriate, such further financing and similar statements under the Uniform Commercial Code, and such further documents, memoranda and other instruments and assurances and take such further action as may from time to time be reasonably required or requested by the Tax-Exempt Indenture Trustee or the IDB in order more effectively to carry out the intent and purposes of this Agreement, the Tax-Exempt Indenture and the Tax-Exempt Indenture Securities issued thereunder, the Mortgage, the Intercreditor Agreement, the Security Agreement, the other Security Documents and other instruments contemplated thereby. If the term of this Agreement shall not have ended prior to such dates, on or before April 15, 2000, and on or before April 15 of every fifth year thereafter during the term of this Agreement, the Mobile Energy Parties will deliver to the Tax-Exempt Indenture Trustee an Opinion of Counsel to the effect that the filings required to continue the 8 perfection of the security interests described herein have been accomplished. SECTION 1.22 Rights Not Extinguished. Except to the extent prohibited by applicable Law, any right, interest or remedy that shall have accrued during the term of this Agreement shall not be terminated or extinguished by the expiration or termination of this Agreement, but may be enforced by the Person for whose benefit such right, interest or remedy shall have accrued and may be enforceable by such Person in accordance with the terms of this Agreement as if it had not terminated or expired or otherwise in accordance with Law. SECTION 1.23 Mortgage and Security Interest. In order to secure its performance under this Agreement, including its obligation to pay the rental payments hereunder and its obligations under Sections 6.2, 6.3 and 7.4, the Company has simultaneously with the execution of this Agreement mortgaged, pledged and collaterally assigned to the Collateral Agent, and granted to and in favor of the Collateral Agent a continuing lien upon, and a continuing security interest in, substantially all of the Company's assets, to secure the Tax-Exempt Indenture Securities and all other Senior Debt now or hereafter issued. ARTICLE II. ISSUANCE OF TAX-EXEMPT BONDS; LEASE OF TAX-EXEMPT PROJECT TO COMPANY; RELATED OBLIGATIONS SECTION 2.1 Issuance of Tax-Exempt Bonds; Deposit of Proceeds. To provide funds to cause the 1984 Bonds to be deemed to be paid within the meaning of Article VIII of the 1984 Indenture and for all other purposes of the 1984 Indenture, and for the redemption of the 1984 Bonds thereafter, the IDB, concurrently with the execution and delivery of this Agreement, and upon satisfaction of the conditions to the delivery of the Tax-Exempt Bonds set forth in the Tax-Exempt Indenture, shall issue, sell and deliver the Tax- Exempt Bonds and will deposit the proceeds thereof with the trustee under the 1984 Indenture in accordance with the 1984 Indenture. SECTION 2.2 Issuance of Additional Tax-Exempt Indenture Securities. (a) The IDB may (subject to compliance with the provisions of Section 4.17), at the request of an Authorized Officer of the Company, authorize the issuance of additional Tax- Exempt Indenture Securities upon the terms and conditions provided herein and in the Tax-Exempt Indenture. Such additional Tax-Exempt Indenture Securities may be issued to provide funds to pay any one (1) or more of the following: (i) the costs of additions to the Tax-Exempt Project (including payment of costs permitted under the Alabama Act), (ii) the costs of making at any time or from time to time such substitutions, additions, repairs, modifications and 9 improvements in, on, or to the Tax-Exempt Project authorized by the Alabama Act as the Company may deem necessary or desirable, (iii) the costs of refunding, to the extent permitted by Law, any outstanding Tax-Exempt Indenture Securities, (iv) the costs of the issuance and sale of such additional Tax-Exempt Indenture Securities and capitalized interest for such period and other costs reasonably related to such issuance (including the funding of any Tax-Exempt Debt Service Reserve Account established and created for the benefit of Holders of such additional Tax-Exempt Indenture Securities) as shall be agreed upon by the Company and the IDB and (v) the costs and other amounts contemplated by Section 4.17; provided, however, that (A) the terms of such additional Tax-Exempt Indenture Securities, the purchase price to be paid therefor and the manner in which the proceeds therefrom are to be disbursed shall have been approved in writing by the Mobile Energy Parties, (B) the IDB is not in default under the Tax-Exempt Indenture or any provision thereof and the Mobile Energy Parties are not in default under this Agreement or any provision hereof, and the issuance of such additional Tax-Exempt Indenture Securities will not constitute a default under this Agreement or cause any violation of the covenants or representations of the Mobile Energy Parties in this Agreement, (C) the Mobile Energy Parties and the IDB shall have entered into an amendment to this Agreement to provide (1) that, for all purposes of this Agreement, the Tax-Exempt Project shall include any facilities being financed by such additional Tax-Exempt Indenture Securities, (2) for such increase in the payments to be made by the Company to the IDB in such amounts as shall be necessary to pay the principal of and premium, if any, and interest on such additional Tax-Exempt Indenture Securities as provided to be paid in the Series Supplemental Indenture with respect to such additional Tax-Exempt Indenture Securities required by Section 2.3 of the Tax-Exempt Indenture and (3) for the extension of the term of this Agreement if the maturity of any of such additional Tax- Exempt Indenture Securities would otherwise occur after the expiration of such term and (D) the IDB shall have otherwise complied with the provisions of Article II and the other provisions of the Tax-Exempt Indenture with respect to the issuance of such additional Tax-Exempt Indenture Securities. (b) The Company expressly reserves the right to request the IDB to issue additional Tax-Exempt Indenture Securities or to enter into, to the extent permitted by Law, a Contract other than this Agreement with respect to the issuance by the IDB under an indenture or indentures other than the Tax-Exempt Indenture to provide additional funds to complete the Tax-Exempt Project, to refund all or any principal amount of the Tax-Exempt Indenture Securities, for the other purposes contemplated by Section 4.17 or any combination of the foregoing. SECTION 2.3 Lease of Tax-Exempt Project and Leased Land; Option to Purchase. (a) The IDB hereby demises and leases to the Company the Tax-Exempt Project and the Leased Land, and the Company 10 hereby leases the Tax-Exempt Project and the Leased Land from the IDB upon the terms and conditions of this Agreement. (b) The Company shall purchase the Tax-Exempt Project and the IDB's interest in the Leased Land at the expiration of the term of this Agreement for the purchase price of ten dollars ($10). The Company shall give written notice to the IDB of the date of such payment. The IDB, upon payment of such purchase price, will convey to the Company all its right, title and interest in and to the Leased Land and the Tax-Exempt Project as it then exists, subject to those liens and encumbrances existing prior to acquisition of the Leased Land and the Tax-Exempt Project by the IDB or created by the Company or to the creation or suffering of which the Company consented. The IDB will take such actions and execute such documents as may be deemed necessary or desirable by the Company to evidence and confirm such conveyance of title. The Company will pay all expenses applicable to or arising from such conveyance of title. SECTION 2.4 Disbursement of Tax-Exempt Indenture Securities Proceeds. The IDB shall establish the Tax-Exempt Indenture Securities Account (and the subaccounts thereof specified in Section 4.1(a) of the Tax-Exempt Indenture) and each Tax-Exempt Debt Service Reserve Account (if any) in accordance with the Tax- Exempt Indenture and any Series Supplemental Indenture relating to the Tax-Exempt Indenture Securities. Amounts in each such Account shall be invested and disbursed by the Tax-Exempt Indenture Trustee as provided in the Tax-Exempt Indenture. Until monies in each such Account are applied by the Tax-Exempt Indenture Trustee as provided in the Tax-Exempt Indenture, such monies shall be subject to the lien of the Tax-Exempt Indenture as a part of the Tax-Exempt Indenture Collateral and held in trust by the Tax-Exempt Indenture Trustee for the benefit of the Holders of Tax-Exempt Indenture Securities, and the Company shall have no right, title or interest therein. SECTION 2.5 Payments for Tax-Exempt Project by Company; Obligation Absolute. (a) The Company agrees to lease the Tax- Exempt Project, and make rental payments therefor, by paying to the Tax-Exempt Indenture Trustee for the account of the IDB an amount equal to principal of and premium, if any, and interest on the Tax- Exempt Indenture Securities when due, at the times, in the manner, in the amounts and at the rate or rates of interest provided in the Tax-Exempt Indenture. (b) The obligation of the Company to make the payments required to be made under this Section 2.5 and Section 2.6 and Article V shall be absolute and unconditional, and shall not be subject to abatement, diminution, postponement or deduction, or to any defense other than payment or to any right of setoff, counterclaim or recoupment arising out of any breach under this Agreement, the Tax-Exempt Indenture or otherwise by the IDB, the 11 Tax-Exempt Indenture Trustee, any Authorized Representatives, the Holders, or any other person, or out of any obligation or liability at any time owing to the Company by any of the foregoing. Until such time as the principal of and premium, if any, and interest on the Tax-Exempt Indenture Securities and all other amounts payable under this Agreement, the Tax-Exempt Indenture and the other Lease Documents have been paid in full, the Company will not suspend or discontinue any payments required to be made hereunder or thereunder, except to the extent the same have been prepaid, and will not fail to perform and observe all of its other agreements contained herein or therein for any cause including any acts or circumstances that may constitute failure of consideration, sale, loss, eviction or constructive eviction, destruction of or damage to the Tax-Exempt Project or commercial frustration of purpose, any change in the tax or other Laws or any failure of the IDB to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or in connection herewith, with the Tax-Exempt Indenture or with the other Lease Documents. The Company hereby waives, to the extent permitted by applicable Law, any and all rights that it may now have or that may at any time hereafter be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender any of its obligations under the Lease Documents and agrees that if, for any reason whatsoever, any of the Lease Documents shall be terminated in whole or in part by operation of Law or otherwise, the Company will nonetheless promptly pay to the Tax-Exempt Indenture Trustee amounts equal to all such amounts that shall become due and payable in respect of this Agreement, to the same extent as if any such Lease Document had not been terminated in whole or in part. Nothing contained in this Section 2.5 shall be construed to release the IDB from the performance of any of the agreements on its part herein contained, and if the IDB should fail to perform any such agreement, the Company may institute such action against the IDB as the Company may deem necessary to compel performance so long as such action shall not seek to excuse the Company from the performance of the agreement on the part of the Company contained in the preceding sentence. The Company may, however, at its own cost and expense and in its own name or in the name of the IDB prosecute or defend any action or proceeding or take any other action involving third Persons that the Company deems reasonably necessary to secure or protect the Company's right of possession, occupancy and use of the Tax-Exempt Project, and in such event the IDB hereby agrees to cooperate fully with the Company, to the extent it may legally do so, in any such action or proceeding if the Company shall so request. (c) The obligation of the Company to make any rental payment in respect of the lease of the Tax-Exempt Project shall be reduced (without duplication) by the amount of any reduction under the Tax-Exempt Indenture of the corresponding payment to be made by the IDB thereunder with respect to the Tax-Exempt Indenture Securities. 12 (d) At or before 10:00 A.M. New York time on each date provided in or pursuant to the Tax-Exempt Indenture for the payment of principal of (whether at maturity, upon redemption or acceleration or otherwise) or premium, if any, or interest on the Tax-Exempt Indenture Securities until the principal of and premium, if any, and interest on the Tax-Exempt Indenture Securities shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Tax-Exempt Indenture, the Company covenants and agrees, in accordance with the Intercreditor Agreement, to pay, or cause to be paid (whether by the Collateral Agent or otherwise), to the Tax-Exempt Indenture Trustee in Federal or other funds that are immediately available for deposit into the Tax-Exempt Indenture Securities Account, as a rental payment, a sum equal, except as provided for in the next succeeding paragraph, to the amount payable on such date as principal (whether at maturity, upon redemption or acceleration or otherwise) and premium, if any, and interest on the Tax-Exempt Indenture Securities as provided in the Tax-Exempt Indenture, less monies then on deposit in the Tax- Exempt Indenture Securities Account and available for such purpose (without giving effect to the proviso contained in Section 4.3 of the Tax-Exempt Indenture). Each payment made hereunder to the Tax- Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account shall be deemed to be a credit against the corresponding obligation of the Company under this Section 2.5. Each payment pursuant to this Section 2.5 shall at all times be sufficient to pay (but need not be in excess of) the total amount of principal (whether at maturity, upon redemption or acceleration or otherwise), premium, if any, and interest in respect of the Tax-Exempt Indenture Securities payable on the date that such payment is due. If, on the Business Day prior to any such payment date, the monies on deposit in the Tax-Exempt Indenture Securities Account are less than the amount required to be paid therefrom or to be on deposit therein pursuant to the provisions of the Tax- Exempt Indenture and the Tax-Exempt Indenture Securities, the Company will forthwith pay, or cause to be paid, any such deficiency to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account. (e) The Company agrees, in accordance with the Intercreditor Agreement, to pay or cause to be paid to the Tax- Exempt Indenture Trustee (i) the reasonable fees and charges of the Tax-Exempt Indenture Trustee for all services of the Tax-Exempt Indenture Trustee and all expenses (including reasonable counsel, certified public accountants, engineering and inspection fees and expenses) incurred under or arising directly or indirectly from services rendered pursuant to the Tax-Exempt Indenture, as and when the same become due and (ii) the reasonable fees and charges of the Tax-Exempt Indenture Trustee, as Security Registrar under the Tax- 13 Exempt Indenture, and any other Authorized Agents thereof as and when the same become due. (f) The Company agrees to pay or cause to be paid to the IDB an amount equal to the reasonable costs and expenses of the IDB incurred in connection with the issuance of the Tax-Exempt Bonds, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses, if any, incurred in connection with the administration of the Tax-Exempt Project. (g) The Company shall designate the series of Tax-Exempt Indenture Securities with respect to which a payment is made pursuant to this Section 2.5. SECTION 2.6 Source of Payments Limited; Rights and Liabilities of Mobile Energy Parties. Except as otherwise specifically provided in this Agreement (including the Guaranty), all rental payments hereunder shall be made only from the Tax- Exempt Indenture Securities Collateral, the payments therefrom and the income and proceeds received by the Tax-Exempt Indenture Trustee or the Collateral Agent and allocable to the Tax-Exempt Indenture Trustee therefrom pursuant to the Security Documents. The IDB agrees that (a) it will look solely to the Tax-Exempt Indenture Securities Collateral, the payments therefrom and the income and proceeds received by the Tax-Exempt Indenture Trustee or the Collateral Agent and allocable to the Tax-Exempt Indenture Trustee therefrom to the extent available for distribution to the IDB as herein provided or provided in the Security Documents and the Guaranty and (b) recourse shall be limited in accordance with Article IX. ARTICLE III. REPRESENTATIONS AND WARRANTIES SECTION 3.1 Representations by Mobile Energy Parties. Each of the Mobile Energy Parties represents and warrants, as of the Closing Date, to the IDB as follows: (a) The Company (i) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Alabama and (ii) is duly authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary. Mobile Energy (A) is a corporation duly formed, validly existing and in good standing under the laws of the State of Alabama and (B) is duly authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary. Each of the Mobile Energy Parties has all requisite limited 14 liability company or corporate (as the case may be) power and authority to own and operate the property it purports to own and to carry on its business as now being conducted and as proposed to be conducted in respect of the Energy Complex. (b) Each of the Mobile Energy Parties has all necessary limited liability company or corporate (as the case may be) power and authority to execute, deliver and perform its obligations under this Agreement, the Tax-Exempt Indenture Securities and each other Project Document to which it is a party. (c) All action on the part of each of the Mobile Energy Parties that is required for the authorization, execution, delivery and performance of this Agreement and each other Project Document to which such Mobile Energy Party is a party has been duly and effectively taken, except (in the case of the Project Contracts) such actions the failure to take would not reasonably be expected to have a Material Adverse Effect; and the execution, delivery and performance by each of the Mobile Energy Parties of this Agreement and each such other Project Document does not require the approval or consent of any holder or trustee of any Debt or other obligations of such Mobile Energy Party that has not been obtained. (d) This Agreement and each other Project Document to which either of the Mobile Energy Parties is a party has been duly executed and delivered by such Mobile Energy Party. Each of this Agreement and each other Project Document to which either of the Mobile Energy Parties is a party constitutes a legal, valid and binding obligation of such Mobile Energy Party, enforceable against it in accordance with the terms thereof (other than with respect to step-in rights or arbitration provisions or to agreements to agree at future dates, as to which no representation or warranty is made), except as such enforceability (i) may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws relating to or affecting the enforcement of creditors' rights and remedies generally and (ii) is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and the discretion of the court before which any proceeding therefor may be brought and to public policy or Federal or state laws that may limit rights to indemnification. (e) Neither the execution and delivery of this Agreement and each other Project Document to which either of the Mobile Energy Parties is a party nor the consummation of any of the transactions contemplated hereby or thereby nor performance of or compliance with the terms and conditions hereof or thereof (i) contravenes any Governmental Approvals or any provision of 15 Law applicable to either of the Mobile Energy Parties or to any of the Collateral, (ii) conflicts or is inconsistent with or constitutes a default under or results in the violation of the provisions of the Articles of Organization of the Company or the Operating Agreement or the articles of incorporation or by-laws of Mobile Energy or, unless such conflict, inconsistency, default or violation would not reasonably be expected to have a Material Adverse Effect, of any other Project Document or any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which either of the Mobile Energy Parties is a party or by which either of the Mobile Energy Parties or any of its property or assets is bound or to which either may be subject or (iii) results in the creation or imposition of any Liens (other than Permitted Liens) on any of the property or assets of either of the Mobile Energy Parties, or results in the acceleration of any obligation of either of the Mobile Energy Parties, that would reasonably be expected to have a Material Adverse Effect. (f) Each of the Mobile Energy Parties and the Energy Complex is in compliance with all Laws applicable to the Mobile Energy Parties or the Energy Complex (as the case may be), unless such non-compliance would not reasonably be expected to have a Material Adverse Effect. (g) Neither of the Mobile Energy Parties nor (to the knowledge of the Mobile Energy Parties) any other party to a Project Document is in material default in the performance of any term, covenant or obligation under any Project Document; no event has occurred that with lapse of time, notice or both could result in a default under a Project Document by either of the Mobile Energy Parties or (to the knowledge of the Mobile Energy Parties) any other party thereto that would reasonably be expected to have a Material Adverse Effect; no material force majeure event has occurred and is continuing under any Project Document; and (to the knowledge of the Mobile Energy Parties) each Project Document is in full force and effect. (h) All material Governmental Approvals that are required to be obtained as of the date hereof by or on behalf of either of the Mobile Energy Parties in connection with (i) the capital improvements contemplated by the Capital Budget and the operation and maintenance of the Energy Complex (including the provision of Processing Services pursuant to the Energy Services Agreements and the Master Operating Agreement) and (ii) the issuance of the Tax-Exempt Indenture Securities and the Guaranty and the execution, delivery and performance by the Mobile Energy Parties of the Project Documents to which they are parties are in effect on the date 16 hereof. Each of the material Governmental Approvals required to be obtained as of the date hereof by either of the Mobile Energy Parties has been duly obtained, was (to the knowledge of the Mobile Energy Parties) validly issued and is in full force and effect. The Mobile Energy Parties are in compliance with all material Governmental Approvals required to be obtained as of the Closing Date unless such noncompliance would not reasonably be expected to result in a Material Adverse Effect. Neither of the Mobile Energy Parties has any reason to believe that it will be unable to obtain the Governmental Approvals that are not required to be obtained prior to the Closing Date in the ordinary course of business, without substantial expense, and at such time or times as may be necessary to avoid any delay in, or material impairment to, the consummation and performance of the transactions as contemplated by this Agreement and the other Project Documents. (i) There are no claims, actions, suits, investigations or proceedings at law or in equity by or before any arbitrator or any Governmental Authority now pending or (to the knowledge of the Mobile Energy Parties) threatened against either of the Mobile Energy Parties or (to the knowledge of the Mobile Energy Parties) now pending or threatened against any Affiliate thereof, or any property or other assets or rights of either of the Mobile Energy Parties or any Affiliate thereof with respect to this Agreement, any other Project Document or the Energy Complex, that would reasonably be expected to result in a Material Adverse Effect. (j) Neither the Tax-Exempt Indenture Trustee, the Collateral Agent or the IDB nor any Holder will be as of the Closing Date (under applicable Law as of the date hereof and solely as a result of the ownership, operation and maintenance of the Energy Complex by either of the Mobile Energy Parties, the purchase and ownership of the Tax-Exempt Indenture Securities or any other transaction contemplated by the Financing Documents) subject to regulation under the Federal Power Act of 1920 or by the State of Alabama Public Service Commission or otherwise be subject to rate regulation under Federal, state or local Law; neither of the Mobile Energy Parties is, nor as of the Closing Date will be, subject to rate regulation under Federal, state or local Law; and none of the execution, delivery or performance by each of the Mobile Energy Parties of all the provisions of the Project Documents as in effect on the Closing Date to which such Mobile Energy Party is a party or the consummation of the transactions contemplated thereby will violate Chapter 14 of Title 37 of the Code of Alabama (1975): Service Territories for Electric Suppliers as in effect on the Closing Date. 17 (k) The Company has, or has valid and enforceable rights to acquire, good, valid title or valid leasehold rights in and to all of the Collateral purported to be covered by the Security Documents to which it is a party and is the owner and holder of a valid and subsisting leasehold estate to the interests in the Site and the tangible personal property forming a part of the Collateral purported to be covered by the Security Documents to which it is a party, subject only to Permitted Liens, and is lawfully possessed of, or has valid and enforceable rights to acquire, a valid and subsisting grant for a term in and of the Easements, subject only to Permitted Liens. (l) With respect to the personal property forming a part of the Collateral, all filings, recordings, registrations and other actions have been made, obtained and taken in all relevant jurisdictions that are necessary to create and perfect the Liens in all right, title, estate and interest of the Company in the Collateral covered thereby subject to no Liens other than Permitted Liens. (m) The Mobile Energy Parties have obtained and hold in full force and effect, or have the right to obtain (or are in the process of obtaining and expect to obtain in the ordinary course of business), all patents, trademarks, copyrights and other such rights or adequate licenses therein, free from restrictions that could reasonably be expected to result in a Material Adverse Effect, that are necessary for the ownership, construction, operation and maintenance of the Energy Complex. (n) Each of the Mobile Energy Parties has filed, or caused to be filed, all tax and information returns that are required to have been filed by it in any jurisdiction and has paid (prior to their delinquency dates) all taxes shown to be due and payable on such returns and all other taxes and assessments payable by it, to the extent the same have become due and payable, except to the extent there is a Good Faith Contest thereof by either of the Mobile Energy Parties. (o) To the knowledge of the Mobile Energy Parties, neither the Site nor the Energy Complex has been contaminated with Hazardous Materials that requires remediation under any applicable Environmental Requirement, except where such remediation would not have a Material Adverse Effect. (p) The Company, the Energy Complex and the Site are in compliance with all applicable Environmental Requirements affecting the Site and the Energy Complex, except where noncompliance would not reasonably be expected to have a Material Adverse Effect; and (to the knowledge of the Mobile Energy Parties) there are no environmental conditions that 18 could reasonably be expected to materially interfere with the commercial operation of the Energy Complex. (q) Neither of the Mobile Energy Parties has engaged in any business or activity other than in connection with the acquisition, development, ownership, operation and financing of the Energy Complex as contemplated by the Project Documents to which such Mobile Energy Party is a party (or, in the case of Mobile Energy, the ownership of the Company). (r) Mobile Energy's sole material non-cash assets consist of its ownership interest in the Company and its rights in respect of the Southern Master Tax Sharing Agreement. (s) Neither of the Mobile Energy Parties, nor any other Person who is a member of a controlled group of corporations or a group of trades or businesses under common control with the Mobile Energy Parties (within the meaning of Section 414 of the Code), has (i) failed to fulfill its obligations under or to comply in any material respect with the requirements of ERISA or the Code with respect to any employee benefit plan, (ii) sought a waiver of the minimum funding standard of Section 412 of the Code, (iii) failed to make any contribution or payment to or in respect of any employee benefit plan required to be made by Law or by the terms of such plan, (iv) made any amendment to any employee benefit plan that has resulted or should result in the imposition of a lien or the posting of a bond or other security under ERISA or the Code or (v) incurred any liability under Title IV of ERISA other than a liability to the Pension Benefit Guaranty Corporation for premiums under Section 4007 of ERISA, if such event or condition set forth in clause (a) through (e) above, together with all such other events or conditions, causes either of the Mobile Energy Parties to incur or be reasonably likely to incur, or any other member of such controlled group to incur any liability for which such Mobile Energy Party would be subject to, a liability that is material in relation to the financial position of such Mobile Energy Party. (t) The representations and certifications of the Company concerning the cost, character and function of the Tax-Exempt Project contained in the Company's certification to Bond Counsel delivered on the date of delivery of this Agreement are true and correct in all material respects. To the best of the Company's knowledge, the Tax-Exempt Project currently constitutes a "solid waste disposal facility" under the Code. (u) The proceeds of the Tax-Exempt Bonds will be used to pay the 1984 Bonds, within the meaning of Article VIII of the 1984 Indenture and for all other purposes of the 1984 19 Indenture, and to effect the redemption of the 1984 Bonds thereafter. (v) The Tax-Exempt Project consists of land or property subject to the allowance for depreciation under the Code and, to the best of the Company's knowledge, substantially all (at least 90%) of the proceeds received from the sale of the 1983 Bonds and interest earnings thereon were used to pay costs of the acquisition and construction of the Tax-Exempt Project (excluding any proceeds of the Series 1983 Bonds and any investment earnings thereon applied to the redemption of the Series 1983 Bonds) and such amounts (excluding any proceeds of the Series 1983 Bonds and any investment earnings thereon applied to the redemption of the Series 1983 Bonds) were or could have been charged with a proper election by the Company (or its predecessors-in-interest) to the capital account of the Tax-Exempt Project for Federal income tax purposes. (w) No changes shall be made in the Tax-Exempt Project and no actions will be taken by the Company or Mobile Energy that shall in any way result in the loss, in whole or in part, of the exclusion of interest on the Tax-Exempt Bonds from gross income for Federal income tax purposes. (x) It is presently expected that the Tax-Exempt Project will not be sold or disposed of in a manner producing proceeds that, together with accumulated proceeds or earnings thereon, would be sufficient to enable the Company to retire substantially all of the Tax-Exempt Bonds prior to the maturity of the Tax-Exempt Bonds. (y) The average maturity of the Tax-Exempt Bonds does not exceed one hundred twenty percent (120%) of the average remaining reasonably expected economic life of the assets financed with the proceeds of the 1983 Bonds and the 1984 Bonds, with the average reasonably expected economic life of each asset being measured from the date such asset was placed in service and by taking into account the respective cost of each asset being financed. (z) The average maturity of the Tax-Exempt Bonds does not exceed the average remaining maturity of the 1984 Bonds. (aa) The payment of principal of or interest on the Tax- Exempt Bonds is not guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof); and less than five percent (5%) of the proceeds of the Tax-Exempt Bonds will be (i) used in making loans the payment of principal of and interest on are to be guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof) or (ii) invested (directly or 20 indirectly) in federally insured deposits or accounts as defined in Section 149(b)(4)(B) of the Code. SECTION 3.2 Representations by IDB. The IDB represents and warrants, as of the Closing Date, to the Mobile Energy Parties as follows: (a) The IDB is a public corporation duly formed, validly existing and in good standing under the laws of the State of Alabama. The IDB has complied with all of the provisions of the constitution and laws of the State of Alabama (including the Alabama Act). The IDB has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Tax-Exempt Indenture Securities, each other Project Document to which it is a party and any and all other Contracts relating thereto. (b) The IDB has found and determined that the issuance of the Tax-Exempt Bonds to refund the 1984 Bonds, which were issued to refund the 1983 Bonds issued to finance the construction and acquisition of the Tax-Exempt Project, will further the purposes of the Alabama Act. (c) Neither the execution and delivery of this Agreement and each other Project Document to which the IDB is a party nor the consummation of any of the transactions contemplated hereby or thereby nor performance of or compliance with the terms and conditions hereof or thereof (i) conflicts or is inconsistent with or constitutes a default under or results in the violation of the provisions of any charter of the IDB or, unless such conflict, inconsistency, default or violation would not reasonably be expected to have a Material Adverse Effect, of any other Project Documents or any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which the IDB is a party or by which the IDB or any of its property or assets is bound or to which it may be subject or (ii) results in the creation or imposition of any Liens (other than Permitted Liens) on any of the property or assets of the IDB, or results in the acceleration of any obligation of the IDB. (d) To accomplish the transactions contemplated by this Agreement, the Tax-Exempt Indenture and the other Lease Documents, the IDB proposes to issue the Tax-Exempt Indenture Securities on the terms and on the basis set forth in the Tax- Exempt Indenture and to use the proceeds thereof as specified therein and herein. (e) This Agreement has not been pledged or hypothecated by the IDB in any manner or for any purpose other than as provided in the Tax-Exempt Indenture as security for the 21 payment of the Tax-Exempt Indenture Securities and other amounts payable under the Lease Documents. ARTICLE IV. COVENANTS Each of the Mobile Energy Parties hereby covenants and agrees that so long as this Agreement is in effect: SECTION 4.1 Payment of Principal, Premium, if any, and Interest; Mobile Energy as Guarantor. (a) The Company shall duly and punctually pay, or cause to be paid, the rental payments specified in Article II. (b) Subject to Article VIII, Mobile Energy agrees to act as guarantor on this Agreement, and agrees that the Tax-Exempt Indenture Trustee on its behalf, and as assignee, of the IDB may enforce against Mobile Energy payment of the rental payments specified in Article II, and all other amounts payable hereunder to the same extent as the IDB may against the Company. SECTION 4.2 Maintenance of Insurance. The Company shall maintain or cause to be maintained on its behalf the required insurance policies in accordance with Schedule 4.2. All property and liability insurance policies shall name each of the Collateral Agent and the IDB as an additional insured and the Collateral Agent as loss payee. If at any time any of the required insurance (other than lenders' policy title insurance) shall no longer be available on commercially reasonable terms and premiums, the Company shall procure substitute insurance coverage that is the most equivalent to the required coverage and that is available on commercially reasonable terms and premiums. SECTION 4.3 Reporting Requirements. The Mobile Energy Parties shall furnish to the Tax-Exempt Indenture Trustee, and to any Holder of a Security or an owner of a beneficial interest therein requesting the same in writing and to any prospective investor of a Security requesting the same in writing and providing written evidence to either of the Mobile Energy Parties demonstrating that such prospective investor is an Approved Institutional Investor (whether or not either of the Mobile Energy Parties is then required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act): (a) As soon as practicable and in any event within sixty (60) days after the end of the first, second and third Fiscal Quarters of each Fiscal Year of the Company (commencing with the Fiscal Quarter ending September 30, 1995) or, in the case of any such request made after such sixty (60) day period, promptly thereafter, an unaudited balance sheet of the Company 22 as of the last day of such Fiscal Quarter and the related statements of income, cash flows and members' equity of the Company and (in the case of such second and third Fiscal Quarters) for the applicable portions of the Fiscal Year ending with the last day of such Fiscal Quarter, setting forth (except in the case of any such Fiscal Quarter ending prior to March 31, 1996) in each case in comparative form corresponding unaudited figures from the preceding Fiscal Year, all in accordance with GAAP, and accompanied by a written statement of an Authorized Officer of the Company to the effect that such financial statements fairly represent the Company's financial condition and results of operations at and as of their date in accordance with GAAP. (b) As soon as practicable and in any event within one hundred twenty (120) days after the end of each Fiscal Year of the Company (commencing with the Fiscal Year ending December 31, 1995) or, in the case of any such request made after such period, promptly thereafter, (i) a balance sheet of the Company as of the end of such Fiscal Year and the related statements of income, cash flow and members' equity of the Company during such Fiscal Year setting forth (except in the case of the Fiscal Year ending December 31, 1995) in each case in comparative form corresponding figures from the preceding Fiscal Year, all in accordance with GAAP, accompanied by an audit report thereon of a firm of independent public accountants of recognized national standing, which opinion shall state that such financial statements fairly represent the Company's financial condition and results of operations at and as of their date in accordance with GAAP, (ii) a certification of such accountants stating that, in the course of making the examinations necessary for their opinion, they obtained no knowledge, except as specifically stated, of any event or condition that constitutes (or that, upon notice or lapse of time or both, would constitute) an Event of Default, (iii) management's discussion and analysis of financial condition and results of operations prepared in accordance with Item 303 of Regulation S-K under the Securities Act and (iv) such other matters as determined by the Mobile Energy Parties. (c) With each annual or quarterly financial statement furnished pursuant to Section 4.3(a) or 4.3(b), an Officer's Certificate of Mobile Energy or the Company (as applicable) certifying as to (i) the aggregate amount of all Restricted Payments made by the Company and (ii) the entering into by the Company of any additional Project Documents or of any amendments, replacements or modifications of, or any notices of termination received by either of the Mobile Energy Parties with respect to, any of the Project Documents (together with copies of any such additional Project Documents or amendments, replacements, modifications or notices attached to such 23 Officer's Certificate), in the case of clauses (i) and (ii) above, during the period covered by such financial statement. (d) Not less often than annually, a brief certificate (complying with the provisions of Section 314(a)(4) of the Trust Indenture Act) from the principal executive officer, principal financial officer or principal accounting officer of each of the Mobile Energy Parties as to such officer's knowledge of such Mobile Energy Party's compliance with all conditions and covenants under this Agreement (or, if either of the Mobile Energy Parties is not so in compliance, a description of any such non-compliance). For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided hereunder or under the Tax-Exempt Indenture. (e) Each of the following items: (i) promptly after any Authorized Officer of either of the Mobile Energy Parties learns or shall become aware of the occurrence thereof, written notice of the occurrence of any event or condition that constitutes (or that, upon notice or lapse of time or both, would constitute) an Event of Default, specifically stating that such event or condition has occurred and describing it and the action being or proposed to be taken with respect thereto; (ii) written notice of the occurrence of any Event of Eminent Domain or any Event of Loss and an Officer's Certificate of the Company setting forth the details thereof and the action being or proposed to be taken with respect thereto; (iii) written notice of the occurrence of any event giving rise, or reasonably expected to give rise, to a claim under any insurance policy maintained in respect of the Energy Complex in an amount greater than $5,000,000; (iv) promptly after any Authorized Officer of either of the Mobile Energy Parties learns or shall become aware of the occurrence thereof, written notice of the occurrence of any event or condition that constitutes a material violation by either of the Mobile Energy Parties of any Environmental Requirement; and (v) any other information required to be furnished by the Mobile Energy Parties to the Indenture Trustee pursuant to the Security Documents. (f) If the Company has deposited a Southern Guaranty into, and for so long as such Southern Guaranty remains on 24 deposit in, the Maintenance Plan Funding Subaccount or the Distribution Account pursuant to the terms of the Intercreditor Agreement, the Company shall cause Southern to provide to the Collateral Agent no later than forty-five (45) days after the end of each fiscal quarter of Southern, an Officer's Certificate of Southern certifying as to the determination of whether or not the Southern Credit Standard has been satisfied as of the end of such fiscal quarter. SECTION 4.4 Maintenance of Existence and Governmental Approvals; Rate Regulation. (a) Each of the Mobile Energy Parties shall at all times preserve and maintain in full force and effect (i) its existence and form as a limited liability company or corporation (as the case may be) and its good standing under the laws of its state of organization or incorporation (as the case may be) and (ii) its qualification to do business in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business as conducted or proposed to be conducted makes such qualification necessary. (b) Each of the Mobile Energy Parties shall obtain and maintain in full force and effect all Governmental Approvals (including maintaining compliance with Environmental Requirements), except where the failure to obtain and maintain in full force and effect such Governmental Approvals or the noncompliance with such Environmental Requirements would not have a Material Adverse Effect. (c) Each of the Mobile Energy Parties shall preserve and maintain good and marketable title to its properties and assets (subject to no liens other than Permitted Liens). (d) Each of the Mobile Energy Parties shall pay all taxes and other governmental charges except where such taxes or charges are being contested in a Good Faith Contest and where the failure to pay such taxes or charges does not affect the enforceability of the Project Documents. (e) If (i) either of the Mobile Energy Parties shall be subject to regulation as to rates with respect to the provision of Processing Services or (ii) the revenues or other amounts received or receivable by the Company under the Project Contracts for the use of Processing Services or other services and facilities of the Energy Complex shall be subject to regulation, in either case by any Governmental Authority having jurisdiction over either of the Mobile Energy Parties under Federal, state or local law, the Mobile Energy Parties shall (A) prior to the issuance by such Governmental Authority of any order with respect to such regulation (whether or not final or subject to review on appeal), contest such regulation in a Good Faith Contest and (B) within fifteen (15) days following (1) the issuance by such Governmental Authority of a binding order (which shall be final and not be subject to review on appeal) to 25 the effect that either of the Mobile Energy Parties, or such revenues or other amounts, shall be subject to such regulation and (2) any amendment or other modification (adverse in any respect) of the provisions of such final and non-appealable order by, or the issuance of another binding order (which shall be final and not be subject to review on appeal and shall not constitute an amendment or other modification to an existing order) of, or the taking of other action relating to such final and non-appealable order that would reasonably be expected to have a Material Adverse Effect by, such Governmental Authority (or another Governmental Authority having jurisdiction over either of the Mobile Energy Parties under Federal, state or local law) affecting such regulation, provide a Revenue Sufficiency Certification (based upon and after giving effect to such regulation) to the Tax-Exempt Indenture Trustee. SECTION 4.5 Nature of Business. Neither of the Mobile Energy Parties shall engage in any business other than the ownership, financing, operation, maintenance and improvement of the Energy Complex as contemplated by the Project Documents. If Mobile Energy acquires more than nominal assets (excluding (a) its ownership of member interests in the Company, (b) its rights under the Southern Master Tax Sharing Agreement) and (c) any Contract providing for administrative services), Mobile Energy shall immediately grant a first priority security interest therein to the Collateral Agent on behalf of the Senior Secured Parties on the same conditions as set forth in the Mortgage and the other Security Documents. SECTION 4.6 Operation and Maintenance. The Company shall, and shall cause the Operator to, use, maintain and operate the Energy Complex and the Site in compliance with Prudent Plant Operating Standards and the material provisions of all relevant Project Documents, except where noncompliance would not have a Material Adverse Effect. SECTION 4.7 Compliance with Law and Organizational Documents. (a) Each of the Mobile Energy Parties shall comply with, and the Company shall ensure that the Energy Complex is maintained and operated in compliance with, and shall make such alterations to the Energy Complex and the Site as may be required for compliance with, all applicable Governmental Approvals and all material applicable Laws, except where noncompliance would not have a Material Adverse Effect. (b) Each of the Mobile Energy Parties shall comply with all material provisions of its Articles of Organization or articles of incorporation (as the case may be). SECTION 4.8 Prohibition on Fundamental Changes and Disposition of Assets. (a) Neither of the Mobile Energy Parties shall enter into any transaction of merger or consolidation, change its form of organization, or liquidate or dissolve itself (or 26 suffer any liquidation or dissolution). Neither of the Mobile Energy Parties shall purchase or otherwise acquire all or substantially all of the assets of any other Person. (b) Neither of the Mobile Energy Parties shall amend, modify or otherwise change its Articles of Organization or articles of incorporation (as the case may be) in any manner that would reasonably be expected to have a Material Adverse Effect or that alters or supersedes any of the provisions of such organizational documents concerning (i) nature of business, (ii) the requirement of an independent director (with respect to Mobile Energy), (iii) the Manager of the Company, (iv) unanimous votes for certain matters, (v) commingling of funds and (vi) maintaining separateness and observing corporate or other entity formalities. (c) Except as contemplated by the Financing Documents, neither of the Mobile Energy Parties shall sell, lease (as lessor) or otherwise transfer (as transferor) any property or assets material to the operation of the Energy Complex except in the ordinary course of business to the extent that such property is worn out or is no longer useful or necessary in connection with the operation of the Energy Complex; provided, however, that to the extent the aggregate fair market value of all sales, leases and other transfers (other than any such transfers from Mobile Energy to the Company) in any Fiscal Year exceeds $2,000,000 (multiplied by the GDPIPD Factor in effect at the time of such sale, lease or transfer), neither of the Mobile Energy Parties shall be permitted to sell, lease or otherwise transfer any of such property or assets during the remainder of such Fiscal Year unless the Company delivers an Officer's Certificate to the Tax-Exempt Indenture Trustee and the Collateral Agent (together with an Independent Engineer Confirmation) to the effect that such property is or such assets are worn out or no longer useful or necessary in connection with the operation of the Energy Complex; provided further, however, that notwithstanding anything in this Section 4.8 to the contrary, subject only to Section 7.1(k), Mobile Energy shall be permitted to transfer its ownership interests in the Company. SECTION 4.9 Transactions with Affiliates. Neither of the Mobile Energy Parties shall enter into or permit the Operator to enter into any Contract related to the Energy Complex with any of its Affiliates, other than (a) the Project Documents entered into as of the Closing Date and, in the case of Mobile Energy, the Southern Master Tax Sharing Agreement, (b) transactions in the ordinary course of business on fair and reasonable terms no less favorable to either of the Mobile Energy Parties or to the Operator (as the case may be) than either of the Mobile Energy Parties or the Operator (as the case may be) would obtain in an arm's length transaction with a Person that is not an Affiliate thereof (it being understood that transactions involving the provision of goods or services to either of the Mobile Energy Parties or the Operator in exchange for reimbursement of costs and expenses (including 27 reasonably allocated overhead expenses) shall be deemed to be in compliance with this Section 4.9), (c) transactions or Contracts involving Affiliate Subordinated Debt and (d) transactions or Contracts involving the provision of goods or services to either of the Mobile Energy Parties in exchange for Subordinated Fees. SECTION 4.10 Amendments to Project Documents. (a) The Company shall not terminate, amend, replace or otherwise modify (other than any such amendments or modifications that are immaterial or any such replacement entered into in satisfaction of the Event of Default Alternative Agreement Requirements) any of the Project Contracts to which it is a party (other than any such Project Contracts that are immaterial), unless the Company delivers to the Tax-Exempt Indenture Trustee an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that (i) such termination, amendment, replacement, modification or addition would not reasonably be expected to have a Material Adverse Effect or (ii) such termination, amendment, replacement, modification or addition is reasonably required to comply with Law or any Governmental Approval and would not have a Material Adverse Effect in light of the consequences of not terminating, amending, replacing, modifying or adding such Project Contract. Promptly upon the execution of any replacement or additional Project Contract, the Company shall take all actions necessary to grant the Collateral Agent (A) an assignment of the Company's rights under such Project Contract (including causing each Project Participant (other than the Mobile Energy Parties) party thereto to execute and deliver to the Collateral Agent a Consent to Assignment having terms no less favorable to the Collateral Agent and the Holders than (1) in the case of a replacement Project Contract, the Consent to Assignment delivered to the Collateral Agent in respect of the Project Contract being replaced and (2) in the case of an additional Project Contract, the form of Consent to Assignment attached as Exhibit D to the Intercreditor Agreement) and (B) a Lien on all property interests acquired by the Company in connection therewith (perfected to the extent such Lien can be perfected by filing a mortgage or fixture filing under local law or a financing statement under the Uniform Commercial Code, provided that no such assignment or Lien shall be required with respect to equipment financed with purchase money obligations permitted under this Agreement if prohibited by the terms of such purchase money obligations). (b) Without the consent of the Holders of a majority in aggregate principal amount of the Outstanding Tax-Exempt Indenture Securities in accordance with the Tax-Exempt Indenture, the Mobile Energy Parties shall not terminate, amend, replace or otherwise modify any of the Financing Documents to which neither the Collateral Agent nor the Tax-Exempt Indenture Trustee is a party (other than this Agreement and the Working Capital Facility) unless the Company delivers to the Tax-Exempt Indenture Trustee an Officer's Certificate, together with an Independent Engineer 28 Confirmation, certifying that such termination, amendment, replacement or modification would not reasonably be expected to reduce the likelihood of payment on the Outstanding Tax-Exempt Indenture Securities or otherwise materially and adversely affect the Holders of the Outstanding Tax-Exempt Indenture Securities. SECTION 4.11 Performance Under Project Contracts. The Company shall perform all covenants, undertakings, stipulations and provisions contained in each Project Contract to which neither the Tax-Exempt Indenture Trustee nor the Collateral Agent is a party, except to the extent that the failure to so perform would not reasonably be expected to have a Material Adverse Effect. SECTION 4.12 Annual Budget. The Company shall submit to the Independent Engineer, in draft form and detailed by month, an operating plan and budget with respect to the Energy Complex (a) on or prior to the Closing Date covering the period from the Closing Date through the end of the Fiscal Year in which the Closing Date occurs and (b) sixty (60) days prior to the commencement of each Fiscal Year commencing after the Closing Date covering such Fiscal Year (each such budget, an "Annual Budget"). Each Annual Budget shall specify the estimated project revenues, the estimated rates and revenues for each category of Processing Services, all Operation and Maintenance Costs and a maintenance plan covering all projected Maintenance Expenditures required during a period of seventeen (17) Fiscal Quarters commencing with the first Fiscal Quarter covered by such Annual Budget (the "Maintenance Plan"). Each Annual Budget shall also include, solely for informational purposes and based upon projections prepared by the Company in accordance with Section 1.12, the projected Senior Debt Service Coverage Ratio for the Fiscal Year then ending and the immediately succeeding Fiscal Year. The Independent Engineer shall provide its comments, if any, to the Company within thirty (30) days of its receipt of the proposed Annual Budget and the Company shall incorporate the Independent Engineer's reasonable suggestions into a final Annual Budget, which shall then be provided to the Collateral Agent. If, after reasonable efforts, the Company and the Independent Engineer cannot agree on a final Annual Budget, the Company may invoke the Third Party Engineer Dispute Resolution as set forth in Section 11.2 of the Intercreditor Agreement. If a final Annual Budget for a given Fiscal Year is not established by the process described above by the end of the prior Fiscal Year, the Annual Budget for such Fiscal Year shall, until a final Annual Budget is so established, be deemed to consist of the previous year's Annual Budget, escalated at the GDPIPD for the previous Fiscal Year; provided, however, that with respect to any Fiscal Year that a final Annual Budget has not been established, the Company may, with the Independent Engineer's reasonable approval, amend the prior Fiscal Year's Annual Budget to make reasonable and adequate provision for scheduled Maintenance Expenditures. The Company shall operate and maintain the Energy Complex, or cause the Energy Complex to be operated and maintained, in accordance with 29 such final Annual Budget as approved by the Independent Engineer, other than deviations resulting from dispatch and other operating requirements, provided that any deviations that would reasonably be expected to result in a Material Adverse Effect shall be approved by the Independent Engineer as being reasonably necessary to comply with Project Contracts or for operation of the Energy Complex in compliance with Prudent Plant Operating Standards; provided further, however, that withdrawals of monies from the Operating Account (other than for any such monies (i) rebated to the United States Government pursuant to Section 148 of the Code, (ii) applied to Maintenance Expenditures, (iii) applied to the payment of IDB Claims or (iv) applied to (or deemed to be applied to) the payment of the 1994 Bonds pursuant to Section 3.16 of the Intercreditor Agreement) and from the Mill Owner Maintenance Reserve Account (other than for any such monies deposited into the Working Capital Facility Account, the Indenture Securities Account or the Tax- Exempt Indenture Securities Account) in any Fiscal Year, together with the amount of any Working Capital Facility O&M Loans during such Fiscal Year, not in excess of one hundred ten percent (110%) of the aggregate amount of Operation and Maintenance Costs (other than Maintenance Expenditures) set forth in the Annual Budget for such Fiscal Year shall be deemed not to reasonably be expected to have a Material Adverse Effect. Each Annual Budget and the Maintenance Plan may be amended, restated, supplemented or otherwise modified from time to time, at the request of the Company with the approval of the Independent Engineer. SECTION 4.13 Insurance Reports. Not later than thirty (30) days prior to the expiration of any insurance required to be maintained by the Company pursuant to the Project Documents, the Company shall submit to the Tax-Exempt Indenture Trustee an Officer's Certificate certifying that such insurance (a) has been renewed or replaced and will continue in full force and effect and all premiums for such renewal or replacement term have been fully paid, together with evidence of such renewal or replacement, or (b) will not be required to be maintained pursuant to the Project Documents following its expiration. Within thirty (30) days after the end of each Fiscal Year, the Company shall submit to the Tax- Exempt Indenture Trustee an Officer's Certificate (accompanied by a certificate signed by the Independent Insurance Advisor) (i) listing all insurance being carried by, or on behalf of, the Company pursuant to the Project Documents and (ii) certifying that all insurance required to be maintained by the Company pursuant to the Project Documents is in full force and effect and all premiums therefor have been fully paid. SECTION 4.14 Liens. Neither of the Mobile Energy Parties shall create or suffer to exist or permit any Lien upon or with respect to any of its properties other than Permitted Liens. SECTION 4.15 Investments. Neither of the Mobile Energy Parties shall make any investment other than Permitted Investments. 30 SECTION 4.16 Indebtedness. Neither of the Mobile Energy Parties shall create or incur or suffer to exist any Debt or lease obligations of such Mobile Energy Party other than Permitted Indebtedness. SECTION 4.17 Debt for Modifications; Replacement Debt; Refunding Debt. The Company may incur Permitted Indebtedness to be used for Required Modifications, Optional Modifications, Replacement Debt and Refunding Debt provided that: (a) The Company shall not issue Senior Debt for Required Modifications or Optional Modifications unless (i) such Senior Debt is issued under the Indenture or the Tax-Exempt Indenture, (ii) the Company delivers to the Tax-Exempt Indenture Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) certifying that (A) based upon projections prepared by the Company in accordance with Section 1.12, the average of the annual Senior Debt Service Coverage Ratios after giving effect to the proposed issuance of such Senior Debt through the final maturity date of the Outstanding Tax-Exempt Indenture Securities is projected to be equal to or greater than the lesser of (1) the then projected average of the annual Senior Debt Service Coverage Ratios without giving effect to such proposed issuance through the final maturity date of the Outstanding Tax-Exempt Indenture Securities and (2) 1.25 to 1.0 in the case of Required Modifications and 1.5 to 1.0 in the case of Optional Modifications, (B) in the case of Optional Modifications, based upon projections prepared by the Company in accordance with Section 1.12, the minimum annual Senior Debt Service Coverage Ratio after giving effect to such proposed issuance in each Fiscal Year through the final maturity date of the Outstanding Tax-Exempt Indenture Securities is projected to be equal to or greater than the lesser of (1) the then projected minimum annual Senior Debt Service Coverage Ratio without giving effect to such proposed issuance in each Fiscal Year and (2) 1.35 to 1.0 and (C) (1) there will be no fundamental change in the use of the Energy Complex as a result of such proposed issuance, (2) the proceeds of such proposed issuance, together with proceeds of additional equity funds provided by the Company or of Subordinated Debt, will be sufficient for the proposed purpose of such proposed issuance and (3) in the case of Optional Modifications, the proposed purpose of such proposed issuance will not impair the operations or reliability of the Energy Complex, (iii) the assets to be financed with such proposed issuance (and, to the extent a Lien can be granted therein under applicable Law, all tangible and intangible rights related to the construction, operation or ownership of such assets) will be subject to the Lien of the Security Documents and (iv) in the case of Optional Modifications, the Company provides to the Tax-Exempt Indenture Trustee a letter from two (2) of the Rating Agencies 31 (then currently rating the Outstanding Tax-Exempt Indenture Securities) confirming that the issuance of such Senior Debt and the obligations to be undertaken by the Company in connection with the facilities to be constructed with the proceeds of such proposed issuance will not, solely as a result thereof, result in any downgrading of the rating on the Outstanding Tax-Exempt Indenture Securities. (b) The Company shall not issue Senior Debt for Replacement Debt or Refunding Debt unless (i) such Senior Debt is issued under the Tax-Exempt Indenture or the Indenture, (ii) (A) monies in an amount sufficient to effect payment of the principal of and premium, if any, and interest on the Senior Debt to be redeemed are held in trust or (B) U.S. Government Obligations in an amount sufficient and having such terms and qualifications so as to defease the Senior Debt to be redeemed in accordance with the Tax-Exempt Indenture or the Indenture (as the case may be) are held in trust, (iii) in the case of Replacement Debt, the Company provides an Officer's Certificate to the Tax-Exempt Indenture Trustee stating that (A) based upon projections prepared by the Company in accordance with Section 1.12, the average of the annual Senior Debt Coverage Ratios after giving effect to such proposed issuance and the repayment or defeasance of any Tax-Exempt Indenture Securities occasioned thereby through the final maturity date of the Outstanding Tax-Exempt Indenture Securities is projected to be equal to or greater than the lesser of (1) the then projected average of the annual Senior Debt Service Coverage Ratios without giving effect to such proposed issuance through the final maturity date of the Outstanding Tax-Exempt Indenture Securities and (2) 1.25 to 1.0 and (iv) in the case of Refunding Debt, the Company delivers to the Tax-Exempt Indenture Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) certifying that, based upon projections prepared by the Company in accordance with Section 1.12, (A) the projected Senior Debt Service Requirement after giving effect to such proposed issuance will not exceed the projected Senior Debt Service Requirement without giving effect to such proposed issuance by more than ten percent (10%) for any Fiscal Year through the final maturity of the Outstanding Tax- Exempt Indenture Securities and (B) either (1) the projected average of the annual Senior Debt Service Requirements after giving effect to such proposed issuance will not exceed the projected average of the annual Senior Debt Service Requirements without giving effect to such proposed issuance or (2) the minimum annual Senior Debt Service Coverage Ratio after giving effect to such proposed issuance in each Fiscal Year through the final maturity date of the Outstanding Tax- Exempt Indenture Securities is projected to be equal to or greater than 1.35 to 1.0 and the average of the annual Senior Debt Service Coverage Ratios after giving effect to such 32 proposed issuance through the final maturity date of the Outstanding Tax-Exempt Indenture Securities is projected to be equal to or greater than 1.5 to 1.0. (c) The Company shall not issue Subordinated Debt for Required Modifications unless (i) the Company delivers to the Tax-Exempt Indenture Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) certifying that, based upon projections prepared by the Company in accordance with Section 1.12, the average of the annual Total Debt Service Coverage Ratios after giving effect to the proposed issuance of such Subordinated Debt through the final maturity of the Outstanding Tax-Exempt Indenture Securities is projected to be equal to or greater than (A) 1.15 to 1.0 or (B) 1.0 to 1.0, unless, in the case of this clause (B), the Tax-Exempt Indenture Trustee receives notice objecting to such proposed issuance from the Collateral Agent pursuant to Section 7.2(d) of the Intercreditor Agreement no later than eighty-five (85) days after the notice from the Company to the Senior Secured Parties described in Section 4.17(d) and (ii) the assets to be financed with the proposed issuance (and, to the extent a Lien can be granted therein under applicable Law, all tangible and intangible rights related to the construction, operation or ownership of such assets) will be subject to the Lien of the Security Documents; provided, however, that if the Company proposes to issue Subordinated Debt for Required Modifications other than as described in clause (i)(B) above, and such average of the annual Total Debt Service Coverage Ratios after giving effect to such proposed issuance is projected to be less than 1.25 to 1.0, such proposed Subordinated Debt shall not be issued unless the Company provides proceeds of additional equity funds or of Affiliate Subordinated Debt such that the ratio of such additional equity (including the Affiliate Subordinated Debt) to total funds used for such Required Modifications is equal to or greater than the ratio of the Company's equity to total capitalization on the Closing Date. (d) Upon notice from the Company to the Senior Secured Parties (i) stating that the Company proposes to issue Subordinated Debt for Required Modifications and that the average of the annual Total Debt Service Coverage Ratios after giving effect to such proposed issuance through the final maturity of the Outstanding Tax-Exempt Indenture Securities is projected to be equal to or greater than 1.0 to 1.0 (but less than 1.15 to 1.0), (ii) setting forth a description of such Required Modifications and (iii) directing the Tax-Exempt Indenture Trustee to give notice to the Holders of such proposed issuance, the Tax-Exempt Indenture Trustee shall within fifteen (15) days of such notice from the Company, give notice to all of the Holders, in a manner provided in Section 1.6 of the Tax-Exempt Indenture, specifying that, unless a 33 majority in principal amount of the Combined Exposure gives notice to the Senior Secured Parties objecting to such proposed issuance within the period expiring on the date that is seventy-five (75) days after such notice from the Company, the Company may issue such Subordinated Debt. Upon the objection of the Holders of not less than a majority in aggregate principal amount of the Outstanding Tax-Exempt Indenture Securities on or prior to the expiration of such period, the Tax-Exempt Indenture Trustee shall promptly (but in no event later than five (5) days after such notice to the Senior Secured Parties) furnish to the Collateral Agent a Senior Creditor Certificate directing the Collateral Agent, subject to receipt by the Collateral Agent of Senior Creditor Certificates from Senior Secured Parties holding or otherwise representing a majority in principal amount of the Combined Exposure to deliver to the Tax-Exempt Indenture Trustee the notice pursuant to Section 7.2(d) of the Intercreditor Agreement objecting to such proposed issuance. (e) The Company shall not issue Subordinated Debt for Optional Modifications unless (i) the Company delivers to the Tax-Exempt Indenture Trustee an Officer's Certificate (together with an Independent Engineer Confirmation) certifying that such proposed Optional Modifications (A) are not reasonably likely to result in a Material Adverse Effect, (B) are technically feasible and (C) are not reasonably expected to materially and adversely affect the operation or reliability of the Energy Complex, (ii) the assets to be financed with such proposed issuance (and, to the extent a Lien can be granted therein under applicable Law, all tangible and intangible rights related to the construction, operation or ownership of such assets) will be subject to the Lien of the Security Documents and (iii) the Company provides to the Tax-Exempt Indenture Trustee a letter from two (2) Rating Agencies (then currently rating the Outstanding Tax-Exempt Indenture Securities) confirming that the proposed issuance of such Subordinated Debt and the obligations to be undertaken by the Company in connection with the facilities to be constructed with the proceeds will not, solely as a result thereof, result in any downgrading on the Outstanding Tax- Exempt Indenture Securities. SECTION 4.18 Application of Proceeds from Sale of Tax- Exempt Bonds and First Mortgage Bonds. (a) Promptly upon issuance of the Tax-Exempt Bonds, the Company shall cause the proceeds thereof to be applied as contemplated by Section 6.1(a). (b) Promptly upon receipt by the Company of the net proceeds from the sale of the First Mortgage Bonds, the Company shall (i) apply $190,000,000 to repay to Southern a bridge loan in the principal amount of $190,000,000 and distribute to the Company's owners $10,523,620, which, in turn, will be dividended to 34 Southern, (ii) repay to Southern Electric $200,000 representing certain costs incurred by Southern Electric associated with the offering of the First Mortgage Bonds and the Tax-Exempt Bonds, (iii) transfer $9,000,000 to the Collateral Agent for deposit into the Capital Budget Subaccount to finance Project Costs in accordance with the Capital Budget, (iv) apply $1,405,979 to pay outstanding attorneys' fees associated with the acquisition of the Energy Complex from Scott, (v) apply $9,552,623 to pay certain financing costs incurred in connection with the transactions contemplated by the Financing Documents, including certain financing costs incurred in connection with the offering of the Tax-Exempt Bonds and the First Mortgage Bonds, and (vi) apply $32,294,690 to pay breakage costs in connection with the termination of the interest hedging arrangements entered into in connection with the acquisition of the Energy Complex from Scott. (c) Promptly upon receipt by the Company of the proceeds from any sale of Senior Securities (other than the First Mortgage Bonds) of any series (net of any underwriting commission) for purposes of (i) financing Optional Modifications or Required Modifications, the Company shall deposit all such proceeds into the Optional Modifications Subaccount or the Required Modifications Subaccount (as the case may be) for application in accordance with the Intercreditor Agreement or (ii) Replacement Debt or Refunding Debt (as the case may be), the Company shall apply such proceeds for such purposes. SECTION 4.19 Restricted Payments. (a) The Company shall not make any Restricted Payments unless, in the case of any Restricted Payment proposed to be made on a Distribution Date, the Company delivers an Officer's Certificate to the Collateral Agent certifying that as of such Distribution Date (i) no Event of Default has occurred and is continuing, and no breach of this Section 4.19 then exists (whether or not such breach is a matured Event of Default), (ii) the Company is not insolvent and would not be rendered insolvent by the making of such proposed Restricted Payment and no Bankruptcy Event has occurred and is continuing in respect of either of the Mobile Energy Parties, (iii) no ESA Blockage Event with respect to the Pulp Mill Owner or its Energy Services Agreement or its Mill has occurred and is continuing, (iv) the provisions of the Tax-Exempt Indenture, the Intercreditor Agreement and the Indenture relating to the funding of the Accounts established thereunder have been complied with as of such Distribution Date, and amounts on deposit in the Debt Service Reserve Account are equal to the Debt Service Reserve Account Required Balance, amounts on deposit in the Tax-Exempt Debt Service Reserve Account are equal to the Tax-Exempt Debt Service Reserve Account Required Balance and amounts on deposit in each of the other Accounts are equal to the then required balances (including, in the case of the Maintenance Reserve Account, the Maintenance Reserve Account Required Deposit with respect to the most recently completed Fiscal Quarter has been made), (v) no Mill Owner is then 35 exercising Mill Owner Step-In Rights and (vi) neither of the Mobile Energy Parties shall be subject to regulation as to rates with respect to the provision of Processing Services, nor shall the revenues or other amounts received or receivable by the Company under the Project Contracts for the use of Processing Services or other services and facilities of the Energy Complex be subject to regulation, in either case by any Governmental Authority having jurisdiction over either of the Mobile Energy Parties under Federal, state or local law, unless the Company has provided a Revenue Sufficiency Certification (based upon and after giving effect to such regulation) to the Tax-Exempt Indenture Trustee upon the earlier of (A) the issuance of a binding order (which shall be final and not subject to review on appeal) of such Governmental Authority to the effect that either of the Mobile Energy Parties, or such revenues or other amounts, shall be subject to such regulation and (B) the application of regulation as to the rates, or revenues or other amounts, received or receivable by the Company under the Project Contracts, including the imposition of any order or other action by a Governmental Authority to the effect that such revenues and other amounts received or receivable by the Company shall be subject to refund. (b) The Company shall not make any Restricted Payments permitted pursuant to Section 4.19(a) on any Distribution Date unless the Company provides an Officer's Certificate to the Collateral Agent certifying that as of such Distribution Date (i) the Senior Debt Service Coverage Ratio for the period consisting of the two (2) semi-annual payment periods immediately preceding such Distribution Date was equal to at least 1.25 to 1 and (ii) based upon projections prepared by the Company in accordance with Section 1.12 (which projections shall, at the request of the Collateral Agent, be reviewed by the Independent Engineer if the Senior Debt Service Coverage Ratio referred to below is less than 1.30 to 1), the Senior Debt Service Coverage Ratio for the period consisting of the current semi-annual payment period and the next succeeding semi-annual payment period is projected to be at least 1.25 to 1; provided, however, that notwithstanding the requirements of this Section 4.19(b), the Company shall be permitted to make Restricted Payments solely to fund an Income Tax Deficiency if the Company provides an Officer's Certificate to the Collateral Agent stating that (A) the Senior Debt Service Coverage Ratio for the period consisting of the two (2) semi-annual payment periods immediately prior to the Distribution Date was equal to at least 1.10 to 1 and (B) based upon projections prepared by the Company in accordance with Section 1.12, the Senior Debt Service Coverage Ratio for the period consisting of the current semi-annual payment period and the next succeeding semi-annual payment period is projected to be at least 1.10 to 1; provided further, however, that the historical tests set forth in clause (i) of this Section 4.19(b) and in clause (A) of the immediately preceding proviso (1) are not required to be satisfied on the first Distribution Date following the Closing Date and (2) are required to be satisfied only for the semi-annual 36 payment period immediately preceding such Distribution Date on the second Distribution Date following the Closing Date. SECTION 4.20 Casualty Proceeds; Eminent Domain Proceeds. The Company shall cause all Casualty Proceeds and Eminent Domain Proceeds to be deposited into the Loss Proceeds Account and applied in accordance with the provisions of this Agreement and the Intercreditor Agreement. SECTION 4.21 Benefit Plan Liabilities. Neither of the Mobile Energy Parties shall, nor shall they permit any Person who is a member of a controlled group of corporations, or a group of trades or businesses under common control with the Company (within the meaning of Section 414 of the Code) to, (a) fail to fulfill its obligations under or to comply in any material respect with the requirements of ERISA or the Code with respect to any employee benefit plans, (b) seek a waiver of the minimum funding standard of Section 412 of the Code, (c) fail to make any contribution or payment to or in respect of any employee benefit plan required to be made by Law or by the terms of such plan, (d) make any amendment to any employee benefit plan that has resulted or should result in the imposition of a lien or the posting of a bond or other security under ERISA or the Code or (e) incur any liability under Title IV of ERISA other than a liability to the Pension Benefit Guaranty Corporation for premiums under Section 4007 of ERISA, if as a result of any such event or conditions set forth in clauses (a) through (e) above, together with all such other events and conditions, either of the Mobile Energy Parties shall incur or be reasonably likely to incur, or any other member of such controlled group shall incur or be reasonably likely to incur any liability for which such Mobile Energy Party would be subject to, a liability that is material in relation to the financial position of such Mobile Energy Party. SECTION 4.22 Maintenance of Tax-Exempt Project; Remodeling. The Company shall at all times cause the Tax-Exempt Project, and every element and unit thereof, to be maintained, preserved and kept in reasonable repair, working order and condition, and from time to time make all needful proper repairs and renewals thereto; provided, however, that, subject to Section 4.8, the Company may exercise all of its rights, powers, elections and options to cause the discontinuance of the operation of the Tax-Exempt Project, or any element or unit thereof, if, in the judgment of the Company, it is no longer advisable to operate the same, or if the Company intends to sell and dispose of the same and within a reasonable time shall endeavor to effectuate such sale or disposition. Subject to Section 4.6, the Company, as agent for the IDB, may at its own expense cause the Tax-Exempt Project to be remodeled or cause substitutions, modifications and improvements to be made to the Tax-Exempt Project from time to time as it, in its 37 discretion, may deem to be desirable for its uses and purposes, which shall be included under the terms of this Agreement as part of the Tax-Exempt Project. No modification of the Tax-Exempt Project shall be made, however, that would adversely affect the exemption from Federal income taxes of interest on the Tax-Exempt Indenture Securities. SECTION 4.23 IDB's Access to Project. The IDB and its authorized representatives shall have the right, upon appropriate prior notice to the Company, to have reasonable access to the Tax- Exempt Project during normal business hours for the purpose of making examinations and inspections of the same. SECTION 4.24 Tax Covenants. (a) The IDB and the Company mutually covenant for the benefit of the purchasers of the Tax-Exempt Indenture Securities that the Company will not, and the IDB will not knowingly, use the proceeds of the Tax-Exempt Indenture Securities, the earnings thereon and any other monies on deposit in any fund or account maintained in respect of the Tax- Exempt Indenture Securities (whether such monies were derived from the proceeds of the sale of the Tax-Exempt Indenture Securities or from other sources) in a manner that would cause the Tax-Exempt Indenture Securities to be "arbitrage bonds" within the meaning of Section 148 of the Code. (b) The Company will not take or permit to be taken any action, including the making of any changes in the design, function, fuel mix or feedstock of the Tax-Exempt Project, that would have the effect, directly or indirectly, of subjecting interest on any of the Tax-Exempt Indenture Securities (excluding Tax-Exempt Indenture Securities held by a "substantial user" of the Tax-Exempt Project or a "related person" within the meaning of Section 147(a) of the Code and Tax-Exempt Indenture Securities in respect of which no opinion of Bond Counsel was delivered at the time of original issuance to the effect that interest thereon is exempt from Federal income taxation) to Federal income taxation. (c) The Company shall at all times do and perform all acts and things necessary in order to assure that interest paid on the Tax-Exempt Indenture Securities (excluding any Tax-Exempt Indenture Securities in respect of which no opinion of Bond Counsel was delivered at the time of original issuance to the effect that interest thereon is exempt from Federal income taxation) shall be excludable from the gross income of the recipients thereof for purposes of Federal income taxation. (d) In the event the IDB shall have been contacted by the Internal Revenue Service regarding the tax-exempt status of any of the Tax-Exempt Indenture Securities (excluding any Tax-Exempt Indenture Securities in respect of which no opinion of Bond Counsel was delivered at the time of original issuance to the effect that interest thereon is exempt from Federal income taxation), the IDB 38 shall promptly notify the Company thereof. If the Internal Revenue Service shall call into question the tax-exempt status of such Tax- Exempt Indenture Securities, by commencing an audit or otherwise, the IDB hereby authorizes the Company to select tax counsel, which is reasonably satisfactory to the IDB, to represent the IDB in connection with such matter. The IDB hereby further agrees to take such lawful action and enter into any closing or settlement agreement as may be advised by tax counsel and requested by the Company. All costs and expenses of the IDB or that are otherwise incurred by the IDB in connection with any such proceeding shall be borne by the Company. As a condition to taking any action hereunder, the IDB may demand that the Company provide adequate assurance that such costs and expenses will be promptly paid or reimbursed. SECTION 4.25 Company to Pursue Remedies Against Contractors. In the event of default of any contractor or subcontractor under any contract or purchase order made by the Company with respect to the Tax-Exempt Project, the Company, in its own name or as agent for the IDB, shall be entitled, either separately or in conjunction with others, to exhaust the remedies of the IDB or the Company against the contractor or subcontractor so in default and against its surety (if any) for the performance of such contract or purchase order. The Company shall advise the IDB of the steps it intends to take in connection with any such default and the Company shall pay all costs, fees and expenses incurred. The Company may, in its own name or in the name of the IDB, prosecute or defend any action or proceeding, or take any other action involving any such vendor, contractor, subcontractor or surety, that the Company deems reasonably necessary, and in such event the IDB will cooperate fully with the Company and will take all action necessary to effect the substitution of the Company for the IDB in any such action or proceeding. Any amounts recovered by way of damages, refunds, adjustments or otherwise in connection with the foregoing shall be paid to the Collateral Agent for deposit into the Revenue Account. SECTION 4.26 Assignment, Sale, Leasing. Subject to Section 4.8, the Company's interest in this Agreement may be assigned in whole or in part, and the Tax-Exempt Project may be leased or the Company's interest in the Tax-Exempt Project may be sold as a whole or in part (whether a specific element or unit or an undivided interest), by the Company, subject, however, to the condition that no assignment, lease or sale shall relieve the Company from primary liability for its obligations to make the rental payments hereunder for the Tax-Exempt Project or for any other of its obligations hereunder. After any such lease or sale of any element or unit of the Tax-Exempt Project, or any interest therein, such element or unit, or interest therein, shall no longer be deemed to be part of the Tax-Exempt Project for the purposes of this Agreement. 39 The Company shall, within fifteen (15) days after the delivery thereof, furnish to the IDB and the Tax-Exempt Indenture Trustee a true and complete copy of the agreements or other documents effectuating any such assignment, lease or sale. SECTION 4.27 Past Due Payments. In the event the Company shall fail to pay any amounts required to be paid hereunder, any such past due amounts shall bear interest at a rate, to the extent permitted by Law, equal to the then highest yield on any of the Outstanding Tax-Exempt Indenture Securities plus two percent (2%) from the date such payment was originally due to and including the date such payment is made. SECTION 4.28 Continuing Disclosure Agreement. Each of the Mobile Energy Parties hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement applicable to such Mobile Energy Party. SECTION 4.29 Mill Owner Maintenance Reserve Account. The Company hereby agrees that monies on deposit in or otherwise credited to (in accordance with the Mill Owner Maintenance Reserve Account Agreement) the Mill Owner Maintenance Reserve Account shall be used solely for Operation and Maintenance Costs or by the Mills as permitted by the Mill Owner Maintenance Reserve Account Agreement; provided, however, that, prior to a Trigger Event, such monies shall be used, as contemplated by the Mill Owner Maintenance Reserve Account Agreement, for payment to the Indenture Trustee for deposit into the Indenture Securities Account, to the Tax-Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account and to the Collateral Agent for deposit into the Working Capital Account, ratably based upon the respective amounts owing to each such Account, on the Monthly Transfer Date immediately preceding each Interest Payment Date or Principal Payment Date therefor, whenever, and to the extent that, the amount of monies on deposit (after giving effect to any monies to be deposited from the Revenue Account into any Account on such Monthly Transfer Date) in the Working Capital Facility Account, the Indenture Securities Account, the Tax-Exempt Indenture Securities Account, the Maintenance Reserve Account, each applicable Debt Service Reserve Account (if any), each applicable Tax-Exempt Debt Service Reserve Account (if any), the Distribution Account, the Subordinated Fee Account and the Subordinated Debt Account (including, in the case of the Maintenance Plan Funding Subaccount and the Distribution Account, the then Available Amount under any Reserve Account Security on deposit therein) are insufficient to make payments when due on the Senior Debt. 40 ARTICLE V. PREPAYMENT OF RENTAL PAYMENTS; DETERMINATION OF TAXABILITY SECTION 5.1 Mandatory Prepayments. The Company shall prepay the rental payments payable hereunder, in whole or in part, to the extent necessary to carry out the redemption of Tax-Exempt Indenture Securities as required by Article VI of the Tax-Exempt Indenture. SECTION 5.2 Optional Prepayments. The Company may prepay amounts payable hereunder, in whole or in part, at any time, and any amounts so prepaid shall be applied to the redemption of Tax-Exempt Indenture Securities to the extent provided in, and permitted by, the Tax-Exempt Indenture and directed by the Company at the time of such prepayment. SECTION 5.3 Determination of Taxability. Upon the occurrence of a Determination of Taxability with respect to any series of Tax-Exempt Indenture Securities, the Company shall be obligated, at its own expense, either to register the Outstanding Tax-Exempt Indenture Securities of such series under the Securities Act or to obtain an Opinion of Counsel acceptable to the IDB and addressed to the IDB and the Tax-Exempt Indenture Trustee to the effect that such registration is not required (unless the Tax- Exempt Indenture Securities of such series have been redeemed in accordance with their terms). ARTICLE VI. OTHER AGREEMENTS AND COVENANTS SECTION 6.1 Agreements of Parties. It is hereby agreed by and between the IDB and the Company that: (a) The Company proposes to refinance the Tax-Exempt Project by causing the IDB to issue the Tax-Exempt Bonds and apply the principal proceeds thereof, together with other funds, to pay the 1984 Bonds, within the meaning of Article VIII of the 1984 Indenture and for all other purposes of the 1984 Indenture, and to redeem the 1984 Bonds thereafter, all for the purposes of fostering the industrial and business development of, and improving living conditions in, the jurisdiction of the IDB and otherwise contributing to the welfare of the State of Alabama and its inhabitants. (b) This Agreement amends and restates the 1984 Lease, and the parties hereto hereby acknowledge, consent to, approve 41 and ratify (i) the amendment and restatement of the 1984 Lease, as effectuated by this Agreement, (ii) the amendment and restatement of the 1984 Indenture, as effectuated by the Tax-Exempt Indenture, including the appointment of the Tax- Exempt Indenture Trustee as successor trustee to the trustee under the 1984 Indenture (provided that (A) the provisions of Article VIII of the 1984 Indenture shall survive with respect to the 1984 Bonds and (B) the trustee under the 1984 Indenture shall continue in such capacity with respect to the 1984 Bonds), (iii) the termination as of the date hereof of the Remarketing Agreement dated as of October 30, 1987 among the IDB, the Company (as assignee) and Goldman, Sachs & Co., as remarketing agent thereunder (subject to the survival of the provisions of Sections 4 and 5 thereof), and (iv) the termination of Scott's obligations under the 1984 Lease, the 1984 Indenture, and the 1984 Bonds and the fact that Scott shall have no obligations under this Agreement, the Tax-Exempt Indenture or the Tax-Exempt Indenture Securities. (c) All of the Tax-Exempt Indenture Securities will be issued under the Tax-Exempt Indenture and will mature, bear interest, be redeemable and have the other terms and provisions set forth in the Tax-Exempt Indenture, pursuant to which the IDB's interest in the Lease Documents and the revenues and receipts thereunder, including the rental payments hereunder, but subject to Section 1.14, will be pledged and conveyed to the Tax-Exempt Indenture Trustee or the Collateral Agent as security for payment of the principal of and premium, if any, and interest on the Tax-Exempt Indenture Securities. (d) Nothing contained herein (including Section 6.1(b) hereof) shall be deemed or construed to restrict, waive or otherwise limit or modify the rights and obligations of any party under the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), which agreement remains in full force and effect. SECTION 6.2 Indemnification. The Mobile Energy Parties hereby release the IDB, and agree to indemnify and hold harmless the IDB, from any liability, whether arising out of a tort, contractual or other claim of any nature whatsoever, including claims for any loss or damage to property, or any injury to or death of any person, that may be occasioned by any cause whatsoever pertaining to the acquisition, construction or operation of the Tax-Exempt Project, issuance of the Tax-Exempt Indenture Securities or the performance of this Agreement. If any such claim is asserted, the IDB will give prompt notice to the Mobile Energy Parties and the Mobile Energy Parties will assume the defense thereof, including the employment of counsel, and payment of all expenses and the right to negotiate and consent to settlement. The 42 IDB shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the IDB unless (i) employment of such counsel has been specifically authorized by the Mobile Energy Parties, (ii) the Mobile Energy Parties have failed to assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both the IDB and either of the Mobile Energy Parties and the IDB shall have been advised by counsel that there are actual or potential conflicting interests between the IDB and any other party represented by counsel that is proposed by the Mobile Energy Parties to represent the IDB, including any such conflicting interests arising from situations in which there are one (1) or more legal defenses available to it that are different from or additional to those available to the Mobile Energy Parties, and that representation of the IDB and the Mobile Energy Parties, by counsel employed by the Mobile Energy Parties, would be inappropriate under applicable standards of professional conduct (in which event the Mobile Energy Parties shall not have the right to assume the defense of such action on behalf of the IDB). The Mobile Energy Parties shall not be liable for any settlement of any such action affected without their consent, but if settled with the consent of the Mobile Energy Parties or if there is a final judgment for the plaintiff in any such action, the Mobile Energy Parties will indemnify and hold harmless the IDB from and against any loss or liability by reason of such settlement or judgment. The term "IDB" in this Section 6.2 includes its members, officers, agents, employees and attorneys, in each case to the extent acting for or on behalf of the IDB. The Mobile Energy Parties agree to indemnify each Authorized Agent for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on any of their parts arising out of or in connection with any of their duties under the Lease Documents, including each of their costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties thereunder. Insofar as such provisions may be applicable, each Authorized Agent shall enjoy the same protective provisions in the performance of their respective duties as are specified in Section 9.3 of the Tax-Exempt Indenture with respect to the Tax-Exempt Indenture Trustee. The provisions of this Section 6.2 shall survive the defeasance or termination of the Tax-Exempt Indenture. The Mobile Energy Parties hereby irrevocably waive any claim that they may otherwise have at any time against the Tax- Exempt Indenture Trustee in the event that the Tax-Exempt Indenture Trustee shall (a) at the direction of Holders of not less than such percentage in principal amount of Tax-Exempt Indenture Securities as is specified in the Tax-Exempt Indenture, in accordance 43 therewith, declare the Tax-Exempt Indenture Securities to be due and payable or (b) when so directed, take any other action required to be taken by it under the Tax-Exempt Indenture at the direction of Holders of Tax-Exempt Indenture Securities. SECTION 6.3 Payment of Expenses; Obligations under Tax- Exempt Indenture. The Mobile Energy Parties shall pay, or cause to be paid, all administration expenses and any out-of-pocket expenses of the IDB incurred in the performance of this Agreement and the other Lease Documents, including (a) the reasonable fees of its counsel, the Independent Engineer, the Independent Insurance Advisor, or any other consultant or advisor retained by the IDB in connection with the performance of its duties under the Lease Documents and (b) the expenses of the Tax-Exempt Indenture Trustee in connection with any actions taken by the Tax-Exempt Indenture Trustee to enforce any of the Lease Documents, including the reasonable fees and expenses of its counsel, the Independent Engineer, the Independent Insurance Advisor or any other consultant or advisor retained by the Tax-Exempt Indenture Trustee in connection with the performance of its duties under the Lease Documents, and agrees to perform all obligations set forth in the Tax-Exempt Indenture to be performed by the Mobile Energy Parties or by the Mobile Energy Parties on behalf of the IDB. SECTION 6.4 Financing Statements. The Mobile Energy Parties shall file or cause to be filed all financing statements and continuation statements necessary to perfect the security interest of the Tax-Exempt Indenture Trustee in this Agreement and the Collateral Agent in the Revenues and the other Tax-Exempt Indenture Collateral. SECTION 6.5 Limited Liability of IDB. THE TAX-EXEMPT INDENTURE SECURITIES ARE LIMITED OBLIGATIONS OF THE IDB, PAYABLE SOLELY FROM THE REVENUES AND RECEIPTS DERIVED FROM, AND CERTAIN ACCOUNTS CREATED UNDER, THIS AGREEMENT, THE TAX-EXEMPT INDENTURE AND THE INTERCREDITOR AGREEMENT. THE TAX-EXEMPT INDENTURE SECURITIES DO NOT AND SHALL NEVER CONSTITUTE AN INDEBTEDNESS OR OTHER LIABILITY OF THE STATE OF ALABAMA, THE CITY OF MOBILE, ALABAMA OR ANY POLITICAL SUBDIVISION OF THE STATE OF ALABAMA, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER. NEITHER THE FULL FAITH OR CREDIT OF THE STATE OF ALABAMA OR THE CITY OF MOBILE, ALABAMA, NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF ALABAMA, NOR THE IDB, WILL BE PLEDGED TO THE PAYMENT OF THE TAX-EXEMPT INDENTURE OR THE INTEREST THEREON, AND THE ISSUANCE OF THE TAX-EXEMPT INDENTURE SECURITIES WILL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE STATE OF ALABAMA, THE CITY OF MOBILE, ALABAMA OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF ALABAMA TO APPLY MONEY FOR, OR TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATEVER TO THE PAYMENT OF, THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE TAX-EXEMPT INDENTURE SECURITIES. THE IDB HAS NO TAXING POWER. 44 SECTION 6.6 Recording and Filing; Further Instruments. (a) The Mobile Energy Parties will cause to be filed all necessary financing statements related to this Agreement and the Tax-Exempt Indenture and all supplements hereto and thereto, and such other documents as may be, in the opinion of counsel reasonably acceptable to the Tax-Exempt Indenture Trustee, reasonably necessary to be kept and filed in such manner and in such places as may be required by law in order to preserve and protect fully the security of the owners of the Tax-Exempt Indenture Securities and the rights of the Tax-Exempt Indenture Trustee hereunder and under the Tax-Exempt Indenture. (b) The IDB shall, upon the reasonable request of the Tax-Exempt Indenture Trustee or either of the Mobile Energy Parties, from time to time execute and deliver such further instruments and take such further action as may be reasonable and as may be required to effectuate the purposes of this Agreement and the Tax-Exempt Indenture or any provision hereof or thereof; provided, however, that no such instruments or actions shall pledge the general credit or the full faith of the IDB, the City of Mobile, the State of Alabama or any other municipality or political subdivision thereof, or the taxing power of the City of Mobile, Alabama, the State of Alabama or any other municipality or political subdivision thereof. ARTICLE VII. EVENTS OF DEFAULT; REMEDIES SECTION 7.1 Events of Default. The term "Event of Default," whenever used herein, shall mean any of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or come about or be affected by operation of law, or be pursuant to or in compliance with any applicable Law), and such event shall continue to be an Event of Default if and for so long as it shall not have been remedied: (a) the Mobile Energy Parties shall fail to pay any rental payment required pursuant to Section 2.5 when the same becomes due and payable, for fifteen (15) or more days; or (b) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in: (i) Section 4.4(e); (ii) Section 4.7(b) (insofar as such failure relates to matters specified in Section 4.8(b)(iv)); (iii) Section 4.8(b) (other than clause (v) thereof); (iv) Section 4.10; or (v) Section 4.19; or (c) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in: (i) Section 4.2; (ii) Section 4.4(a); (iii) Section 4.5; (iv) 45 Section 4.7(a); (v) Section 4.7(b) (insofar as such failure would reasonably be expected to have a Material Adverse Effect or relates to matters specified in Section 4.8(b)(v)); (vi) Section 4.8(a), 4.8(b)(v) or 4.8(c); (vii) Section 4.13; (viii) Section 4.14; (ix) Section 4.15; (x) Section 4.16; (xi) Section 3(e), 3(f), 3(g), 3(h), 3(i) or 3(j) of the Security Agreement; or (xii) Section 8, 10, 13, 14 or 15 of the Mortgage; and, in the case of clauses (i) through (xii) above, such failure shall continue uncured for thirty (30) or more days after either of the Mobile Energy Parties has knowledge of such failure; or (d) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in: (i) Section 4.4(b); or (ii) Section 4.7(b) (insofar as such failure relates to matters specified in Section 4.8(b)(i) or 4.8(b)(iii)); and, in the case of clauses (i) and (ii) above, such failure continues for more than thirty (30) days after either of the Mobile Energy Parties has knowledge of such failure; provided, however, that if (and for so long as an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that) (A) such failure is capable of being remedied and either of the Mobile Energy Parties is diligently attempting to remedy such failure, (B) no other Event of Default has occurred and is continuing and (C) such failure would not have a Material Adverse Effect, then either of the Mobile Energy Parties may continue to effect such cure of the default for an additional sixty (60) days; or (e) either of the Mobile Energy Parties shall fail to perform or observe any material covenant or agreement to be performed or observed by it under the provisions of this Agreement, the Tax-Exempt Indenture, the Security Agreement or the Mortgage (other than those referred to in Sections 7.1(a), (b), (c) and (d)) and such failure shall continue uncured for thirty (30) or more days after either of the Mobile Energy Parties has knowledge of such failure; provided, however, that if (and for so long as an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that) (i) such failure is capable of being remedied and either of the Mobile Energy Parties is diligently attempting to remedy such failure and (ii) no other Event of Default has occurred and is continuing, then either of the Mobile Energy Parties may continue to effect such cure of the default for an additional one hundred twenty (120) days; or (f) any representation or warranty made by either of the Mobile Energy Parties herein or in any other Financing Document or in any certificate, financial statement or other document furnished to the Tax-Exempt Indenture Trustee or the Collateral Agent hereunder or thereunder shall prove to have 46 been false or misleading in any respect as of the time made, confirmed or furnished and the inaccuracy has resulted or would reasonably be expected to result in a Material Adverse Effect and (if capable of being cured) such misrepresentation shall continue uncured for thirty (30) or more days after either of the Mobile Energy Parties has knowledge thereof; provided, however, that if (and for so long as an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that) (i) such failure is capable of being remedied and either of the Mobile Energy Parties is diligently attempting to remedy such misrepresentation and (ii) no other Event of Default has occurred and is continuing, either of the Mobile Energy Parties may continue to effect such cure of the misrepresentation, and such misrepresentation shall not be deemed an Event of Default, for an additional sixty (60) days; provided further, however, that if (and for so long as) (A) an Authorized Officer of either of the Mobile Energy Parties provides an Officer's Certificate certifying that such misrepresentation will not have a Material Adverse Effect and (B) the Tax-Exempt Indenture Trustee consents thereto, then either of the Mobile Energy Parties may continue to effect such cure of the misrepresentation beyond such additional sixty (60) days; or (g) either of the Mobile Energy Parties shall fail to perform any obligation in respect of any Debt in an amount exceeding $5,000,000 and acceleration shall be declared with respect to such Debt; or (h) with respect to any Project Contract to which the Company is a party: (i) such Project Contract is declared unenforceable by a Governmental Authority; (ii) any other party thereto terminates such Project Contract prior to its stated expiration or denies it has an obligation and substantially ceases performance thereunder (other than, in either case, in connection with a Mill Closure with respect to the Tissue Mill or the Paper Mill, if the Company has provided the Revenue Sufficiency Certification to the Collateral Agent); or (iii) any other party thereto defaults in respect of its obligations under such Project Contract; and, in the case of any event described in clauses (i), (ii) and (iii) above (other than with respect to the Pulp Mill Energy Services Agreement), such event would result in a Material Adverse Effect; provided, however, that none of such events shall be an Event of Default hereunder if within one hundred eighty (180) days from the occurrence of such an event, the Company shall have provided an Officer's Certificate certifying, together with an Independent Engineer Confirmation, to the Tax-Exempt Indenture Trustee that (A) such Project Contract and (if such Project Contract is an Energy Service Agreement) the applicable Mill Owner's 47 obligations under the Master Operating Agreement have been reinstated on identical terms pursuant to the provisions of the Master Operating Agreement, provided that if the obligor thereunder is different from the obligor prior to such reinstatement, such obligor is reasonably capable of performing its obligations under such Project Contract or (B) the Company has satisfied the Event of Default Alternative Agreement Requirements with respect to such Project Contract; or (i) (i) an Event of Default under any Working Capital Facility shall have occurred and be continuing and shall not have been waived by the Working Capital Facility Provider; (ii) an Event of Default under the Indenture shall have occurred and be continuing and shall not have been waived by the Indenture Trustee; (iii) an Event of Default under the Tax-Exempt Indenture shall have occurred and be continuing and shall not have been waived by the Tax-Exempt Indenture Trustee; or (iv) an Event of Default under any Security Document shall have occurred and be continuing and shall not have been waived; or (j) a final and non-appealable judgment or judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against either of the Mobile Energy Parties, and the same shall not be stayed or discharged within thirty (30) days from the date of entry thereof; or (k) at any time Southern shall fail to (i) continue to control, directly or indirectly, the management and operations of the Company (except if necessary to comply with applicable regulatory restrictions, including (if the Company elects, or the Members elect, to qualify the Energy Complex as a Qualifying Facility under PURPA) those imposed on Qualifying Facilities under PURPA and the rules promulgated thereunder) or (ii) maintain ownership, directly or indirectly, of at least fifty percent (50%) of the ownership interests in the Company; or (l) at any time the Company shall fail to maintain Southern Electric or an Affiliate thereof as Operator, unless the Company provides a letter from any two (2) Rating Agencies (then currently rating the Outstanding Tax-Exempt Indenture Securities) confirming that the rating of such Tax-Exempt Indenture Securities will not be adversely affected by such failure; or (m) any grant of a Lien contained in the Security Documents shall cease to be effective to grant a perfected Lien to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) on the Collateral described therein with the priority purported to be 48 created thereby; provided, however, that the Company shall have ten (10) days from actual knowledge or constructive knowledge thereof to cure any such cessation; or (n) a Bankruptcy Event in respect of either of the Mobile Energy Parties shall have occurred and be continuing; or (o) if any Southern Guaranty is in effect with respect to any Reserve Account Security Account, a Bankruptcy Event in respect of Southern shall have occurred and be continuing, unless a Reserve Account Letter of Credit or cash in the amount of the then Available Amount under such Southern Guaranty is provided within fifteen (15) days of such Bankruptcy Event; or (p) the failure by Southern to perform any of the "Guaranteed Obligations" under any Southern Guaranty and such failure shall continue for fifteen (15) or more days. SECTION 7.2 Enforcement of Remedies. If one (1) or more Events of Default shall have occurred and be continuing and, in accordance with the terms of the Tax-Exempt Indenture, the Tax- Exempt Indenture Securities shall have been declared to be or become immediately due and payable pursuant to any provision of the Tax-Exempt Indenture, then: (a) All rental payments hereunder shall, without further action, become and be immediately due and payable, anything herein to the contrary notwithstanding. Upon such acceleration of the rental payments hereunder, the Mobile Energy Parties shall pay an amount sufficient to enable the Tax-Exempt Indenture Trustee to pay the aggregate principal amount of the Outstanding Tax-Exempt Indenture Securities and all interest and premium, if any, on the Tax-Exempt Indenture Securities then due and to become due to the date of payment of the Tax-Exempt Indenture Securities. In addition, the Mobile Energy Parties shall pay all fees and expenses of the Tax-Exempt Indenture Trustee accrued and to accrue through the date of such acceleration, including the reasonable fees and expenses of counsel to the Tax-Exempt Indenture Trustee. The Tax-Exempt Indenture Trustee shall rescind any such declaration of acceleration of the rental payments under this Agreement concurrently with any rescission of acceleration of the Tax-Exempt Indenture Securities pursuant to Section 8.2 of the Tax-Exempt Indenture. (b) The Collateral Agent, on behalf of the Tax-Exempt Indenture Trustee and the other Senior Secured Parties, may exercise through the Collateral Agent all remedies provided in the Mortgage, the Security Agreement and the Intercreditor 49 Agreement, subject to the terms of the Intercreditor Agreement. (c) The Tax-Exempt Indenture Trustee, on behalf of the IDB, may inspect, examine and make copies of the books and records and any and all accounts and data of the Mobile Energy Parties relating to the use and operation of the Energy Complex. (d) Subject to the provisions of the Intercreditor Agreement and to the extent not prohibited by applicable Law, the Tax-Exempt Indenture Trustee, on behalf of the IDB, may take all other actions and pursue all other remedies available under any other contract or agreement or otherwise by statute, at Law or in equity, whether or not inconsistent with the foregoing, that may appear necessary or appropriate to collect the sums then due and thereafter to become due from the Mobile Energy Parties by reason of this Agreement, or to enforce specific performance and observance of any obligation, agreement or contract of the Mobile Energy Parties under this Agreement. Any amounts collected pursuant to action taken pursuant to this Section 7.2 shall be applied in accordance with the provisions of the Tax-Exempt Indenture. SECTION 7.3 Remedies Cumulative; Delay or Omission Not a Waiver. To the extent permitted by law each and every right, power and remedy herein specifically given to the IDB (or the Tax- Exempt Indenture Trustee acting on its behalf) shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the IDB (or the Tax-Exempt Indenture Trustee acting on its behalf) and the exercise or the beginning of the exercise of any right, power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy, and no delay or omission by the IDB (or the Tax-Exempt Indenture Trustee acting on its behalf) in the exercise of any right, power or remedy or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver by the IDB (or the Tax-Exempt Indenture Trustee acting on its behalf) of any default on the part of either of the Mobile Energy Parties or to be an acquiescence therein. (In order to entitle the IDB to exercise any remedy reserved to it in this Article VII, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Such rights and remedies as are granted the IDB hereunder shall also extend to the Tax-Exempt Indenture Trustee, and the Tax-Exempt Indenture Trustee and the Holders of Tax-Exempt Indenture 50 Securities shall be deemed to be third party beneficiaries of all covenants and agreements herein contained.) SECTION 7.4 Reimbursement of Attorneys' Fees. If either of the Mobile Energy Parties shall default under any of the provisions hereof and the IDB or the Tax-Exempt Indenture Trustee shall employ attorneys or incur other reasonable expenses for the collection of payments due hereunder or for the enforcement of performance or observance of any obligation or agreement on the part of the Mobile Energy Parties contained herein, the Mobile Energy Parties will on demand therefor reimburse the IDB or the Tax-Exempt Indenture Trustee, as the case may be, for the reasonable fees of such attorneys and such other reasonable expenses so incurred. SECTION 7.5 Waiver of Breach. In the event any obligation created hereby shall be breached by any of the parties and such breach shall thereafter be waived, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. In view of the assignment of certain of the IDB's rights and interest hereunder to the Tax- Exempt Indenture Trustee, the IDB shall have no power to waive any default hereunder by the Mobile Energy Parties in respect of such rights and interest without the consent of the Tax-Exempt Indenture Trustee, and the Tax-Exempt Indenture Trustee may exercise any of the rights of the IDB hereunder. SECTION 7.6 Unforeseen Requirements. The Mobile Energy Parties may take any action under this Agreement, whether or not specifically stated herein, without the consent of Holders of the Tax-Exempt Indenture Securities but with the consent of the Tax-Exempt Indenture Trustee and Bond Counsel to (a) avoid a potential Determination of Taxability or (b) obtain, upgrade or maintain any rating of the Tax-Exempt Indenture Securities. SECTION 7.7 Intercreditor Agreement. Simultaneously with the execution and delivery of this Agreement, the IDB and the Tax-Exempt Indenture Trustee shall enter into the Intercreditor Agreement on behalf of itself and, in the case of the Tax-Exempt Indenture Trustee, all Holders of any of the Outstanding Tax-Exempt Securities and all future Holders of Tax-Exempt Indenture Securities. Notwithstanding any other provision of this Agreement to the contrary, all rights, powers and remedies available to the Tax-Exempt Indenture Trustee, the IDB, the Holders of any of the Outstanding Tax-Exempt Indenture Securities and all future Holders of any of the Tax-Exempt Indenture Securities or the Tax-Exempt Indenture Trustee, with respect to the Shared Collateral, or otherwise pursuant to the Security Documents, shall be subject to the Intercreditor Agreement, including, in all cases, the ability to enforce any remedy other than remedies specified in Section 7.2 of this Agreement. To the extent that the Collateral Agent has been authorized to exercise any such rights, powers and remedies 51 under the Intercreditor Agreement, any right given to the Tax- Exempt Indenture Trustee hereunder to exercise any remedy with respect to the Shared Collateral shall, during such time as the Intercreditor Agreement is in effect, be a right of the Tax-Exempt Indenture Trustee to direct the Collateral Agent to take such action to the extent set forth in the Intercreditor Agreement. ARTICLE VIII. GUARANTY SECTION 8.1 Guaranty of Payment and Performance. Mobile Energy hereby (a) guarantees to the IDB for its own benefit and the benefit of the Tax-Exempt Indenture Trustee and the Holders of Tax-Exempt Indenture Securities from time to time the due and punctual payment, observance and performance of all of the Guaranteed Obligations in accordance with their respective terms and when and as due (whether at maturity of the Tax-Exempt Indenture Securities, by reason of acceleration or otherwise), or deemed to be due pursuant to Section 8.2, and (b) agrees so to pay, observe or perform the same when so due, or deemed to be due, upon demand. SECTION 8.2 Continuance and Acceleration of Guaranteed Obligations upon Certain Events. If (a) any Event of Default described in Section 7.1(n) shall have occurred and be continuing, (b) any injunction, stay or the like that enjoins any acceleration, or demand for the payment, observance or performance, of any Guaranteed Obligations that would otherwise be required or permitted under the Security Documents shall become effective or (c) any Guaranteed Obligations shall be or be determined to be or become discharged, disallowed, invalid, illegal, void or otherwise unenforceable (whether by operation of any present or future law or by order of any Governmental Authority) against the Company then (i) such Guaranteed Obligations shall, for all purposes of this Agreement, be deemed (A) in the case of clause (c) above, to continue to be outstanding and in full force and effect notwithstanding the unenforceability thereof against the Company, and (B) if such is not already the case, to have thereupon become immediately due and payable and to have commenced bearing interest at the rate equal to the then highest yield on any of the Outstanding Securities plus two percent (2%) and (ii) the IDB may, with respect to such Guaranteed Obligations, exercise all of the rights and remedies hereunder that would be available to it during an Event of Default. SECTION 8.3 Recovered Payments. The Guaranteed Obligations shall be deemed not to have been paid, observed or performed, and Mobile Energy's obligations under this Guaranty in respect thereof shall continue and not be discharged, to the extent that any payment, observance or performance thereof by the Company 52 or any other guarantor, or out of the proceeds of any collateral, is recovered from or paid over by or for the account of the IDB or the Tax-Exempt Indenture Trustee for any reason, including as a preference or fraudulent transfer or by virtue of any subordination (whether present or future or contractual or otherwise) of the Guaranteed Obligations, whether such recovery or payment over is effected by any judgment, decree or order of any Governmental Authority, by any plan of reorganization or by settlement or compromise by the IDB or the Tax-Exempt Indenture Trustee (whether or not consented to by either of the Mobile Energy Parties or any other guarantor) of any claim for any such recovery or payment over. To the extent not prohibited by applicable Law, Mobile Energy hereby expressly waives the benefit of any applicable statute of limitations and agrees that it shall be liable hereunder with respect to any Guaranteed Obligation whenever such a recovery or payment over thereof occurs. SECTION 8.4 Evidence of Guaranteed Obligations. The records of the Tax-Exempt Indenture Trustee shall be conclusive evidence (absent manifest error) of the Guaranteed Obligations and of all payments, observances and performances in respect thereof. SECTION 8.5 Binding Nature of Certain Adjudications. Mobile Energy shall be conclusively bound by the adjudication in any action or proceeding, legal or otherwise, involving any controversy arising under, in connection with, or in any way related to, any of the Guaranteed Obligations, and by a judgment, award or decree entered therein, if Mobile Energy shall have had the right, or shall have been given the opportunity, to participate in such action or proceeding and shall have been given notice of such action or proceeding in time to exercise such right or avail itself of such opportunity. SECTION 8.6 Nature of Mobile Energy's Obligations. Mobile Energy's obligations hereunder (a) are absolute and unconditional, (b) are unlimited in amount, (c) constitute a guaranty of payment and performance and not a guaranty of collection, (d) are as primary obligor and not as a surety only, (e) shall be a continuing guaranty of all present and future Guaranteed Obligations and all promissory notes and other documentation given in extension or renewal or substitution for any of the Guaranteed Obligations and (f) shall be irrevocable. SECTION 8.7 No Release of Mobile Energy. The obligations of Mobile Energy under this Guaranty shall not be reduced, limited or terminated, nor shall Mobile Energy be discharged from any thereof, for any reason whatsoever (other than, subject to Sections 8.3 and 8.12, the payment, observance and performance of the Guaranteed Obligations), including (and whether or not the same shall have occurred or failed to occur once or more than once and whether or not Mobile Energy shall have received notice thereof): (a) (i) any increase in the principal amount of, 53 or interest rate applicable to, (ii) any extension of the time of payment, observance or performance of, (iii) any other amendment or modification of any of the other terms and provisions of, (iv) any release, composition or settlement (whether by way of acceptance of a plan of reorganization or otherwise) of, (v) any subordination (whether present or future or contractual or otherwise) of or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, in each case the Guaranteed Obligations; (b) (i) any failure to obtain any release, composition or settlement of, (ii) any amendment or modification of any of the terms and provisions of, (iii) any subordination of or (iv) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, in each case any guaranties of the Guaranteed Obligations; (c) (i) any failure to obtain any release of, (ii) any failure to protect or preserve, (iii) any release, compromise, settlement or extension of the time of payment of any obligations constituting, (iv) any failure to perfect or maintain the perfection or priority of any Lien upon, (v) any subordination of any Lien upon or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of any Lien or intended Lien upon, in each case any collateral now or hereafter securing the Guaranteed Obligations or any other guaranties thereof; (d) any termination of or change in any relationship between Mobile Energy and the Company, including any such termination or change resulting from a change in the ownership of Mobile Energy or the Company or from the cessation of any commercial relationship between Mobile Energy and the Company; (e) any exercise of, or any election not or failure to exercise, delay in the exercise of, waiver of, or forbearance or other indulgence with respect to, any right, remedy or power available to the IDB or the Tax-Exempt Indenture Trustee, including (i) any election not or failure to exercise any right of setoff, recoupment or counterclaim, (ii) any election of remedies effected by the IDB or the Tax-Exempt Indenture Trustee, including the foreclosure upon any real estate constituting collateral, whether or not such election affects the right to obtain a deficiency judgment and (iii) any election by the IDB or the Tax-Exempt Indenture Trustee in any proceeding under the Bankruptcy Code of the application of Section 1111(b)(2) of such Code; and (f) any other act or failure to act or any other event or circumstance that (i) varies the risk of Mobile Energy under this Guaranty or (ii) but for the provisions hereof, would, as a matter of statute or rule of law or equity, operate to reduce, limit or terminate the obligations of Mobile Energy hereunder or discharge Mobile Energy from any thereof. SECTION 8.8 Certain Waivers. Mobile Energy waives (a) any requirement, and any right to require, that any right or power be exercised or any action be taken against the Company, any other guarantor or any collateral for the Guaranteed Obligations or any guaranty thereof, (b) all defenses to, and all setoffs, counterclaims and claims of recoupment against, the Guaranteed Obligations that may at any time be available to the Company or any 54 guarantor, (c) (i) notice of acceptance of and intention to rely on this Guaranty, (ii) notice of the issuance of any Tax-Exempt Indenture Securities under the Tax-Exempt Indenture and of the incurrence or renewal of any other Guaranteed Obligations, (iii) notice of any of the matters referred to in Section 8.7 and (iv) all other notices that may be required by Law or otherwise to preserve any rights against Mobile Energy under this Guaranty, including any notice of default, demand, dishonor, presentment and protest, (d) diligence, (e) any defense based upon, arising out of or in any way related to (i) any claim that any sale or other disposition of any collateral for the Guaranteed Obligations or any guaranty thereof was not conducted in a commercially reasonable fashion or that a public sale, should the IDB, the Tax-Exempt Indenture Trustee or the Collateral Agent (as the case may be), have elected to so proceed, was, in and of itself, not a commercially reasonable method of sale, (ii) any claim that any election of remedies by the IDB, the Tax-Exempt Indenture Trustee or the Collateral Agent (as the case may be) including the exercise by the IDB, the Tax-Exempt Indenture Trustee or the Collateral Agent (as the case may be), of any rights against any collateral, impaired, reduced, released or otherwise extinguished any right that Mobile Energy might otherwise have had against the Company or any other guarantor or against any collateral, including any right of subrogation, exoneration, reimbursement or contribution or right to obtain a deficiency judgment, (iii) any claim based upon, arising out of or in any way related to any of the matters referred to in Section 8.7 and (iv) any claim that this Guaranty should be strictly construed against the Tax-Exempt Indenture Trustee and (f) ALL OTHER DEFENSES UNDER APPLICABLE LAW THAT WOULD, BUT FOR THIS CLAUSE (f), BE AVAILABLE TO MOBILE ENERGY AS A DEFENSE AGAINST OR A REDUCTION OR LIMITATION OF ITS OBLIGATIONS HEREUNDER. SECTION 8.9 Independent Credit Evaluation. Mobile Energy has independently, and without reliance on any information supplied by the IDB or the Tax-Exempt Indenture Trustee, taken, and will continue to take, whatever steps it deems necessary to evaluate the financial condition and affairs of the Company, and the IDB and the Tax-Exempt Indenture Trustee shall have no duty to advise Mobile Energy of information at any time known to them regarding such financial condition or affairs. SECTION 8.10 Subordination of Rights Against Company, Other Guarantors and Collateral. All rights that Mobile Energy may at any time have against the Company, any other guarantor or any collateral for the Guaranteed Obligations or any guaranty thereof (including rights of subrogation, exoneration, reimbursement and contribution and whether arising under Law or otherwise), and all obligations that the Company or any other guarantor may at any time have to Mobile Energy, Mobile Energy's obligations hereunder or any payment made are hereby expressly subordinated to the prior payment, observance and performance in full of the Guaranteed Obligations and any other such guaranty. Mobile Energy shall not 55 enforce any of the rights, or attempt to obtain payment or performance of any of the obligations, subordinated pursuant to this Section 8.10 until the Guaranteed Obligations have been paid, observed and performed in full, except that such prohibition shall not apply to routine acts, such as the giving of notices and the filing of continuation statements, necessary to preserve any such rights. If any amount shall be paid to or recovered by Mobile Energy (whether directly or by way of setoff, recoupment or counterclaim) on account of any right or obligation subordinated pursuant to this Section 8.10, such amount shall be held in trust by Mobile Energy for the benefit of the IDB and the Tax-Exempt Indenture Trustee, not commingled with any of Mobile Energy's other funds and forthwith paid over to the Tax-Exempt Indenture Trustee, in the exact form received, together with any necessary endorsements, to be applied and credited against, or held as security for, the Guaranteed Obligations and the obligations of Mobile Energy hereunder. Notwithstanding the foregoing, nothing herein shall restrict or otherwise limit the ability of Mobile Energy to receive monies distributed to it by the Collateral Agent pursuant to Section 3.11 of the Intercreditor Agreement, which monies need not be held in trust by Mobile Energy. SECTION 8.11 Payments by Mobile Energy. (a) All payments due to the IDB or the Tax-Exempt Indenture Trustee hereunder shall be made to the Tax-Exempt Indenture Trustee at the Corporate Trust Office or at such other address the Tax-Exempt Indenture Trustee may designate by notice to Mobile Energy. A payment shall not be deemed to have been made on any day unless such payment has been received by the Tax-Exempt Indenture Trustee at the required place of payment, in lawful money of the United States of America in funds immediately available to the Tax-Exempt Indenture Trustee. (b) All payments due the IDB or the Tax-Exempt Indenture Trustee under this Guaranty, and all of the other terms, conditions, covenants and agreements to be observed and performed by Mobile Energy under this Guaranty, shall be made, observed or performed by Mobile Energy without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim (whether, in any case, in respect of an obligation owed by the IDB or the Tax-Exempt Indenture Trustee to Mobile Energy, the Company or any other guarantor and, in the case of a counterclaim, whether sounding in tort, contract or otherwise) or tax. (c) Mobile Energy hereby authorizes the Tax-Exempt Indenture Trustee, if and to the extent any amount payable by Mobile Energy under this Guaranty is not otherwise paid when due, to charge such amount against any or all of the accounts of Mobile Energy with the Tax-Exempt Indenture Trustee or any of its Affiliates (whether maintained at a branch or office located within 56 or without the United States), with Mobile Energy remaining liable for any deficiency. (d) Whenever any payment to the IDB or the Tax-Exempt Indenture Trustee under this Article VIII would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day. If the date any payment hereunder is due is extended (whether by operation of this Agreement, Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. SECTION 8.12 Continuance of Guaranty; Survival. The obligations of Mobile Energy and the rights of the IDB and the Tax- Exempt Indenture Trustee under Article VIII of this Agreement shall continue in full force and effect until the payment, observance and performance in full of the Guaranteed Obligations. SECTION 8.13 Assignments and Participations; Assignments. Mobile Energy may not assign any of its rights or obligations under this Guaranty without the prior written consent of the Tax-Exempt Indenture Trustee, and no assignment of any such obligation shall release Mobile Energy therefrom unless the Tax- Exempt Indenture Trustee shall have consented to such release in a writing specifically referring to the obligation from which Mobile Energy is to be released. SECTION 8.14 Benefit and Enforcement. This Guaranty is given for the benefit of the IDB, the Tax-Exempt Indenture Trustee and, subject to the terms and conditions set forth herein, the Holders from time to time of the Tax-Exempt Indenture Securities, all of whom shall be entitled in the same manner as set forth herein to enforce performance and observance of this Guaranty. ARTICLE IX. LIMITED RECOURSE Satisfaction of the obligations of the Mobile Energy Parties (including pursuant to the Guaranty) under this Agreement for the making of rental payments, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be had solely from the assets of the Mobile Energy Parties. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in Article VIII) or of the stockholders of Mobile Energy, other than their respective interests in the Tax-Exempt Securities Collateral, if any, (b) any Member (other than Mobile Energy as provided in Article VIII) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect 57 of any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, Southern) and in the event of any non-performance by either of the Company or Mobile Energy of its obligation to make rental payments, or any part thereof, or for any claim based thereon or otherwise in respect thereof, no judgment for any deficiency upon the obligations of either of the Company or Mobile Energy under this Agreement, for the making of rental payments, or any part thereof, or for any claim based thereon or otherwise in respect thereof or related thereto, shall be obtainable by the IDB, the Holders, the Tax-Exempt Indenture Trustee or the Collateral Agent against any Member (other than Mobile Energy as provided in Article VIII) or any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in the Maintenance Plan Funding Subaccount or the Distribution Account, Southern). Notwithstanding anything in this Article IX to the contrary, (i) satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company, (ii) nothing contained herein, in the Tax-Exempt Indenture or in the Tax-Exempt Indenture Securities shall limit or otherwise prejudice in any way the right of the IDB, the Tax-Exempt Indenture Trustee, the Collateral Agent or any Holder to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party or limit or otherwise prejudice in any way the right of the IDB, the Holders, the Tax-Exempt Indenture Trustee or the Collateral Agent to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Tax-Exempt Indenture Securities Collateral granted hereunder or under the Security Documents and (iii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud or wilful misrepresentations, including those contained in Officer's Certificates issued from time to time. 58 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, and their seals to be hereunto affixed and attested, by their respective officers thereunto duly authorized as of the day and year first above written. [Seal] MOBILE ENERGY SERVICES COMPANY, L.L.C. Attest: /s/ By: /s/ Assistant Secretary Name:Christoper J. Kysar Title: Vice President [Seal] MOBILE ENERGY SERVICES HOLDINGS, INC. Attest: By: /s/ /s/ Name: Christoper J. Kysar Assistant Secretary Title:Vice President [Seal] THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA Attest: By: /s/ /s/ Name: Clarence M. Boll, Jr. Secretary Title: Vice President of the Board of Director STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Christopher Kysar whose name as Vice President of Mobile Energy Services Company, L.L.C., an Alabama limited liability company, is signed to the foregoing Amended and Restated Lease and Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said limited liability company. Given under my hand and seal this the 23rd day of August, 1995. /s/ (seal) Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Christopher Kysar whose name as Vice President of Mobile Energy Services Holdings, Inc., an Alabama corporation, is signed to the foregoing Amended and Restated Lease and Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and seal this the 23rd day of August, 1995. /s/ (seal) Notary Public STATE OF ALABAMA ) ) ss.: COUNTY OF MOBILE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Clarence Boll, Jr. whose name as Vice Chairman of The Industrial Development Board of the City of Mobile, Alabama, a public corporation organized under the laws of the State of Alabama, is signed to the foregoing Amended and Restated Lease and Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. Given under my hand and seal this the 17th day of August, 1995. /s/ (seal) Notary Public Appendix A DEFINED TERMS For purposes of any Financing Document (as defined herein), terms used in such Financing Document (including terms used herein) that are not otherwise defined therein shall have the following meanings, subject to any provisions contained in such Financing Document that affect the construction or interpretation of such terms. Except as otherwise expressly provided in any such Financing Document, if and to the extent that such Financing Document shall be amended, restated, supplemented or otherwise modified from time to time pursuant to the terms and provisions thereof, this Appendix A shall be, or be deemed to have been, amended, restated, supplemented or otherwise modified concurrently with the execution and delivery of such amendment, restatement, supplement or other modification in order to conform the terms herein and therein, mutatis mutandis, to the terms set forth in or required by such amendment, restatement, supplement or other modification. Except as otherwise expressly provided in any such Financing Document: (a) the terms used in such Financing Document have the meanings assigned to them in this Appendix A and include the plural as well as the singular; provided, however, that, in the case of the Indenture, all such terms that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (b) (i) all accounting terms not otherwise defined in such Financing Document have the meanings assigned to them, (ii) all financial statements and all certificates and reports as to financial matters required to be delivered to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), under such Financing Document shall be prepared and (iii) all calculations made for the purpose of determining compliance with such Financing Document shall (except as otherwise expressly provided herein) be made, in the case of clauses (i), (ii) and (iii) above, in accordance with, or by application of, GAAP applied on a basis consistent (except inconsistencies that are disclosed in writing to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), and are in accordance with GAAP as certified by a firm of independent certified public accountants of recognized national standing) with that used in the preparation of the then most recent corresponding financial statements furnished under such Financing Document to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be); 62 (c) all references in such Financing Document to any designated "Article," "Section," "Appendix," "Schedule," "Exhibit" and other subdivision are to the designated Article, Section, Appendix, Schedule, Exhibit and other subdivision, respectively, of such Financing Document; (d) all references in such Financing Document to (i) the words "herein," "hereof" and "hereunder" and other words of similar import refer to such Financing Document as a whole and not to any particular Article, Section or other subdivision and (ii) the term "this Agreement" or "this Indenture" means such Financing Document as a whole, including Appendices, Schedules and Exhibits thereto; (e) all references in such Financing Document to any Project Document or other Contract defined or referred to therein shall include such Contract (and, in the case of the Senior Securities or any other instrument, any other instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified, or as such Contract may have been replaced (including (i) in the case of an Energy Services Agreement or the Master Operating Agreement, any replacement Contract therefor then satisfying the Restricted Payment Alternative Agreement Requirements with respect thereto and (ii) in the case of any Project Contract, any replacement Contract therefor then satisfying the Event of Default Alternative Agreement Requirements with respect thereto), from time to time; (f) all references in such Financing Document to any Person (including any of its capacities) shall include the permitted successors and assigns of such Person (including in such capacity) in accordance with the terms of such Financing Document and the other Project Documents and, in the case of any Governmental Authority, any Person succeeding to its functions and capacities; (g) all references in such Financing Document to any Law shall include such Law or any successor Law as amended, supplemented or otherwise modified and in effect from time to time, and any other Law in substance substituted therefor; (h) any item or list of items set forth following the word "including," "include" or "includes" in such Financing Document is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included," such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such item or items similar to such items; (i) all references in such Financing Document to the Collateral Agent, the Indenture Trustee, the Tax-Exempt 63 Indenture Trustee, the IDB or the Working Capital Facility Provider shall be deemed to refer to each such Person however designated in the Financing Documents so that (i) references to rights or duties of the Collateral Agent under such Financing Document shall be deemed to include the rights or duties of such Person as the "Secured Party" under the Security Agreement and as the "Mortgagee" under the Mortgage, (ii) references to rights or duties of the Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement, (iii) references to rights or duties of the Tax-Exempt Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement and (iv) references to rights or duties of the Working Capital Facility Provider under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement; provided, however, that, if such Financing Document is (A) the Security Agreement, references to rights or duties of the "Secured Party" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent, (B) the Mortgage, references to rights or duties of the "Mortgagee" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent and (C) the Working Capital Facility, references to rights or duties of the "Agent" thereunder or a Lender shall be deemed to include the rights or duties of such Person as the Working Capital Facility Provider; (j) all terms defined in such Financing Document shall have the meanings therein ascribed to them when used in any certificate, opinion or other document delivered pursuant thereto and, in the case of the Indenture and the Tax-Exempt Indenture, in the Senior Securities; (k) all references in such Financing Document to the knowledge of any Person that is a corporation, limited liability company or partnership, or any other Person that is not an individual, with respect to any subject or event (including the occurrence or non-occurrence of any circumstance, the failure to perform or observe, or the satisfaction of, any covenant or agreement or the pending or threatened nature of any action) shall be deemed to mean that an Authorized Officer of such Person (or, if such Person is the Company, the Plant Manager thereof) has actual knowledge or awareness of such subject or event or when notice of such subject or event shall have been given, or deemed to have been given, to such Person in accordance with the provisions of such Financing Document; and (l) all references in such Financing Document to the Project Contracts shall be deemed to exclude any Project Contract (and the Consent to Assignment (if any) with respect thereto) (i) after the date on which such Project 64 Contract (A) may have been terminated in accordance with Section 5.10 of the Indenture or Section 4.10 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), (B) shall have reached its stated termination date (if any) or (C) (other than in the case of the Energy Services Agreements and the Master Operating Agreement in connection with a Mill Closure) shall have been fully and finally performed by all parties thereto and (ii) after the date of any disposition of the Company's rights and obligations under such Project Contract in accordance with Section 5.8 of the Indenture or Section 4.8 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), except, in the case of clauses (i) and (ii) above, if and to the extent that any provisions of such Project Contract so excluded provide that the rights and obligations of any Person that is a party to such Contract shall survive the termination thereof. "Accounts" means, collectively, the Intercreditor Agreement Accounts, the Indenture Accounts and the Tax-Exempt Indenture Accounts. "Act" has the meaning specified (a) in the case of any Holder of Indenture Securities, in Section 1.4 of the Indenture and (b) in the case of any Holder of Tax-Exempt Indenture Securities, in Section 1.4 of the Tax-Exempt Indenture. "Additional Available Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies neither constituting Revenues nor otherwise required (except pursuant to the provisions of Section 3.10 of the Intercreditor Agreement) to be deposited into any Account that are deposited into the Loss Proceeds Account as other amounts available to the Company and necessary for the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of securities or partnership or other ownership interests or by contract or otherwise. Notwithstanding the foregoing, Southern, Mobile Energy, Southern Electric, the Operator and each Person owning, directly or indirectly, five percent (5%) or more of the membership interests in the Company shall be deemed to be an Affiliate of the Company. "Affiliate Subordinated Debt" means any unsecured, subordinated loan or loans to the Company from any of its Affiliates pursuant to a Subordinated Loan Agreement, fully 65 subordinated as to payment and exercise of remedies and payable only from monies otherwise distributable by the Company from the Distribution Account in accordance with the Intercreditor Agreement. "Aggregate Demand" has the meaning specified in the Master Operating Agreement. "Alabama Act" means Ala. Code ss. 11-54-80 to ss. 11-54-101. "Annual Budget" means the operating plan and budget for the Energy Complex developed by the Company for operation of the Energy Complex for any Fiscal Year, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Approved Institutional Investor" has the meaning specified (a) in the case of the Tax-Exempt Bonds, in the Limited Offering Memorandum dated August 17, 1995 relating to the initial offering thereof and (b) in the case of any other Tax-Exempt Indenture Securities, in any other offering memorandum relating to the initial offering of such Tax-Exempt Indenture Securities. "Articles of Organization" means the Articles of Organization of the Company dated July 13, 1995. "Authenticating Agent" means any Person acting as Authenticating Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Authorized Agent" means any Paying Agent, Authenticating Agent or Security Registrar or other agent appointed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or the Company or the IDB (as the case may be) in accordance with the Indenture or the Tax-Exempt Indenture (as the case may be) to perform any function that such indenture authorizes such agent to perform. "Authorized Officer" means (a) in the case of a corporation (including Mobile Energy) or limited liability company (including the Company), the chief executive officer, the president, the chief financial officer, a vice president, the treasurer or an assistant treasurer of such corporation or limited liability company and (b) in the case of any general or limited partnership, any Person authorized by the managing general partner (or such other Person that is responsible for the management of such partnership) to take the applicable action on behalf of such partnership or any officer (with a title specified in clause (a) above) of such partnership's managing general partner (or such other Person that is responsible for the management of such managing general partner). 66 "Authorized Representative" means, in respect of any Person, the individual or individuals authorized to act on behalf of such Person by the board of directors, manager, management committee, board of control or any other governing body of such Person as designated from time to time in a certificate of such Person, which shall include or attach thereto specimen signatures, delivered to the Collateral Agent upon which the Collateral Agent may conclusively rely. "Authorized Trust Officer" means any officer of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or any other individual who shall be duly authorized by appropriate corporate action on the part of either such trustee to authenticate Senior Securities. "Automatic Acceleration Default" has the meaning specified (a) in the case of the Indenture, in Section 8.2(a) thereof and (b) in the case of the Tax-Exempt Indenture, in Section 8.2(a) thereof. "Available Amount" means, at any time, (a) in the case of any Reserve Account Letter of Credit, the undrawn stated amount of such Reserve Account Letter of Credit at such time and (b) in the case of any Southern Guaranty, an amount equal to the "Available Amount" set forth therein (as such amount may be increased or decreased in accordance with such Southern Guaranty). "Bankruptcy Code" means the Federal Bankruptcy Code of 1978. "Bankruptcy Event" means, in respect of any Person, (a) such Person's general inability, or its admission of its inability, to pay its debts as such debts become due, (b) the application by such Person for or its consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (c) the commencement by such Person of a voluntary case under the Bankruptcy Code, (d) the making by such Person of a general assignment for the benefit of its creditors, (e) the filing of a petition by such Person seeking to take advantage as a debtor of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, winding-up or readjustment of debts, (f) the failure by such Person to controvert in a timely and appropriate manner, or its acquiescence in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, (g) the taking of any corporate or other action by such Person for the purpose of effecting any of the foregoing, (h) the commencement of a proceeding or case, without the application or consent of such Person, in any court seeking (i) such Person's reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator, examiner or the like of such Person or all or any substantial part of its property or (iii) similar relief in respect of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up or 67 composition or adjustment of debt and such proceeding or case specified in this clause (h) shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and (except in the case of Section 5.19(a)(ii) of the Indenture or Section 4.19(a)(ii) of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility)) in effect, for a period of sixty (60) or more days or (i) an order for relief against such Person shall be entered in any involuntary case under the Bankruptcy Code. "Board of Directors" means (a) when used with respect to the Company, the Manager of the Company and (b) when used with respect to Mobile Energy, either the board of directors of Mobile Energy or any committee of such board duly authorized to act for it. "Board Resolution" means (a) when used with respect to the Company, a copy of a resolution certified by an Authorized Officer of the Company or the secretary or assistant secretary of the Company as having been adopted by the Manager of the Company and to be in full force and effect on the date of such certification and (b) when used with respect to Mobile Energy, means a copy of a resolution certified by an Authorized Officer or the secretary or assistant secretary of Mobile Energy as having been adopted by the Board of Directors of Mobile Energy and to be in full force and effect on the date of such certification. "Boiler Ash Agreement" means the Boiler Ash Disposal Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Bond Counsel" means Balch & Bingham or other nationally recognized counsel experienced in matters of municipal law and the tax-exempt status of obligations under the Code. "Business Day" means any day other than a Saturday or Sunday or other day on which banks in New York, New York or Atlanta, Georgia are authorized or required to be closed. "Capital Budget" means the capital plan and budget developed by the Company with respect to the capital improvements to the Energy Complex specified in the Master Operating Agreement and certain other planned capital expenditures thereto. "Capital Budget Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Casualty Proceeds" means all insurance proceeds (including title insurance proceeds) and other amounts actually received on account of an Event of Loss, including any net interest thereon or gain in respect thereof, other than (a) proceeds of third-party liability insurance (to the extent paid directly from 68 an insurer or insurers to a third-party) and (b) proceeds of business interruption insurance and other payments received for interruption of operations. "Casualty Proceeds" do not include Additional Available Proceeds with respect to such Event of Loss. "Closing Date" means the date on which the First Mortgage Bonds and the Tax-Exempt Bonds are originally issued. "Coal Supplier" means E.J. Hodder & Associates, Inc., a Tennessee corporation. "Coal Supply Agreement" means the Coal Supply Agreement dated as of May 1, 1995 between the Coal Supplier and the Company. "Code" means, as applicable, the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder or the Internal Revenue Code of 1954 and the rules and regulations promulgated thereunder. "Collateral" means, collectively, all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) by the Company or the IDB (as the case may be), in each case pursuant to the granting and assigning clauses of the applicable Financing Documents. "Collateral Agent" means Bankers Trust (Delaware), a Delaware banking corporation, or any other Person appointed as a substitute or replacement Collateral Agent under the Intercreditor Agreement. "Collateral Agent Claims" means all obligations of the Senior Secured Parties and the Mobile Energy Parties, now or hereafter existing, to pay fees, costs and expenses to the Collateral Agent pursuant to Section 7.3(f) and Article VIII of the Intercreditor Agreement. "Combined Exposure" means, at any time, the sum of (a) the aggregate principal amount of all Senior Securities Outstanding and (b) the aggregate principal amount of all outstanding Working Capital Facility Loans made, and the unutilized Working Capital Facility Commitment, under the Working Capital Facility. "Common Services Agreement" means the Common Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Company" means Mobile Energy Services Company, L.L.C., an Alabama limited liability company. "Company Request" and "Company Order" mean, respectively, a written request or order signed in the name of the Company by an 69 Authorized Officer of the Company and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Company Step-In Rights" has the meaning specified for "MESC Step-In Rights" in the Master Operating Agreement. "Completion Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Consents to Assignment" means, collectively, (a) the Consents to Assignment, the Lease Estoppel and the Supplementary Lease Estoppel of Scott with respect to the Project Contracts to which it is a party, (b) the Consent to Assignment of the Pulp Mill Owner with respect to the Project Contracts to which it is a party, (c) the Consent to Assignment of the Tissue Mill Owner with respect to the Project Contracts to which it is a party, (d) the Consent to Assignment of the Paper Mill Owner with respect to the Project Contracts to which it is a party, (e) the Consent to Assignment of Southern Electric with respect to the Project Contracts to which it is a party, (f) the Consent to Assignment of SCS with respect to the SCS Agreement, (g) any Consent to Assignment of the Coal Supplier with respect to the Coal Supply Agreement, (h) the Consent to Assignment of TRT with respect to the Nondisturbance Agreement (which may be effected pursuant to the Recognition Agreement to which TRT is a party), (i) the Consent to Assignment of the IDB with respect to the Project Contracts to which it is a party (which may be effected pursuant to the Recognition Agreements) and (j) the Consent to Assignment of Ahlstrom Recovery, Inc. with respect to Purchase Order Number MG-2601. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of August 1, 1995 among the Mobile Energy Parties and the Tax-Exempt Indenture Trustee. "Contract" means (a) any agreement (whether executory or non-executory and whether a Person entitled to rights thereunder is so entitled directly or as a third-party beneficiary), including an indenture, lease or license, (b) any deed or other instrument of conveyance, (c) any certificate of incorporation, articles of organization or charter and (d) any by-law. "Corporate Trust Office" means the principal office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) at which at any particular time the corporate trust business thereof shall be administered, which as of the Closing Date is (a) in the case of the Collateral Agent, Bankers Trust (Delaware), c/o Bankers Trust Company, Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group, (b) in the case of the Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309 and (c) in the case of the Tax-Exempt Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309, or 70 such other office as may be designated by the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to the Mobile Energy Parties and, in the case of the Collateral Agent, to the other Intercreditor Parties. "Credit Standard Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the unsecured long-term Debt of the provider of such Reserve Account Letter of Credit shall not be rated "A" or higher by S&P, "A" or higher by Fitch and "A2" or higher by Moody's and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the Collateral Agent or the Indenture Trustee shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has not been satisfied or (ii) Southern shall have failed, or the Company shall have failed to cause Southern, to provide to the Collateral Agent or the Indenture Trustee, on or prior to the date that is forty-five (45) days after the end of each fiscal quarter of Southern, an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied. "Current Fiscal Quarter" has the meaning specified in the definition of Maintenance Reserve Account Required Deposit. "Debt" means, in respect of any Person, (a) indebtedness for borrowed money or the deferred purchase price of property or services (excluding obligations under agreements for the purchase price of goods and services in the normal course of business which are not more than ninety (90) days past due), (b) obligations as lessee under leases that shall have been or should be, in accordance with GAAP, recorded as capital leases, (c) obligations (whether matured or contingent) with respect to any letters of credit issued for the account of such Person, (d) obligations under direct or indirect guaranties or other similar contingent liabilities in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (a), (b) or (c) above and (e) all Debt of another Person secured by a lien on any property owned by the first Person (whether or not such Debt has been assumed by such first Person). "Debt Service Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to draw upon such Reserve Account Letter of Credit pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause third of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security Account is the Distribution Account, clause second of Section 3.8(b) of the Intercreditor Agreement, (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause second of Section 4.5 of the Indenture and (iv) 71 if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, clause second of Section 4.6 of the Tax- Exempt Indenture and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent or the Indenture Trustee (as the case may be) to call upon such Southern Guaranty pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause fourth of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security Account is the Distribution Account, clause third of Section 3.8(b) of the Intercreditor Agreement and (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause third of Section 4.5 of the Indenture. "Debt Service Reserve Account" means any Account so designated (if any) established and created under any Series Supplemental Indenture to the Indenture for the benefit of Holders of Indenture Securities established thereunder. "Debt Service Reserve Account Required Balance" means, in respect of any Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Indenture establishing such Debt Service Reserve Account. "Default Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the provider of such Reserve Account Letter of Credit shall default in its payment obligations thereunder or (ii) the provider of such Reserve Account Letter of Credit shall become insolvent and (b) with respect to any Southern Guaranty, (i) Southern shall fail to perform any of the "Guaranteed Obligations" thereunder as and when due or (ii) Southern shall become insolvent. "Designated Southern Subsidiaries" means, for purposes of the satisfaction of the Southern Credit Standard, all of the Eligible Southern Subsidiaries other than, as designated by the Company to be excluded for such purposes, any one or all (including any combination) of the Eligible Southern Subsidiaries, provided that the aggregate net worth of such Eligible Southern Subsidiaries so excluded is equal to or less than ten percent (10%) of the aggregate net worth of all of the Eligible Southern Subsidiaries. For such purposes, "net worth" means (a) par value of common stock plus (b) paid-in capital plus (c) premium on preferred stock plus (d) retained earnings minus (e) accrued and unpaid dividends on, or other amounts due and payable in respect of, capital stock, in each case, of each of such Eligible Southern Subsidiaries. "Determination of Taxability" means a final determination by the Internal Revenue Service or a court of competent jurisdiction in a proceeding in which the Company has been afforded an opportunity to participate, or, at the election of the Company in its sole discretion, a determination by the Company based on an opinion of Bond Counsel, that as a result of any event the interest payable on any Tax-Exempt Indenture Security (in respect 72 of which, at the time of original issuance, the Tax-Exempt Indenture Trustee received an opinion of Bond Counsel to the effect that interest payable on such Tax-Exempt Indenture Security was not includable for Federal income tax purposes in the gross income of any owner of such Tax-Exempt Indenture Security (other than an owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code)) is includable for Federal income tax purposes in the gross income of any owner of such Tax-Exempt Indenture Security (other than any owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code). No such determination by the Internal Revenue Service shall be considered final unless the Company has been given written notice and, if it so desires, has been given the opportunity to contest the same, either directly or in the name of any owner of a Tax-Exempt Indenture Security and until the conclusion of any appellate review, if sought. Interest on Tax-Exempt Indenture Securities shall not be deemed includable for Federal income tax purposes merely by reason of such interest being treated as a tax preference item for purposes of a Federal alternative minimum tax, loss of or reduction in a related deduction or other indirect adverse tax consequences. "Distribution Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Distribution Date" means any Business Day following an Interest Payment Date and preceding the Monthly Transfer Date immediately succeeding such Interest Payment Date, as selected by the Company. "Easement Deeds" means, collectively, (a) the Easement Deed, dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Company certain easements, (b) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Pulp Mill Owner certain easements, (c) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Company certain easements, (d) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Tissue Mill Owner certain easements, (e) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Company certain easements and (f) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Paper Mill Owner certain easements. "Easements" means, collectively, all easements, licenses, franchises, rights-of-way and spur track agreements to which the Company is now or hereafter a party or beneficiary affecting construction on, or the use or operation of, or constituting a part of, the Site (including the Easement Deeds). 73 "Eligible Southern Subsidiaries" means, at any time, each of Alabama Power Company, an Alabama corporation, Georgia Power Company, a Georgia corporation, Gulf Power Company, a Maine corporation, Mississippi Power Company, a Mississippi corporation, and Savannah Electric and Power Company, a Georgia corporation, provided that a majority of the voting securities of such Person is owned, directly or indirectly, by Southern at such time. "Eminent Domain Proceeds" means all amounts and proceeds actually received in respect of any Event of Eminent Domain, including any net interest thereon or gain in respect thereof. "Eminent Domain Proceeds" do not include Additional Available Proceeds with respect to such Event of Eminent Domain. "Energy Complex" has the meaning specified in the Master Operating Agreement. "Energy Services Agreements" means, collectively, the Pulp Mill Energy Services Agreement, the Tissue Mill Energy Services Agreement and the Paper Mill Energy Services Agreement. "Environmental Bonds" means, collectively, (a) (i) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1973, (ii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1976 and (iii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1980, in the case of clauses (i), (ii) and (iii) above, issued under and secured by a Trust Indenture dated as of April 1, 1973, as supplemented by a First Supplemental Indenture thereto dated as of September 1, 1976 and a Second Supplemental Indenture thereto dated as of October 1, 1980 between the IDB and AmSouth Bank of Alabama, as trustee, and (b) the IDB's Industrial Revenue Bonds (Scott Paper Company Project), Series B of 1976 issued under and secured by a Trust Indenture dated as of September 1, 1976 between the IDB and AmSouth Bank of Alabama, as trustee . "Environmental Indemnity Agreements" means, collectively, (a) the Pulp Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner, (b) the Paper Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Paper Mill Owner, (c) the Tissue Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner and (d) the Scott Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy). 74 "Environmental Requirement" means any Governmental Approvals in effect from time to time relating to the protection of the environment or otherwise addressing environmental issues or environmental requirements of or by any Governmental Authority, or otherwise relating to noise or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, emission, discharge, release or handling of Hazardous Material, including the Comprehensive Environmental Response Compensation, and Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. ss. 1101 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. ss. 2761), the Occupational Health and Safety Act (29 U.S.C. ss. 641 et seq.), the Pollution Prevention Act (42 U.S.C. ss. 1201 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), Preservation Development, Etc. of Coastal Areas (Ala. Code ss. 9-7-1 et seq.), the Alabama Environmental Management Act (Ala. Code ss. 22-22A-1 et seq.), the Alabama Water Pollution Control Act (Ala. Code ss. 22- 22A-1 et seq.), the Alabama Safe Drinking Water Act (Ala. Code ss. 22-23-30 et seq.), Water Well Standards (Ala. Code ss. 22-24-1 et seq.), Water Wastewater Systems and Treatment Plants (Ala. Code ss. 22-25-1 et seq.), Sewage Collection, Treatment, and Disposal Facilities (Ala. Code ss. 22-26-1 et seq.), Solid Wastes Disposal Act (Ala. Code ss. 22-27-1 et seq.), the Alabama Air Pollution Control Act of 1971 (Ala. Code ss. 22-28-1 et seq.), the Hazardous Wastes Management and Minimization Act (Ala. Code ss. 22-30-1 et seq.), the Alabama Hazardous Substance Cleanup Fund (Ala. Code ss. 22-30A-1 et seq.), the Water Pollution Control Authority (Ala. Code ss. 22-34-1 et seq.), the Alabama Underground and Aboveground and Storage Tank Trust Fund Act (Ala. Code ss. 22-35-1 et seq.), the Alabama Underground Storage Tank and Wellhead Protection Act of 1988 (Ala. Code ss. 22-36-1 et seq.) and the Alabama Lead Ban Act of 1988 (Ala. Code ss. 22-37-1 et seq.) and, in each case, any regulations promulgated thereunder. "ERISA" means the Employee Retirement Income Security Act of 1974. "ESA Blockage Event" means, with respect to any Mill Owner or its respective Energy Services Agreement or its Mill, that: (a) such Energy Services Agreement or the Master Operating Agreement has been declared unenforceable by a Governmental Authority having jurisdiction, unless the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (i) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by the Company and such Mill Owner, (ii) such declaration of enforceability 75 has been overruled, reversed or rescinded by such Governmental Authority or by another Governmental Authority having final jurisdiction or greater jurisdiction than such first Governmental Authority or (iii) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (b) such Mill Owner has either (i) terminated, or delivered written notice pursuant to the Master Operating Agreement of its intention to terminate (which notice has not been rescinded), its rights and obligations under such Energy Services Agreement or the Master Operating Agreement in connection with a Mill Closure with respect to such Mill or (ii) denied that it has any obligations and substantially ceased performance under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (A) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by the Company and such Mill Owner or, provided that another Person is reasonably capable of performing such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement (as the case may be), by the Company and such other Person or (B) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (c) a default has occurred and is continuing in respect of such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement, unless, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been terminated as a result of such default, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (d) based upon the knowledge of either of the Mobile Energy Parties, it is reasonably likely that, on or prior to the next Distribution Date, either (i) there will be a Mill Closure with respect to such Mill or (ii) such Mill Owner will deliver written notice pursuant to the Master Operating Agreement of such Mill Owner's intention to terminate its rights and obligations under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been 76 terminated as a result of such Mill Closure, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); or (e) a Bankruptcy Event has occurred and is continuing in respect of such Mill Owner, unless (i) the obligations of such Mill Owner under such Energy Services Agreement and the Master Operating Agreement have been expressly assumed with the approval of a court of competent jurisdiction or (ii) if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been rejected or otherwise terminated, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirement with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be). "Event of Default" means, so long as there are any Financing Commitments or any Financing Liabilities outstanding, an "Event of Default" under the Indenture, an "Event of Default" under the Tax-Exempt Indenture or an "Event of Default" under the Working Capital Facility. "Event of Default Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more Persons in substitution for or replacement of any such Project Contract, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that such alternative Contract (a) contains substantially equivalent terms and conditions or, if such terms and conditions are no longer available on a commercially reasonable basis, the terms and conditions then available on a commercially reasonable basis, (b) would, after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, maintain a minimum annual Senior Debt Service Coverage Ratio for each Fiscal Year through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) projected to be equal to or greater than the lesser of (i) the minimum annual Senior Debt Service Coverage Ratio projected to have been in effect for such Fiscal Year had performance under such Project Contract continued and (ii) 1.2 to 1.0 and (c) is reasonably capable of being performed by the parties thereto. Notwithstanding the foregoing, such alternative Contract need not satisfy the conditions described in clauses (a) and (b) above, provided that (A) the Company delivers to the applicable Senior Secured Parties an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the 77 Restricted Payment Alternative Agreement Requirements (other than the conditions set forth in subclauses (C) and (D) of clause (b)(ii) of the definition of Restricted Payment Alternative Agreement Requirements with respect to such alternative Contract) and (B) after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.2 to 1.0. "Event of Eminent Domain" means any compulsory transfer or taking, or transfer under threat of compulsory transfer or taking, of a material part of the Energy Complex by any Governmental Authority or any Person acting with the authority thereof for more than six (6) months, unless such transfer or taking is the subject of a Good Faith Contest. "Event of Loss" means any physical loss or destruction of, or destruction to, the Energy Complex, or any other event that causes all or a material part of the Energy Complex to be rendered unfit for normal use for any reason whatsoever, including through failure of title. "Excess Loss Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies in an amount equal to the excess, if any, of all of the Loss Proceeds with respect to such Event of Loss or Event of Eminent Domain (as the case may be) over the total cost of the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Exchange Act" means the Securities Exchange Act of 1934. "Financing Commitment" means any commitment pursuant to the Financing Documents to provide credit to the Company. "Financing Documents" means all Contracts evidencing or securing the Financing Liabilities. "Financing Liabilities" means all indebtedness, liabilities and obligations of the Mobile Energy Parties (including principal, interest, fees, reimbursement obligations, penalties, indemnities and legal expenses, whether due to acceleration or otherwise) owing to the Senior Secured Parties (of whatsoever nature and however evidenced) under or pursuant to (a) the Indenture (including the Guaranty), (b) the Senior Securities, (c) the IDB Lease Agreement, (d) the Tax-Exempt Indenture, (e) the Working Capital Facility and any evidence of indebtedness entered into thereunder and (f) the other Security Documents, in the case of clause (a) through (f) above, whether direct or indirect, primary or secondary, fixed or contingent or now or hereafter arising out of or relating to any such Contract. 78 "Financing Statements" means Uniform Commercial Code financing statements filed in connection with the other Security Documents. "First Mortgage Bonds" means the Indenture Securities issued on the Closing Date under the first Series Supplemental Indenture to the Indenture. "Fiscal Quarter" means the period of time beginning at 12:01 a.m. on the first day of each calendar quarter and ending at midnight on the last day of such calendar quarter. "Fiscal Year" means the period of time beginning at 12:01 a.m. on January 1 of each year and ending at midnight on December 31 of such year. "Fitch" means Fitch Investors Service, L.P., a New York limited partnership. "Fuel Inventory" means fuel inventory of the Energy Complex, in whatever form, including oil, gas, coal, black liquor, biomass and sludge. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "GDPIPD" means the Gross Domestic Product Implicit Price Deflator as published in the United States Department of Commerce, Bureau of Analysis publication entitled "Survey of Current Business." If the Gross Domestic Product Implicit Price Deflator ceases to exist or is no longer available, the Company, with the approval of the Independent Engineer, shall designate a substitute index that is reasonably similar to the Gross Domestic Product Implicit Price Deflator. "GDPIPD Factor" means, with respect to each Fiscal Year, the GDPIPD most recently published during or prior to such Fiscal Year divided by the GDPIPD published with respect to December 1994; provided, however, that such GDPIPD Factor shall not be less than one (1). "Good Faith Contest" means the contest of an item if (a) such item is diligently contested in good faith by appropriate proceedings and adequate reserves or bonding are established in accordance with GAAP with respect to such item and (b) the failure to pay or comply with such item during the period of such contest would not result in a Material Adverse Effect. "Governmental Approvals" means those authorizations, consents, approvals, waivers, exemptions, variances, registrations, certifications, permissions, permits and licenses with any Governmental Authority required for the ownership and operation of the Energy Complex and the performance of a Person's obligations under the Project Documents. 79 "Governmental Authority" means any Federal, state, city, county, municipal, foreign, international, regional or other governmental or regulatory authority, agency, department, board, body, instrumentality, commission, arbiter or court. "Guaranteed Obligations" means all indebtedness, liabilities, obligations, covenants and duties of, and all terms and conditions to be observed by, the Company (including in its capacity as a "debtor in possession" under the Bankruptcy Code) due or owing to, or in favor or for the benefit of, the Senior Secured Parties under the Security Documents or the Working Capital Facility (as the case may be), in each case (a) whether due or owing to, or in favor or for the benefit of, the Senior Secured Parties or any other Person that becomes the Indenture Trustee, the Tax-Exempt Indenture Trustee or the Working Capital Facility Provider (as the case may be) by reason of any succession or assignment at any time thereafter and (b) whether or not an allowable claim against the Company under the Bankruptcy Code, or otherwise enforceable against the Company, and including, in any event, interest accruing after the filing by or against the Company of a petition under the Bankruptcy Code; provided, however, that the satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company. "Guaranty" means the unconditional guaranty by Mobile Energy of the Guaranteed Obligations included in Article XIV of the Indenture, Article VIII of the IDB Lease Agreement and Article VIII of the Working Capital Facility (as the case may be). "Hazardous Materials" means hazardous wastes, hazardous substances, hazardous constituents, air contaminants or toxic substances, whether solids, liquids or gases, including substances defined or otherwise regulated as "hazardous materials," "regulated substances," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "carcinogens," "hazardous air pollutants," "criteria pollutants," "reproductive toxins," "radioactive materials," "toxic chemicals," or other similar designations in, or otherwise subject to regulation under, any Environmental Requirement, including petroleum hydrocarbons, asbestos-containing materials, urea formaldehyde foam insulation, polychlorinated biphenyls and radionuclides. "Holder" means a Person in whose name an Indenture Security or a Tax-Exempt Indenture Security (as the case may be) is registered in the register providing for the registration, including upon transfer or exchange, thereof pursuant to the Indenture or the Tax-Exempt Indenture (as the case may be). "IDB" means The Industrial Development Board of the City of Mobile, Alabama. 80 "IDB Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses, indemnification payments or other amounts to the IDB under the Financing Documents, other than (a) rent payments under the IDB Lease Agreement and (b) payments in respect of principal of and premium, if any, and interest on the 1994 Bonds. "IDB Lease Agreement" means the Amended and Restated Lease and Agreement dated as of August 1, 1995 among the IDB and the Mobile Energy Parties. "IDB Request" and "IDB Order" mean, respectively, a written request or order signed in the name of the IDB by an Authorized Officer of the IDB and delivered to the Tax-Exempt Indenture Trustee. "Income Tax Deficiency" means (a) with respect to the second Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the sum of (A) the combined Federal and State of Alabama quarterly estimated income tax payments that would have been required to be paid by all Members during such Fiscal Year prior to such Distribution Date and (B) one-half of the amounts estimated to be required to be paid for County and City of Mobile, Alabama income taxes in respect of such Fiscal Year, if any, all calculated, solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (1) be a member of a consolidated, affiliated, combined, unitary or other tax group, (2) be a party to any tax sharing arrangements with any other Person and (3) have income, loss or credits (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the first Distribution Date during such Fiscal Year in excess of the amount of distributions, if any, that would have been calculated by clause (b) below with respect to such Distribution Date and (b) with respect to the first Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the estimate, as of such Distribution Date, of the combined Federal, State of Alabama, and County and City of Mobile, Alabama income taxes that relate to the immediately preceding Fiscal Year of all Members, all calculated solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (A) be a member of a consolidated, affiliated, combined, unitary or other tax group, (B) be a party to any tax sharing arrangements with any other Person and (C) have income, loss or credits (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the second Distribution Date of such prior Fiscal Year. 81 "Indenture" means the Trust Indenture dated as of August 1, 1995 among the Mobile Energy Parties and the Indenture Trustee. "Indenture Accounts" means, with respect to the Indenture Securities of any series, the Indenture Securities Account and each Debt Service Reserve Account (if any) established for the benefit of Holders of the Indenture Securities of such series. "Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Indenture Securities" means all Debt issued pursuant to the Indenture. "Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Indenture Trustee by the Company pursuant to the granting and assigning clauses of the Indenture and (b) the Shared Collateral. "Indenture Securities Interest Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Principal Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Redemption Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Independent Engineer" means Stone & Webster Engineering Corporation or another nationally recognized consulting or engineering firm appointed Independent Engineer pursuant to the terms of the Intercreditor Agreement. "Independent Engineer Agreement" means the Independent Engineer Agreement dated as of August 1, 1995 between the Company and the Independent Engineer or any other similar Contract among such Persons. "Independent Engineer Confirmation" means a certificate signed by an authorized representative of the Independent 82 Engineer confirming the reasonableness of statements and projections contained in certain Officer's Certificates delivered to the applicable Senior Secured Parties or the Collateral Agent under the Financing Documents, which confirmation may not be unreasonably withheld, conditioned or delayed. "Independent Insurance Advisor" means Sedgwick James or another nationally recognized insurance advisory firm appointed as insurance advisor under the Indenture and the Tax-Exempt Indenture by the Collateral Agent. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among the Senior Secured Parties, the Collateral Agent, the IDB and the Mobile Energy Parties. "Intercreditor Agreement Accounts" means, collectively, the Completion Account, the Revenue Account, the Mill Owner Reimbursement Account, the Working Capital Facility Account, the Operating Account, the Maintenance Reserve Account, the Loss Proceeds Account, the Subordinated Debt Account, the Subordinated Fee Account and the Distribution Account. "Intercreditor Parties" means, collectively, the Senior Secured Parties, the IDB, the Mobile Energy Parties, any Subordinated Debt Provider and any other Person party to the Intercreditor Agreement (other than the Collateral Agent). "Interest Payment Date" means each January 1 and July 1 of each year, commencing January 1, 1996. "Investment Grade" means a rating in one of the four highest categories (without regard to subcategories within such rating categories) by a Rating Agency. "Law" means any constitution, treaty, statute, code, ordinance, regulation, order, decree, writ or judicial or arbitral decision. "Lease" means the Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July, 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Lease Documents" means, collectively, the IDB Lease Agreement, the Tax-Exempt Indenture (including any Series Supplemental Indenture) and (to the extent relating to, or securing, the Tax-Exempt Indenture Securities) the other Financing Documents. "Lease Indemnity" means the Letter Agreement dated August 1, 1995 by the Mobile Energy Parties in favor of Scott, providing for the indemnification of Scott with respect to matters arising under the Utilities Land Sublease dated as of December 1, 1983, as amended, between Scott and the IDB. 83 "Leased Land" means the land underlying the components of the Tax-Exempt Project marked on Exhibit A to the IDB Lease Agreement. "Lenders" has the meaning specified in the Working Capital Facility. "Lien" means any lien, claim, security interest, mortgage, trust arrangement, judgment, pledge, option, charge, easement, encumbrance, title retention, conditional sales agreement, encroachment, right-of-way, building or use restriction, preferential right or any other security agreement, arrangement or similar right in favor of any Person, whether voluntarily incurred or arising by operation of law, and includes any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "Loss Proceeds" means, as applicable, Casualty Proceeds or Eminent Domain Proceeds. "Loss Proceeds Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Excess Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Expenditures" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, other than (a) fuel costs and expenses, (b) labor and employee expenses, including fringe benefits and labor relations expense, (c) payments for insurance premiums and like insurance related expenses required or otherwise maintained under any Project Document, (d) costs and expenses of consumable items such as process or cleaning chemicals and lubricants, (e) equipment rental, small tools and vehicle maintenance expenses, (f) costs and expenses associated with legal, accounting and other office and administrative functions, (g) permitting fees, (h) costs and expenses of safety supplies, office supplies and other office expenses, (i) property taxes and payments made in lieu of taxes, (j) computer maintenance expenses, (k) any amounts payable for services rendered under the Common Services Agreement, (l) ash disposal costs, (m) liquidated damages payable to the Mill Owners under the Master Operating Agreement, (n) amounts payable to the Mill Owners in connection with the exercise of Mill Owner Step-In Rights, (o) any amounts required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of the Tax-Exempt Indenture Securities (to the extent not already provided for in the Tax-Exempt Indenture) and (p) payments to the IDB (including IDB Claims and payments required to be made by the Company with respect to the 1994 Bonds), in the case of clauses (a) through 84 (p) above, to the extent the foregoing costs or expenses are not customarily treated as capital expenditures. "Maintenance Plan" means the maintenance plan and budget for the Energy Complex, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Maintenance Plan Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Reserve Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Reserve Account Balance" means, with respect to the Current Fiscal Quarter, the sum of (a) the monies on deposit in the Maintenance Reserve Account, (b) amounts available to be drawn or called upon under any Reserve Account Security deposited in the Maintenance Plan Funding Subaccount and (c) the monies on deposit in, or otherwise credited to (by means of a guaranty, capital infusion agreement or otherwise), the Mill Owner Maintenance Reserve Account, in the case of clauses (a), (b) and (c) above, at the beginning of the Current Fiscal Quarter. "Maintenance Reserve Account Required Deposit" means, with respect to any Fiscal Quarter during any Fiscal Year (the "Current Fiscal Quarter"), one or more deposits into the Maintenance Reserve Account on Monthly Transfer Dates occurring during the Current Fiscal Quarter in an aggregate amount equal to the excess of the sum of paragraphs (a), (b) and (c) below over the Maintenance Reserve Account Balance with respect to the Current Fiscal Quarter: (a) the amount of Maintenance Reserve Account Required Deposits with respect to each Fiscal Quarter preceding the Current Fiscal Quarter that were required to be deposited into the Maintenance Reserve Account during each such Fiscal Quarter but were not, and have not been since, so deposited; (b) the aggregate amount of any withdrawals from the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account during each Fiscal Quarter preceding the Current Fiscal Quarter that were in excess of the aggregate projected Maintenance Expenditures for each such Fiscal Quarter (as specified in the Maintenance Plan) but were not, and have not been since, redeposited in the Maintenance Reserve Account; and (c) the greatest of: (i) if the Current Fiscal Quarter is the first Fiscal Quarter of such Fiscal Year, the amount obtained 85 by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding sixteen (16) Fiscal Quarters (in each case as specified in the Maintenance Plan) by sixteen (16); (ii) if the Current Fiscal Quarter is the first or second Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fifteen (15) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fifteen (15); (iii) if the Current Fiscal Quarter is the first, second or third Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fourteen (14) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fourteen (14); and (iv) if the Current Fiscal Quarter is the first, second, third or fourth Fiscal Quarter of such Fiscal Year, the greatest of the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for any period consisting of the Current Fiscal Quarter and any number of consecutive Fiscal Quarters from one (1) to thirteen (13) immediately succeeding the Current Fiscal Quarter (in each case as specified in the Maintenance Plan) by such number of consecutive Fiscal Quarters. "Manager" means Mobile Energy and any Person appointed as an additional, substitute or replacement manager of the Company pursuant to the terms of the Articles of Organization. "Master Operating Agreement" means the Amended and Restated Master Operating Agreement dated as of July 13, 1995 among the Company (as assignee of Mobile Energy), Scott, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Material Adverse Effect" means (a) a change in the financial condition of either of the Mobile Energy Parties or the Energy Complex that would reasonably be expected to materially and adversely affect the ability of either of the Mobile Energy Parties to pay principal of and interest on the Senior Debt as and when required or (b) any event or occurrence of whatever nature that would materially and adversely affect (i) the ability of either of the Mobile Energy Parties to perform its obligations under the Project Documents or (ii) the Lien of the Security Documents. "Member" means any Person owning a membership interest in the Company. 86 "Mill Closure" means (a) a public announcement by a Mill Owner that it will close its respective Mill for a period of at least one (1) year or that it will reduce production of pulp, paper or tissue (as applicable) at such Mill (permanently or for a period of at least two (2) years) to less than ten percent (10%) of 1994 production levels or (b) the occurrence of a two (2) year period during which, for any reason other than the occurrence of a Force Majeure Event (as defined in the Master Operating Agreement), such Mill Owner's production of pulp, paper or tissue (as applicable) at such Mill is less than ten percent (10%) of 1994 production levels. "Mill Owner Maintenance Reserve Account" means the account so designated established and created pursuant to the Master Operating Agreement for the sole benefit of the Mill Owners. "Mill Owner Maintenance Reserve Account Agreement" means the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among Southern, the Company and the Mill Owners. "Mill Owner Reimbursement Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Mill Owner Step-In Rights" has the meaning specified in the Master Operating Agreement. "Mill Owners" means, collectively, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Mills" means, collectively, the Pulp Mill, the Tissue Mill and the Paper Mill. "Mixed-Use Bonds" means, collectively, the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series A and the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series B, in each case issued under and secured by a Trust Indenture dated as of December 1, 1984, as supplemented by a First Supplemental Indenture thereto dated as of June 1, 1985, between the IDB and AmSouth Bank of Alabama, as trustee. "Mobile Energy" means Mobile Energy Services Holdings, Inc., an Alabama corporation. "Mobile Energy Parties" means, collectively, the Company and Mobile Energy. "Mobile Energy Request" or "Mobile Energy Order" means, respectively, a written request or order signed in the name of Mobile Energy by an Authorized Officer of Mobile Energy and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Mobile Facility" means the integrated pulp, paper and tissue manufacturing facility located on a 730-acre site along 87 the Mobile River and the Chickasaw Creek in Mobile, Alabama, comprised of the Mills and the Energy Complex. "Monthly Transfer Date" means the last Business Day of each month of each Fiscal Year, commencing with the first such day occurring after the Closing Date. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation. "Mortgage" means the Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 among the Company, the IDB and the Mortgagee. "Mortgagee" means Bankers Trust (Delaware), or any other Person appointed as a substitute or replacement Mortgagee under the Mortgage. "1983 Bonds" means the IDB's Exempt Facilities Revenue Bonds (Scott Paper Company Project), 1983 Series B, issued under and secured by a Trust Indenture dated as of December 1, 1983 between the IDB and BankAmerica Trust Company of New York, as trustee. "1984 Bonds" means the IDB's Variable Rate Demand Solid Waste Revenue Refunding Bonds (Scott Paper Company Project) Series 1984 A, B, C, D and E issued under and secured by the 1984 Indenture. "1984 Indenture" means the Trust Indenture dated as of December 1, 1984, as supplemented by the First Supplemental Indenture thereto dated as of January 1, 1985 and the Second Supplemental Indenture thereto dated as of August 1, 1995, between the IDB and Chemical Bank, as trustee. "1984 Lease" means the Lease and Agreement dated December 1, 1984, as amended by Amendment No. 1 thereto dated as of November 8, 1994 and Amendment No. 2 thereto dated as of December 9, 1994, between the IDB and the Company (as assignee of Mobile Energy (as assignee of Scott)). "1994 Bond Payment Date" means each June 1 and December 1 of each year, commencing December 1, 1995. "1994 Bond Trustee" means Bankers Trust (Delaware), in its capacity as trustee under the 1994 Indenture. "1994 Bonds" means the IDB's Industrial Development Revenue Bonds (Scott Paper Recovery Boiler Project) 1994 Series A. For all purposes of the Financing Documents, (a) payments in respect of the principal of and premium, if any, and interest on the 1994 Bonds shall be treated as neither Operation and Maintenance Costs nor Senior Debt Service Requirements (or any other debt service) and (b) receipts (or deemed receipts) in respect of the 1994 Bonds shall not be treated as Revenues. 88 "1994 Indenture" means the Trust Indenture dated as of December 1, 1994 between the IDB and the 1994 Bond Trustee. "1995 Bonds" has the meaning specified in Section 2.17(a) of the Tax-Exempt Indenture, which means the Tax-Exempt Bonds. "Non-Affiliate Subordinated Debt" means any unsecured loan or loans from any Person that is not an Affiliate of the Company pursuant to a Subordinated Loan Agreement, the amounts necessary for repayment of which have been included in the Annual Budget approved by the Collateral Agent and the Independent Engineer. "Nondisturbance Agreement" means the Estoppel and Nondisturbance Agreement dated as of December 12, 1994 between TRT and the Company (as assignee of Mobile Energy). "Officer's Certificate" means a certificate that has been signed by an Authorized Officer of either of the Mobile Energy Parties or of Southern (as the case may be). "O&M Agreement" means the Facility Operations and Maintenance Agreement dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Operator. "Operating Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Operating Agreement" means the Operating Agreement of the Company dated as of July 13, 1995, as amended by the First Amendment thereto dated as of July 13, 1995, among the Members. "Operation and Maintenance Costs" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, including and together with (a) Subordinated Fees, (b) Maintenance Expenditures and (c) any such costs and expenses specified in clauses (a) through (p) of the definition of Maintenance Expenditures (other than (i) rent payments under the IDB Lease Agreement and (ii) payments of principal of and premium, if any, and interest on the 1994 Bonds). "Operator" means Southern Electric, in its capacity as operator under the O&M Agreement. "Opinion of Counsel" means a written opinion of counsel for any Person either expressly referred to in any Financing Document to which the Collateral Agent or any of the Senior Secured Parties is a party or otherwise satisfactory to the Collateral Agent or such Senior Secured Party (which may include counsel for either of the Mobile Energy Parties, whether or not such counsel is an employee of either or both of them). "Optional Modifications" means all modifications to the Energy Complex that are not Required Modifications. 89 "Optional Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Outstanding" means, when used with respect to any of the Senior Securities (however referenced in any Financing Document), as of the date of determination, all such Senior Securities theretofore authenticated and delivered under the Indenture or the Tax-Exempt Indenture (as the case may be), except: (a) such Senior Securities theretofore canceled by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or delivered to either such Trustee for cancellation; (b) such Senior Securities or portions thereof deemed to have been paid within the meaning of, in the case of the Indenture, Section 12.1 thereof and, in the case of the Tax- Exempt Indenture, Section 12.1 thereof (as the case may be); and (c) such Senior Securities that have been exchanged for other Senior Securities or Senior Securities in lieu of which other Senior Securities have been authenticated and delivered pursuant to the Indenture or the Tax-Exempt Indenture (as the case may be) unless held by a Holder in whose hands such Senior Securities constitute valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Senior Securities (however referenced in any Financing Document) Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or the Tax-Exempt Indenture (as the case may be) or whether or not a quorum is present at a meeting of Holders of such Senior Securities, such Senior Securities owned by either of the Mobile Energy Parties (or any Affiliate thereof) shall be disregarded and deemed not to be Outstanding, except that, in determining whether or not the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to presence of a quorum, only such Senior Securities that a Responsible Officer of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) knows to be so owned shall be so disregarded. Any such Senior Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) such pledgee's right so to act with respect to such Senior Securities and that such pledgee is not a Mobile Energy Party (or any Affiliate thereof). "Paper Mill" means the paper mill located at the Mobile Facility, which as of the Closing Date is owned by S.D. Warren. 90 "Paper Mill Energy Services Agreement" means the Paper Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated July 13, 1995, between the Paper Mill Owner and the Company (as assignee of Mobile Energy). "Paper Mill Owner" means S.D. Warren, in its capacity as owner of the Paper Mill. "Paying Agent" means any Person acting as Paying Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Percentage Share" means an amount (expressed as a percentage) equal to: (a) with respect to the Working Capital Facility, (i) the Working Capital Facility Commitment in effect immediately prior to any deposit into the Working Capital Facility Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(i) of the Intercreditor Agreement divided by (ii) the Combined Exposure immediately prior to such deposit; (b) with respect to the Indenture, (i) the principal amount of the Indenture Securities Outstanding immediately prior to any transfer to the Indenture Trustee for deposit into the Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(ii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer; and (c) with respect to the Tax-Exempt Indenture, (i) the principal amount of the Tax-Exempt Indenture Securities Outstanding immediately prior to any transfer to the Tax- Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(iii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer. "Permitted Indebtedness" means (a) in the case of the Company: (i) the First Mortgage Bonds; (ii) Debt incurred under a Working Capital Facility having a Working Capital Facility Commitment not to exceed $15,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time, provided 91 (and the Working Capital Facility shall contain provisions to such effect) that (A) no more than $5,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time) of such Debt may be scheduled to mature during any calendar month, (B) any Working Capital Facility Loan advanced thereunder shall mature no later than ninety-three (93) days from the date such Working Capital Facility Loan was first advanced, (C) the Company shall be required to repay all amounts advanced thereunder so that no amounts are outstanding once during each Fiscal Year (other than the Fiscal Year ending December 31, 1995) for a period of five (5) consecutive days and (D) the Working Capital Facility Provider thereunder shall become a party to the Intercreditor Agreement; (iii) the Tax-Exempt Bonds; (iv) reimbursement obligations in respect of letters of credit (if any) and other financial obligations arising under the Project Contracts and obligations arising under the Lease Indemnity; (v) purchase money obligations incurred to finance discrete items of equipment not comprising an integral part of the Energy Complex that extend only to the equipment being financed and that do not in the aggregate have annual debt service or lease obligations exceeding $2,000,000 (multiplied by the GDPIPD Factor in effect at the time such obligations were incurred); (vi) trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (vii) obligations in respect of surety bonds or similar instruments in an aggregate amount not exceeding $10,000,000 (multiplied by the GDPIPD Factor in effect at the time such obligations were incurred) at any one time outstanding; (viii) Affiliate Subordinated Debt; (ix) Replacement Debt permitted to be issued pursuant to the terms of the Financing Documents; (x) Debt permitted to be issued pursuant to the terms of the Financing Documents for Required Modifications and Optional Modifications; (xi) Non-Affiliate Subordinated Debt (including any Non-Affiliate Subordinated Debt permitted by clause (x) above) in an aggregate principal amount not to exceed $75,000,000 (multiplied by the GDPIPD Factor in effect at the time such Debt was incurred) permitted to be issued pursuant to the terms of the Financing Documents; (xii) Refunding Debt permitted to be issued pursuant to the terms of the Financing Documents; and (xiii) the Company's obligations in respect of the 1994 Bonds, the Mixed-Use Bonds, the Environmental Bonds and the Refunding Letter of Credit; and (b) in the case of Mobile Energy, the Guaranty. "Permitted Investments" means investments in securities that are: (a) direct obligations of the United States of America or of any agency thereof; (b) obligations fully guaranteed by the United States of America or any agency thereof; (c) time deposits (which may be represented by certificates of deposit) issued by commercial banks organized under the laws of the United States of America or of any political subdivision thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union having a combined capital and surplus of at least $500,000,000 and having long-term unsecured Debt having a 92 rating at least equal to (i) the highest rating assigned to the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) by at least two of the Rating Agencies or (ii) "B" by Thompson Bankwatch, Inc. (in either case provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such bank); (d) open market commercial paper of any corporation incorporated or doing business under the laws of the United States of America or of any political subdivision thereof then rated at least A-1/P-1 (or an equivalent thereof) by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such corporation); (e) obligations issued or guaranteed by, and any other obligations the interest on which is excluded from income for Federal income tax purposes issued by, any state of the United States of America or the District of Columbia or the Commonwealth of Puerto Rico or any political subdivision, agency, authority or instrumentality thereof, which issuer or guarantor has (i) a short-term Debt rating which is (on the date of acquisition thereof) A-1/P-1 (or an equivalent thereof) or better and (ii) a long-term Debt rating that is (on the date of acquisition thereof) "A" or better, in each case by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such issuer or guarantor); (f) guaranteed investment contracts of any financial institution organized under the laws of the United States of America or any state thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union, which financial institution has assets of at least $5 billion in the aggregate and has a long term Debt rating that is (on the date of acquisition thereof) "A" or better by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such institution); (g) investment contracts of any financial institution either (i) (A) fully secured by direct obligations of the United States, (B) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States or (C) securities or receipts evidencing ownership interests in obligations or specified portions thereof described in clause (A) or (B) above, in each case guaranteed as a full faith and credit obligation of the United States, having a market value at least equal to 102% of the amount deposited thereunder and possession of which obligation is held under arrangements satisfactory to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or (ii) with long-term Debt ratings of "A" or higher and short-term ratings in one of the highest two major categories by any of the Rating Agencies; (h) a contract or investment agreement with a provider or guarantor (i) which provider or guarantor is rated at least "A" or equivalent by each of the Rating Agencies (provided that if a guarantor is party to the rating, the guaranty is unconditional and is confirmed in writing prior to any assignment by the provider to another subsidiary of such guarantor), (ii) providing that monies invested shall be payable to the Indenture 93 Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall be payable to the Collateral Agent) without condition (other than notice) and without breakage fee or other penalty, upon not more than two (2) Business Days' notice for application when and as required or permitted under the Indenture, the Intercreditor Agreement or the Tax-Exempt Indenture (as applicable), (iii) stating that such contract or agreement is unconditional, expressly disclaiming any right of setoff and providing for immediate termination in the event of insolvency of the provider and termination upon demand of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall provide for termination upon demand of the Collateral Agent) (which demand shall only be made at the direction of the Company) after any payment or other covenant default by the provider and (iv) the terms and provisions of which are in form and substance satisfactory to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be); and (i) investments in money market funds registered under the Investment Company Act of 1940 then rated in the highest category by S&P and Moody's. "Permitted Liens" means: (a) Liens specifically created, required or permitted by the Indenture, the Tax-Exempt Indenture or the IDB Lease Agreement; (b) the Liens created, or purported to be created, on the Collateral pursuant to the Security Documents; (c) Liens for taxes that are either not yet due, are due but payable without penalty or are the subject of a Good Faith Contest; (d) any exceptions to title that are set forth on Schedule B--Section 2 of the title insurance policy delivered to the Collateral Agent on the Closing Date (to the extent that such exceptions have not been released or subordinated prior to the Closing Date); (e) such minor defects, easements, rights of way, restrictions, irregularities, encumbrances and clouds on title and statutory liens that do not materially impair the property affected thereby and that do not individually or in the aggregate materially impair the value of the security interests granted under the Financing Documents; (f) the easements and other rights in favor of third-parties contained in the Project Contracts as of the Closing Date; (g) deposits or pledges to secure statutory obligations or appeals, release of attachments, stays of execution or injunction, performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or for purposes of like general nature in the ordinary course of business; (h) Liens in connection with worker's compensation, unemployment insurance or other social security or pension obligations; (i) legal or equitable encumbrances deemed to exist by reason of the existence of any litigation or other legal proceeding if the same are the subject of a Good Faith Contest (excluding any attachment prior to judgment, judgment lien or attachment in aid of execution on a judgment); (j) mechanic's, workmen's, materialmen's, construction or other like Liens arising in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations that are not yet due or that are the subject of a 94 Good Faith Contest; (k) Liens securing purchase money obligations that constitute Permitted Indebtedness; (l) Liens in favor of the Mill Owners on the Mill Owner Maintenance Reserve Account, including monies on deposit therein or otherwise credited thereto (in accordance with the Mill Owner Maintenance Reserve Account Agreement) not exceeding $2,000,000, to the extent arising under the Master Operating Agreement or the Mill Owner Maintenance Reserve Account Agreement; and (m) Liens on cash collateral not exceeding $1,500,000 in favor of the issuer of the Refunding Letter of Credit. "Person" means any individual, sole proprietorship, corporation, partnership, limited liability company, joint venture, trust, unincorporated association, institution, Governmental Authority or any other entity. "Place of Payment" means, when used with respect to the Senior Securities of any series, the office or agency maintained pursuant to, in the case of the Indenture, Section 9.14(a) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(a) thereof and, in either case, such other place or places, if any, where the principal of and premium, if any, and interest on the Senior Securities of such series are payable as specified in the Series Supplemental Indenture to the Indenture or the Tax- Exempt Indenture (as the case may be) establishing the Senior Securities of such series. "Predecessor Securities" means, with respect to any particular Senior Security, every previous Senior Security evidencing all or a portion of the same Debt as that evidenced by such particular Senior Security. For purposes of this definition, any Senior Security authenticated and delivered under, in the case of any Indenture Security, Section 2.9 of the Indenture and, in the case of any Tax-Exempt Indenture Security, Section 2.9 of the Tax-Exempt Indenture in lieu of a lost, destroyed or stolen Senior Security shall be deemed to evidence the same Debt as such lost, destroyed or stolen Senior Security. "Prepayment Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Principal Payment Date" means in respect of (a) the Indenture Securities, any January 1 or July 1 on which principal payments are due to Holders thereof and (b) the Tax-Exempt Indenture Securities, any January 1 on which principal payments are due to Holders thereof. "Processing Services" has the meaning specified in the Master Operating Agreement. "Project Contracts" means, collectively, (a) the Energy Services Agreements, (b) the Master Operating Agreement, (c) the Lease, (d) the Supplementary Lease, (e) the O&M Agreement, (f) the Common Services Agreement, (g) the Water Agreement, (h) the Boiler Ash Agreement, (i) the Environmental Indemnity Agreements, 95 (j) the Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of June 16, 1995 and the Second Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy), (k) the Employee Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, among Scott, the Company (as assignee of Mobile Energy) and Southern Electric, (l) the SCS Agreement, (m) the Easement Deeds, (n) the Asset Purchase Agreement dated as of December 12, 1994 between Scott, as seller, and the Company (as assignee of Mobile Energy), as buyer, (o) the Coal Supply Agreement, (p) any other Contract entered into by either of the Mobile Energy Parties for the provision of fuel to the Energy Complex, (q) the IDB Lease Agreement, (r) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (s) the Construction, Financing and Installment Sale Agreement dated as of April 1, 1973 between the IDB and Scott, (t) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (u) the Facilities Lease and Agreement dated as of December 1, 1984 between the IDB and Scott, (v) the Sublease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (w) the Construction, Financing and Installment Sale Agreement dated as of September 1, 1976 between the IDB and Scott, (x) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (y) the Recovery Boiler Facilities Lease and Agreement dated as of December 1, 1994 between the IDB and Scott, (z) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (aa) the Nondisturbance Agreement, (bb) the Recognition Agreements, (cc) the Mill Owner Maintenance Reserve Account Agreement and (dd) the Transfer Agreement. "Project Costs" means costs and expenses (other than financing costs and expenses) paid, incurred or to be incurred by the Company after the Closing Date to complete the capital improvements to the Energy Complex specified in the Master Operating Agreement in accordance with the Capital Budget and certain other planned expenditures relating to the Energy Complex. "Project Documents" means, collectively, the Project Contracts and the Financing Documents. "Project Participant" means each Person that is party to a Project Document. "Prudent Plant Operating Standards" has the meaning specified in the Master Operating Agreement. "Pulp Mill" means the pulp mill (including a process water plant and waste water treatment plant) located at the Mobile Facility, which as of the Closing Date is owned by Scott. 96 "Pulp Mill Energy Services Agreement" means the Pulp Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Pulp Mill Owner" means Scott, in its capacity as owner of the Pulp Mill. "Pulp Mill Step-In Equipment" has the meaning specified in the Master Operating Agreement. "PURPA" means the Public Utility Regulatory Policies Act of 1978. "Qualified Engineer" means an independent engineer listed on Schedule 1 to the Intercreditor Agreement, as such Schedule may be amended from time to time in accordance with Section 11.3 of the Intercreditor Agreement. "Qualifying Facility" means a "Qualifying Cogeneration Facility" as specified in section 3(18)(B) of the Federal Power Act or a qualifying small power production facility within the meaning of section 201 of PURPA. "Rating Agencies" means, collectively, S&P, Fitch and Moody's, together with any other nationally recognized credit agency of similar standing if any such Person is not then currently rating the proposed subject of such rating. "Receivables" means all of the Company's rights to payment for goods sold or leased or services performed by the Company, including (a) rights evidenced by an account, note, contract, security, instrument, chattel paper or other evidence of indebtedness and (b) all "accounts" as defined in Section 9-106 of the Uniform Commercial Code as in effect in the State of New York on the Closing Date. "Recognition Agreements" means, collectively, (a) the Recognition, Cooperation and Consent Agreement relating to the Mixed-Use Bonds dated as of August 1, 1995 among the Company, the IDB, AmSouth Bank of Alabama, TRT and the Collateral Agent and (b) the Recognition, Cooperation and Consent Agreement relating to the Tax-Exempt Bonds dated as of August 1, 1995 among the Company, the IDB, the Tax-Exempt Indenture Trustee and the Collateral Agent. "Redemption Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Redistributed Proceeds" means, with respect to any Excess Loss Proceeds, the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the Working Capital Facility Distribution Amount in respect of such Excess Loss Proceeds. 97 "Refunding Debt" means Debt, the proceeds of which are used to refund outstanding Senior Debt. "Refunding Letter of Credit" means one or more letters of credit issued by a commercial bank in an aggregate amount not to exceed $1,500,000 to provide for the payment of accrued interest on the 1984 Bonds upon the redemption thereof. "Regular Record Date" means, for the Stated Maturity of any Senior Security of a series, or for the Stated Maturity of any installment of principal thereof or payment of interest thereon, the 15th day (whether or not a Business Day) of the month prior to such Stated Maturity, or any other date specified for such purpose in the form of Senior Security of such series attached to the Series Supplemental Indenture to the Indenture or the Tax- Exempt Indenture (as the case may be) relating to the Senior Securities of such series. "Replacement Debt" means Senior Securities, the proceeds of which are used to refinance all or a portion of the outstanding Tax-Exempt Indenture Securities (whether by effecting a gross-up of, or by the issuance of Senior Securities to replace, affected Tax-Exempt Indenture Securities) upon the occurrence of a Determination of Taxability. "Replacement Facility" means a facility with materially different performance capabilities from the Energy Complex that can be built to provide services to some or all of the Mills following the occurrence of an Event of Loss or an Event of Eminent Domain. "Required Deposit" means, at the time of any Required Deposit Event with respect to any Reserve Account Security on deposit in any Reserve Account Security Account, an amount equal to the aggregate Available Amount under such Reserve Account Security at such time; provided, however, that if such Required Deposit Event results from the occurrence of a Debt Service Event, such amount shall be equal to the aggregate amount required to be transferred pursuant to, if such Reserve Account Security Account is (a) the Maintenance Plan Funding Subaccount, Section 3.5(c) of the Intercreditor Agreement, (b) the Distribution Account, Section 3.8(b) of the Intercreditor Agreement, (c) a Debt Service Reserve Account, Section 4.5 of the Indenture and (d) a Tax-Exempt Debt Service Reserve Account, Section 4.6 of the Tax-Exempt Indenture. "Required Deposit Event" means (a) in the case of any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Reserve Account Letter of Credit, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Reserve Account Letter of Credit, unless such Reserve Account Letter of Credit has been replaced with monies or other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to such 98 date, (iii) the occurrence of a Credit Standard Event or Default Event with respect to such Reserve Account Letter of Credit and the continuance thereof for a period of five (5) days, unless such Reserve Account Letter of Credit has been replaced with other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to the expiration of such period or (iv) the date on which a Trigger Event Notice has been delivered and (b) in the case of any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Southern Guaranty, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Southern Guaranty, unless such Southern Guaranty has been replaced with monies or other Reserve Account Security prior to such date, (iii) the occurrence of a Credit Standard Event with respect to such Southern Guaranty and the continuance thereof for a period of fifteen (15) days, unless (A) the Collateral Agent or the Indenture Trustee (as the case may be) shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied after such occurrence and prior to the expiration of such period or (B) such Southern Guaranty has been replaced with monies or other Reserve Account Security prior to the expiration of such period, (iv) the occurrence of a Default Event and the continuance thereof for a period of five (5) days, unless such Southern Guaranty has been replaced with other Reserve Account Security prior to the expiration of such period or (v) the date on which a Trigger Event Notice has been delivered. "Required Interest Deposit" means, in the case of any Monthly Transfer Date with respect to: (a) the Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date, is equal to the amount of interest on the Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date (unless such next succeeding Interest Payment Date is January 1, 2020, in which case together with a uniform amount to be deposited 99 therein on each succeeding Monthly Transfer Date prior to December 1, 2019), is equal to the amount of interest on the Tax-Exempt Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Tax-Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax-Exempt Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). "Required Modifications" means those modifications reasonably necessary for the Energy Complex to remain in compliance with all material Governmental Approvals and maintain, at a minimum, the Maximum Capacity (as defined in the Master Operating Agreement) levels as in effect on the Closing Date. "Required Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Required Principal Deposit" means in the case of any Monthly Transfer Date with respect to: (a) the Indenture Securities Principal Subaccount, an amount equal to one-sixth (1/6th) of the amount of principal of the Indenture Securities becoming due on each Principal Payment Date therefor occurring within the six (6) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within six (6) months after the Closing Date or any other date on which any Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date 100 prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date) (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Principal Subaccount, one-twelfth (1/12th) (unless such Monthly Transfer Date occurs on or after January 1, 2019, in which case one-eleventh (1/11th)) of the amount of principal of the Tax-Exempt Indenture Securities becoming due on each Principal Payment Date therefor occurring within the twelve (12) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within twelve (12) months after the Closing Date or any other date on which any Tax-Exempt Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date)(such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Tax-Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax-Exempt Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). 101 "Required Senior Creditors" means Senior Secured Parties holding or otherwise representing 331/3% of the Combined Exposure. "Reserve Account Letter of Credit" means a letter of credit issued by a commercial bank whose long-term unsecured Debt is rated at least "A" by S&P, "A" by Fitch and "A2" by Moody's. "Reserve Account Security" means either, or any combination of, (a) one or more Southern Guaranties or (b) one or more Reserve Account Letters of Credit. "Reserve Account Security Accounts" means, collectively, each Debt Service Reserve Account (if any), each Tax-Exempt Debt Service Reserve Account (if any), the Maintenance Plan Funding Subaccount and the Distribution Account. "Responsible Officer" means, when used with respect to the Collateral Agent, the Indenture Trustee and the Tax-Exempt Indenture Trustee, (a) any officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) within the Corporate Trust Office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be), including any vice president, any assistant vice president, any assistant secretary or any assistant treasurer, (b) any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) performing functions similar to those performed by any of the officers designated in clause (a) above and (c) with respect to a particular corporate trust matter, any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to whom such matter is referred because of such other officer's knowledge of and familiarity with the particular subject. "Restricted Payment Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more other Persons in substitution for or replacement of any such Project Contract that has been declared unenforceable or rejected or otherwise terminated, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that either (a) the Company has delivered to the Collateral Agent a letter from any two of the Rating Agencies (then currently rating the Indenture Securities or the Tax-Exempt Indenture Securities) confirming that, after giving effect to such alternative Contract, the ratings of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) are Investment Grade or (b) the Company (i) has provided to the Collateral Agent the Revenue Sufficiency Certification and (ii) has delivered to the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that (A) the term of such alternative Contract extends through the earlier of (1) the final maturity of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) and (2) the term of such Project Contract, (B) such alternative 102 Contract contains termination provisions no less favorable to the Company than those contained in such Project Contract, (C) such alternative Contract has been in full force and effect for at least thirty-six (36) months, (D) the average of the two annual Senior Debt Service Coverage Ratios for the four immediately preceding semi-annual payment periods was equal to at least 1.25 to 1.0 and, based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.25 to 1.0 and (E) such alternative Contract is reasonably capable of being performed by the parties thereto. "Restricted Payments" means, collectively, (a) payments from the Subordinated Fee Account or any other payment in respect of Subordinated Fees, (b) distributions (from the Distribution Account or otherwise), including a return of capital contributions and dividends, paid to, or at the direction or for the benefit of, any Affiliate of the Company, but excluding distributions of cash from any Account to the extent such cash has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents, (c) the payment of principal of or premium, if any, or interest on any Affiliate Subordinated Debt, (d) the repurchase by the Company of any interest of any Member, or (e) the making of any loans or other advances from the Company to any Affiliate of the Company, but excluding advances of cash to the extent such cash (i) has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents or (ii) constitutes a payment required under the O&M Agreement or the SCS Agreement. "Revenue Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Revenue Sufficiency Certification" means an Officer's Certificate of the Company, together with an Independent Engineer Confirmation, to the effect that, based upon projections prepared by the Company in accordance with Section 1.15 of the Indenture or Section 1.12 of the IDB Lease Agreement, or of any comparable provision of the Working Capital Facility, the Project Contracts then in effect (including any alternative Contract entered into, or to be entered into, by the Company with one or more other Persons in substitution or replacement of any other Project Contract as contemplated by the Event of Default Alternative Agreement Requirements or the Restricted Payment Alternative Agreement Requirements) generate sufficient Revenues to enable the Company to pay its debts and other obligations (including Operation and Maintenance Costs) when they become due through the final maturity of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be). "Revenues" means (without duplication), for any period, the revenues received by the Company for use of the services and facilities of the Energy Complex including (a) amounts received 103 by the Company under the Project Contracts, (b) interest and other income earned and credited on monies deposited in the Accounts (to the extent not retained in such Accounts), (c) the proceeds of the sale of any part of the Energy Complex, provided that such sale is not prohibited by the Financing Documents, (d) the proceeds of any business interruption insurance and other payments received for interruption of operations (excluding any proceeds of any liability or physical damage insurance) and (e) all other monies that have been deposited into the Revenue Account as required or permitted by the terms of the Financing Documents. Notwithstanding the foregoing, "Revenues" do not include (i) capital contributions to the Company, (ii) the proceeds of any Debt or Loss Proceeds, (iii) amounts received by the Company in connection with the exercise of Company Step-In Rights (to the extent in excess of the Company's expenses incurred in connection therewith, including the cure or the attempted cure of the related Pulp Mill Triggering Event (as defined in the Master Operating Agreement)), (iv) monies transferred from the Completion Account to the Revenue Account pursuant to Section 3.9(c) of the Intercreditor Agreement, (v) monies transferred from any Debt Service Reserve Account to the Revenue Account pursuant to Section 4.5 of the Indenture, (vi) amounts received by the Company with respect to the 1994 Bonds and (vii) monies deposited into any Reserve Account Security Account in replacement (or satisfaction) of Reserve Account Security on deposit therein (including monies deposited into the Maintenance Plan Funding Subaccount pursuant to the last sentence of Section 3.5(a) of the Intercreditor Agreement). "S&P" means Standard & Poor's Ratings Group, a New York corporation. "Scott" means Scott Paper Company, a Pennsylvania corporation. "SCS" means Southern Company Services, Inc., an Alabama corporation. "SCS Agreement" means the Agreement dated July 14, 1995 between SCS and the Company. "S.D. Warren" means S.D. Warren Company, a Pennsylvania corporation. "SEC" means the Securities and Exchange Commission of the United States of America. "Secretary" means, in the case of a corporation (including Mobile Energy) or limited liability company (including the Company) the secretary or an assistant secretary of such corporation or limited liability company (as the case may be). "Secured Obligations" means, collectively, the Financing Liabilities, the Trustee Claims, the Collateral Agent Claims and the IDB Claims. 104 "Secured Party" means Bankers Trust (Delaware) or any other Person appointed as a substitute or replacement Secured Party under the Security Agreement. "Securities" has the meaning specified (a) in the case of the Indenture, in the first "WHEREAS" clause thereof and (b) in the case of the Tax-Exempt Indenture, in the last "WHEREAS" clause thereof. "Securities Act" means the Securities Act of 1933. "Security Agreement" means the Assignment and Security Agreement dated as of August 1, 1995 among the Company, the IDB and the Secured Party. "Security Documents" means, collectively, (a) the Mortgage, (b) the Security Agreement, (c) the Indenture (including any Series Supplemental Indenture), (d) the Intercreditor Agreement, (e) the Tax-Exempt Indenture (including any Series Supplemental Indenture), (f) the IDB Lease Agreement, (g) the Consents to Assignment and (h) each Financing Statement. "Security Interest" means the Liens created, or purported to be created, on Shared Collateral pursuant to any Security Document. "Security Register" has the meaning specified in Section 2.8 of the Indenture or Section 2.8 of the Tax-Exempt Indenture (as the case may be). "Security Registrar" means any Person acting as Security Registrar under the Indenture or the Tax-Exempt Indenture pursuant to Section 9.14 or Section 9.13 (as the case may be) thereof. "Senior Creditor Certificate" means a certificate of a Senior Secured Party, signed by an Authorized Representative of such Senior Secured Party, (a) setting forth the principal amount of the Financing Liabilities due or owing to, or in favor of or for the benefit of, such Senior Secured Party as of the date of such certificate and the outstanding unutilized Financing Commitments of such Senior Secured Party as of the date of such certificate, (b) setting forth a contact person for such Senior Secured Party, including phone and facsimile numbers for such person, (c) directing the Collateral Agent to take a specified action and (d) stating specifically the action the Collateral Agent is directed to take and the Security Document and the provision thereof pursuant to which the Collateral Agent is being directed to act. "Senior Debt" means, collectively, the Outstanding Senior Securities and the outstanding Working Capital Facility Loans. "Senior Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other 105 income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operation and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Senior Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (iv) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (v) the aggregate amount of overdue payments in respect of clauses (b)(i) through (iv) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Senior Debt Service Coverage Ratio. "Senior Debt Service Requirement" means, for any period, the sum of (a) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (b) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (c) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (d) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (e) the aggregate amount of overdue payments in respect of the foregoing from previous periods, in each case determined on a cash basis in accordance with GAAP. "Senior Debt Termination Date" means the date on which all Financing Liabilities, other than contingent liabilities and obligations that are unasserted at such date, have been paid and satisfied in full and all Financing Commitments have been terminated. "Senior Secured Parties" means, collectively, (a) the Indenture Trustee (on behalf of the Holders of the Indenture Securities from time to time and, solely in its capacity as trustee on behalf of such Holders, itself), (b) the Tax-Exempt Indenture Trustee (on behalf of the Holders of the Tax-Exempt Indenture Securities from time to time and, solely in its 106 capacity as trustee on behalf of such Holders, itself) and (c) the Working Capital Facility Provider (on behalf of the Lenders from time to time and itself). "Senior Securities" means, collectively, the Indenture Securities and the Tax-Exempt Indenture Securities. "Series Supplemental Indenture" means an indenture supplemental to the Indenture or the Tax-Exempt Indenture entered into by the Mobile Energy Parties or the IDB (as the case may be) and the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) for the purpose of establishing, in accordance with such indenture, the title, form and terms of the Senior Securities of any series. "Shared Collateral" means all Collateral other than (a) the Collateral referenced in clause (a) of the definition of Indenture Securities Collateral and (b) the Collateral referenced in clause (a) of the definition of Tax-Exempt Indenture Securities Collateral. "Sinking Fund" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Redemption Dates" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Requirements" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Site" means the real property on which the Energy Complex is situated, as more fully described in the Mortgage. "Southern" means The Southern Company, a Delaware corporation. "Southern Credit Standard" means, at any time, (a) Southern's outstanding senior long-term Debt is then rated at least, and not rated less than, "A" by either S&P or Moody's (unless such senior long-term Debt is not then rated by either S&P or Moody's, in which case each Designated Southern Subsidiary has outstanding senior long-term Debt that is then rated at least, and not rated less than, BBB by S&P or Baa2 by Moody's) and (b) the sum of (i) cash and cash equivalents (including marketable securities) of Southern and the Designated Southern Subsidiaries, (ii) amounts available from committed credit facilities of Southern and the Designated Southern Subsidiaries and (iii) amounts available from commercial paper authorized to be issued by Southern and rated not less than A-1/P-1 by S&P or Moody's (in each case as of the end of Southern's most recently completed fiscal quarter and provided that such cash and cash equivalents and other amounts are available, without restriction, for distribution to the Collateral Agent or the Indenture 107 Trustee, upon fifteen (15) days' notice) is equal to at least the aggregate amount of Southern Guaranties then outstanding multiplied by four. "Southern Electric" means Southern Electric International, Inc., a Delaware corporation. "Southern Guaranty" means one or more unconditional, absolute and irrevocable guaranties from Southern to be delivered to (a) the Collateral Agent for deposit into the Maintenance Plan Funding Subaccount or the Distribution Account pursuant to and in accordance with Section 3.15(a) of, and in substantially the form attached as Exhibit C to, the Intercreditor Agreement or (b) the Indenture Trustee for deposit into each Debt Service Reserve Account (if any) pursuant to and in accordance with Section 4.6(a) of, and in substantially the form attached as Exhibit A to, the Indenture, provided that, in the case of clause (a) and (b) above, the Southern Credit Standard is satisfied at the time of such delivery and deposit. "Southern Master Tax Sharing Agreement" means the Income Tax Allocation Agreement dated as of December 29, 1981 among Southern and its corporate subsidiaries. "Special Record Date" means, with respect to the payment of any defaulted principal or interest, a date fixed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) pursuant to, in the case of the Indenture Trustee, Section 2.10 of the Indenture and, in the case of the Tax-Exempt Indenture Trustee, Section 2.10 of the Tax-Exempt Indenture. "Stated Maturity" means, when used with respect to any Senior Security or any installment of principal thereof or payment of interest thereon, the date specified in such Senior Security as the fixed date on which such Senior Security or such installment of principal or payment of interest is due and payable. "Subordinated Debt" means, collectively, Affiliate Subordinated Debt and Non-Affiliate Subordinated Debt. "Subordinated Debt Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Debt Provider" means any Person providing Subordinated Debt pursuant to a Subordinated Loan Agreement. "Subordinated Fee" means a fee in exchange for the provisions of goods or services to either of the Mobile Energy Parties, the payment of which is fully subordinated to the Secured Obligations as to payment and exercise of remedies and that is payable only to the extent it would otherwise be distributable if on deposit in the Distribution Account. 108 "Subordinated Fee Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Loan Agreement" means a binding agreement with a Subordinated Debt Provider providing unsecured debt financing for the benefit of the Energy Complex and on terms and conditions that shall satisfy the requirements of the Financing Documents. "Supplementary Lease" means the Supplementary Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Tax-Exempt Bonds" means the Tax-Exempt Indenture Securities issued on the Closing Date under the Tax-Exempt Indenture. "Tax-Exempt Debt Service Reserve Account" means the Account so designated established and created under Section 4.4(a) of the Tax-Exempt Indenture and any Account so designated and created under any Series Supplemental Indenture to the Tax-Exempt Indenture for the benefit of Holders of the Tax-Exempt Indenture Securities established thereunder. "Tax-Exempt Debt Service Reserve Account Required Balance" means (a) in respect of the Tax-Exempt Debt Service Reserve Account established and created under Section 4.4(a) of the Tax- Exempt Indenture, the amount designated in Section 4.4(b) thereof and (b) in respect of any other Tax-Exempt Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Tax-Exempt Indenture establishing such Tax- Exempt Debt Service Reserve Account. "Tax-Exempt Indenture" means the Amended and Restated Trust Indenture dated as of August 1, 1995 between the IDB and the Tax- Exempt Indenture Trustee. "Tax-Exempt Indenture Accounts" means, with respect to the Tax-Exempt Indenture Securities of any series, the Tax-Exempt Indenture Securities Account and each Tax-Exempt Debt Service Reserve Account (if any) established for the benefit of Holders of the Tax-Exempt Indenture Securities of such series. "Tax-Exempt Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Tax-Exempt Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Tax-Exempt Indenture Securities" means all Outstanding Debt issued pursuant to the Tax-Exempt Indenture. 109 "Tax-Exempt Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Tax-Exempt Indenture. "Tax-Exempt Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Tax-Exempt Indenture Trustee by the IDB pursuant to the granting and assigning clauses of the Tax-Exempt Indenture and (b) the Shared Collateral. "Tax-Exempt Indenture Securities Interest Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Principal Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Redemption Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax-Exempt Indenture. "Tax-Exempt Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Tax-Exempt Project" means those portions of the Energy Complex financed with the proceeds of the 1983 Bonds, as described generally in Exhibit A to the IDB Lease Agreement. "Termination Event" means, with respect to any Reserve Account Security, such Reserve Account Security shall have terminated or expired (other than any termination thereof pursuant to the last sentence of Section 3.8(c) of the Intercreditor Agreement). "Third Party Engineer" means the independent engineering firm chosen from the list of engineers maintained as Schedule 1 to the Intercreditor Agreement and appointed Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Third Party Engineer Dispute Resolution" means the dispute resolution process involving a Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Tissue Mill" means the tissue mill located at the Mobile Facility, which as of the Closing Date is owned by Scott. "Tissue Mill Energy Services Agreement" means the Tissue Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, 110 between the Tissue Mill Owner and the Company (as assignee of Mobile Energy). "Tissue Mill Owner" means Scott, in its capacity as owner of the Tissue Mill. "Total Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operations and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account or the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Total Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayments of principal), (iv) all amounts payable by the Company as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents, (v) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the outstanding Subordinated Debt, (vi) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any Subordinated Debt Provider and (vii) the aggregate amount of overdue payments in respect of clauses (b)(i) through (vi) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Total Debt Service Coverage Ratio. "Transfer Agreement" means the Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement dated July 14, 1995 between Mobile Energy and the Company. "Trigger Event" means (a) an Event of Default under the Indenture and an acceleration of Indenture Securities thereunder, (b) an Event of Default under the Tax-Exempt Indenture and an acceleration of Tax-Exempt Indenture Securities thereunder, (c) an Event of Default under the Working Capital Facility and an acceleration of Working Capital Facility Loans thereunder or (d) a Bankruptcy Event in respect of either of the Mobile Energy Parties and the expiration of the shortest applicable grace period with respect thereto. 111 "Trigger Event Period" means that a Trigger Event shall have occurred and be continuing, provided that, except in the case of any such Trigger Event that shall have resulted from a Bankruptcy Event in respect of either of the Mobile Energy Parties, the written request of the Required Senior Creditors specified in Section 5.1(a) of the Intercreditor Agreement shall have been delivered to the Collateral Agent and not been rescinded. "TRT" means Three Rivers Timber Company, a Washington corporation. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which the Indenture was executed, except as provided in Section 11.6 thereof; provided, however, that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended. "Trustee Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses or other amounts to (a) the Indenture Trustee under the Indenture or (b) the Tax-Exempt Indenture Trustee under the Tax-Exempt Indenture. "Uniform Commercial Code" means the Uniform Commercial Code of the jurisdiction the law of which governs the Contract in which such term is used. "U.S. Government Obligations" means non-callable direct obligations of or obligations as to which the payment of principal of and interest is unconditionally guaranteed by the United States of America. "Water Agreement" means the Water Procurement and Effluent Service Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Paper Mill Owner and the Tissue Mill Owner. "Wind-Up Event" means, at any time upon and after a Trigger Event, the application of monies on deposit in any of the Intercreditor Agreement Accounts, or of proceeds from any sale, disposition or other realization of any Shared Collateral (other than the Intercreditor Agreement Accounts), in either case to the payment of amounts owing in respect of any Senior Debt and as a result of the exercise of remedies by the Collateral Agent under Article V of the Intercreditor Agreement. "Working Capital Escalation Factor" means, with respect to any Fiscal Year, a factor (calculated in June of such Fiscal Year) equal to the amount obtained by (a) dividing (i) the GDPIPD most recently published during such Fiscal Year by (ii) the GDPIPD published during the prior Fiscal Year on the date that most closely corresponds to, and is on or prior to, the date of such GDPIPD most recently published (provided that if the amount obtained is less than or equal to 1.015, then such amount shall 112 be deemed to equal 1.015), (b) then subtracting 0.015, and (c) then multiplying by the Working Capital Escalation Factor with respect to the immediately preceding Fiscal Year. "Working Capital Facility" means the Revolving Credit Agreement dated as of August 1, 1995 between the Company and the Working Capital Facility Provider or any other Contract between the Company and a Working Capital Facility Provider pursuant to which funds for the working capital requirements of the Company are provided. "Working Capital Facility Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Working Capital Facility Commitment" means the aggregate of the commitments of the Lenders under the Working Capital Facility. "Working Capital Facility Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement and provided that the Working Capital Facility Commitment is subject to reduction in connection with such Event of Loss or Event of Eminent Domain pursuant to the terms of the Working Capital Facility, an amount equal to the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the unutilized Working Capital Facility Commitment in effect immediately prior to such reduction, unless the Company would not be able to borrow Working Capital Facility Loans (because the conditions set forth in Article III of the Working Capital Facility are not available or not satisfied), in which case the lesser of (a) the Working Capital Facility's Percentage Share of such Excess Loss Proceeds and (b) the outstanding Working Capital Loans at such time. "Working Capital Facility O&M Loan" means a Working Capital Facility Loan, to the extent the proceeds thereof are applied to Operation and Maintenance Costs other than (a) rebates to the United States government pursuant to Section 148 of the Code, (b) Maintenance Expenditures and (c) payments of IDB Claims. "Working Capital Facility Provider" means Banque Paribas, a French banking corporation, and each other Person providing funds to the Company pursuant to a Working Capital Facility. "Working Capital Facility Loan" means a Loan (as defined in the Working Capital Facility) advanced by the Working Capital Facility Provider pursuant to the Working Capital Facility. 113 Schedule 4.2 INSURANCE POLICIES General Conditions: (a) All policies shall waive the rights of subrogation against the Collateral Agent. (b) All property and liability policies shall name each of the Collateral Agent and the IDB as an additional insured. All policies protecting real and personal property or loss of income shall include a Lenders Loss Payable provision for the benefit of the Collateral Agent. (c) All policies shall be endorsed to provide a minimum of thirty (30) days notice of cancellation, nonrenewal, or material change (restricting coverage) (ten (10) days in the case of cancellation for non-payment of premiums) to the Collateral Agent and the Company. (d) Where commercially available, all policies shall stipulate by endorsement or equivalent policy language that the additional insured status of the Collateral Agent and the IDB places no responsibility on the Collateral Agent or the IDB (as the case may be) for the payment of policy premiums, nor does the action or failure to take action by any other insured or additional insured invalidate coverages for the Collateral Agent or the IDB under said policy. (e) A severability of interest clause or equivalent cross liability endorsement shall be included in each policy. (f) All policies shall be primary as respects coverage provided for the Energy Complex and the Site. (g) All policies shall be provided through insurance carriers rated A-IX or better by the Best's Insurance Guide (except for policies underwritten by Lloyd's of London, AEGIS and approved English companies) or other insurance companies reasonably acceptable to the Collateral Agent, in each case, which are authorized to do business in the State of Alabama. (h) All policies shall stipulate by endorsement or equivalent policy language that following a Wind-Up Event, the Collateral Agent shall have the right to make all claims made under said policy. (i) All policies (other than liability policies) shall stipulate by endorsement or equivalent policy language that following a Wind-Up Event, said policy can be assigned to the Collateral Agent. Schedule 4.2-1 The following coverages shall be maintained in effect at all times until all obligations of the Mobile Energy Parties pursuant to this Agreement, the Tax-Exempt Indenture Securities, the Working Capital Facility, the Guaranty and the other Security Documents have been fully discharged: Required Insurance: (a) Workers' Compensation Insurance. Workers' compensation insurance, as required by state and Federal laws (including United States Longshoremen and Harbor Workers and Maritime Liability (Jones Act) Insurance), including employer's liability insurance for all employees of the Energy Complex in the minimum amount of $1,000,000 per occurrence and in the aggregate where applicable; provided, however, that the Company may satisfy such obligations, in whole or in part, through the self-insurance of the Operator against workers' compensation claims. (b) Comprehensive General Liability Insurance. Comprehensive general liability insurance against claims for personal injury (including bodily injury and death), and property damage. Such insurance shall provide coverage for products-completed operations, premises/operations, blanket contractual, explosion, collapse and underground coverage, broad form property damage and personal injury insurance coverage to protect the Collateral Agent against claims arising out of operations performed by the Company and its subcontractors, with a $1,000,000 minimum limit per occurrence for combined bodily injury and property damage and with an aggregate of $2,000,000. The general liability insurance shall, at a minimum, be provided under a 1986 ISO Commercial General Liability form of policy or equivalent policy and shall be written on an occurrence basis, or the AEGIS claim-first-made policy form. (c) Comprehensive Automobile Liability. Comprehensive automobile liability insurance against claims of personal injury (including bodily injury and death) and property damage, including loss of use thereof, covering all owned, leased, non-owned and hired vehicles used by the Company in the operation of the Energy Complex, with a $1,000,000 minimum limit per occurrence for bodily injury and property damage and a $2,000,000 minimum limit per occurrence for combined bodily injury and property damage. (d) Aircraft and Watercraft Liability. Aircraft Liability insurance (if applicable), including Passengers and Crew Liability, and Watercraft Liability insurance (if applicable), each having a $25,000,000 minimum limit per occurrence for property damage and bodily injury, covering all aircraft or watercraft that is owned, leased or chartered by the Company or any of its subcontractors. If the performance of any obligations by a subcontractor in connection with services performed at the Energy Complex requires the use of any aircraft or watercraft that is owned, leased or chartered by such subcontractor or any of its subcontractors, such subcontractor shall obtain Aircraft Liability and Watercraft Schedule 4.2-2 Liability insurance with a $25,000,000 minimum limit per occurrence for property damage and bodily injury. If a helicopter is used to lift materials or equipment, any Aircraft Liability insurance required hereunder shall not contain any exclusion of coverage for "slung-cargo." (e) Umbrella Liability or Excess Insurance. Excess Liability insurance on an "occurrence" basis, or the AEGIS claims-first-made policy form pursuant to an "Umbrella" policy covering claims in excess of and following the terms of the underlying insurance as set forth in (a), (b) and (c) with a $24,000,000 minimum limit per occurrence and a $24,000,000 annual aggregate limit; provided that, in the event that claims under such aggregate liability coverage would reduce the coverage to an amount less than or equal to $50,000,000, the Company shall provide prompt written notice thereof to the Collateral Agent and promptly after such claims are made, restore the coverage under such policy to the coverage amount maintained prior to the assertion of such claims. (f) Property Damage Insurance. Property Damage insurance on an "all risk" replacement cost basis including coverage against damage or loss caused by earth movement, flood and windstorm and providing (i) coverage for the Energy Complex in a minimum aggregate amount of the lesser of (A) the full replacement value of the Energy Complex and (B) the outstanding amount of Senior Debt (including the unutilized Working Capital Facility Commitment) of the Company (for which purpose there shall be included all steam, gas and electrical transmission lines along with related equipment for which the Company has an insurable interest) and (ii) Transit coverage, including Ocean marine coverage (if applicable), with sub-limits sufficient to insure the full replacement value of all property or equipment removed from the Energy Complex, provided that, for the perils of flood, earth movement, increased cost of construction, debris removal and loss to undamaged property, any sub-limit shall be not less than $100,000,000. For purposes of this paragraph (f), "replacement cost," including any improvements and equipment and supplies, shall be without deduction for physical depreciation. All such policies may have deductibles of not greater than $1,000,000, except for earth movement, flood and windstorm, which will have the lowest deductible available on commercially reasonable terms in the insurance marketplace. Such insurance shall include and "Agreed Amount" Clause or Waiver of Co-Insurance and shall provide for increased cost of construction, debris removal, and loss to undamaged property as the result of enforcement of building laws or ordinances. (g) Boiler and Machinery Insurance. Boiler and Machinery insurance coverage to be written on a "comprehensive form" basis for all insurable objects including all production machinery, pressure vessels, electrical turbines and equipment, motors, air tanks, boilers, machinery, pressure piping or any other similar objects located on or adjacent to the Site in a minimum aggregate amount equal to the maximum foreseeable loss and expediting Schedule 4.2-3 expenses in the amount of $2,500,000 (with losses to be adjusted on a replacement value) (subject to the limit set forth in paragraph (f) above). All such policies may have deductibles of not greater than $1,000,000. (h) Business Interruption and Extra Expense Insurance. Business Interruption insurance covering as a minimum amount all fixed expenses and debt service for a period of twelve (12) months arising from any loss insured by (f) and (g). The maximum deductible shall be no greater than thirty (30) days. There shall be either an Agreed Amount Clause or Waiver of Coinsurance. (i) Subcontractor Insurance. To the extent required by the Master Operating Agreement or any Energy Services Agreement, the Company shall require each of its subcontractors expected to perform work with a value in excess of $5,000,000 (including the Operator) to obtain, from an insurance company meeting the qualifications set forth above, on or before the effective date of any agreement between the Company and such subcontractor with respect to the Energy Complex, each of the insurance coverages set forth in paragraphs (a), (b) and (c). Each subcontractor shall furnish to the Company, and the Company shall furnish to the Collateral Agent, the Tax-Exempt Indenture Trustee and the Working Capital Facility Provider, a certificate of insurance verifying that the insurance to be provided as required hereunder has been secured. Schedule 4.2-4 Exhibit A TAX-EXEMPT PROJECT AND LEASED LAND The Tax-Exempt Project consists of solid waste disposal facilities at the Mobile, Alabama plant of the Company presently existing, under construction or to be constructed, including a multi-fuel power boiler and auxiliaries, the portion of the central control system associated with the solid waste disposal function, the portion of the water and compressed air system serving the multi-fuel power boiler, the portion of a power complex structure associated with the solid waste disposal function, a biomass handling system, sludge burning facilities, a coal handling system and a portion of certain underground process sewers, storm sewers and utilities associated with the solid waste disposal facilities. EXHIBIT A Description of Leased Land Those certain premises located in the County of Mobile, State of Alabama bounded and described as follows: RECOVERY AREA NO. 7 Beginning at a Point at Alabama State Plane Coordinate N 268944.583, E327580.044, said point being 2458.36 ft. North and 1588.85 ft. East of the Site of the Great Magnolia; Thence S-17(degree)-10'-07"-E for 26.11 ft.; Thence S-26(degree)-37'-14"-E for 164.93 ft.; Thence S-29(degree)-44'-52"-E for 142.73 ft.; Thence S-44(degree)-22'-46"-E for 28.07 ft.; Thence S-25(degree)-30'-05"-W for 50.78 ft.; Thence S-79(degree)-06'-46"-W for 410.18 ft.; Thence N-10(degree)-49'-45"-W for 384.40 ft.; Thence N-79(degree)-10'-15"-E for 282.10 ft.; Thence N-10(degree)-49'-30"-W for 18.51 ft.; Thence N-79(degree)-10'-38"-E for 29.76 ft.; Thence S-10(degree)-49'-34"-E for 18.51 ft.; Thence N-79(degree)-10'-08"-E for 18.85 ft. to the Point of Beginning. SLUDGE BUILDING ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268777.532, E 327712.983, said point being 2291.31 ft. North and 1721.79 ft. East of the Site of the Great Magnolia; Thence N-30(degree)-36'-15"-W for 22.16 ft.; Thence N-59(degree)-23'-39"-E for 27.51 ft.; Thence S-30(degree)-36'-18"-E for 22.16 ft.; Thence S-59(degree)-23'-49"-W for 27.51 ft. to the Point of Beginning. SLUDGE TOWER Beginning at a Point at Alabama State Plane Coordinate N 268984.742, E 327588.763, said point being 2498.52 ft. North and 1597.57 ft. East of the Site of the Great Magnolia; Thence N-78(degree)-58'-04"-E for 15.66 ft.; Thence N-11(degree)-01'-56"-W for 12.11 ft.; Thence N-78(degree)-58'-04"-E for 17.76 ft.; Thence S-11(degree)-01'-56"-E for 32.08 ft.; Thence S-78(degree)-58'-04"-W for 33.41 ft.; Thence N-11(degree)-01'-58"-W for 19.97 ft. to the Point of Beginning. A-2 BIOMASS TOWER ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268989.042, E 327343.762, said point being 2502.82 ft. North and 1352.57 ft. East of the Site of the Great Magnolia; Thence S-78(degree)-55'-12"-W for 24.05 ft.; Thence N-11(degree)-04'-48"-W for 31.70 ft.; Thence N-78(degree)-55'-12"-E for 24.05 ft.; Thence S-11(degree)-04'-48"-E for 31.70 ft. to the Point of Beginning. COAL TOWER ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268846.988, E 326816.353, said point being 2360.76 ft. North and 825.167 ft. East of the Site of the Great Magnolia; Thence S-75(degree)-10'-05"-W for 33.09 ft.; Thence N-14(degree)-49'-56"-W for 26.97 ft.; Thence N-75(degree)-10'-05"-E for 33.09 ft.; Thence S-14(degree)-49'-56"-E for 26.97 ft. to the Point of Beginning. COAL UNLOADING BUILDING ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268573.700, E 326422.793, said point being 2087.48 ft. North and 431.60 ft. East of the Site of the Great Magnolia; Thence N-32(degree)-45'-47"-W for 50.48 ft.; Thence N-57(degree)-14'-13"-E for 20.34 ft.; Thence S-32(degree)-45'-47"-E for 50.48 ft.; Thence S-57(degree)-14'-13"-W for 20.34 ft. to the Point of Beginning. AREA CONVEYORS ALSO: 4 strips of land being 10 feet in width and lying 5 feet each side of the following described centerlines. TO-WIT: Beginning at a Point at Alabama State Plane Coordinate N 268792.160, E 327704.257, said point being 2305.94 ft. North and 1713.07 ft. East of the Site of the Great Magnolia; Thence S-63(degree)-24'-43"-W for 4.45 ft.; Thence N-26(degree)-36'-02"-W for 200.15 ft. to the Point of ending of the Centerline herein described. Beginning at a Point at Alabama State Plane Coordinate N 268990.737, E 327615.688, said point being 2504.51 ft. North and 1624.50 ft. East of the Site of the Great Magnolia; Thence A-3 N-88(degree)-52'-24"-W for 273.56 ft. to the Point of Ending of the Centerline herein described. Beginning at a Point at Alabama State Plane Coordinate N 268995.750, E 327317.964, said point being 2509.53 ft. North and 1326.77 ft. East of the Site of the Great Magnolia; Thence S-75(degree)-08'-47"-W for 522.98 ft. to the Point of Ending of the Centerline herein described. Beginning at a Point at Alabama State Plane Coordinate N 268842.848, E 326783.217, said point being 2356.62 ft. North and 792.03 ft. East of the Site of the Great Magnolia; Thence S-57(degree)-47'-29"-W for 428.42 ft. to the Point of Ending of the Centerline herein described. Being a portion of the premises conveyed by Augustine Meaher, Jr., et al., to Scott Paper Company by deed dated July 25, 1994 record in the office of the Judge of Probate of Mobile County Alabama in Real Property Book 4183, Page 1204. A-4 EX-4.6 7 Exhibit 4.6 EXECUTION COPY - ------------------------------------------------------------------------------ REVOLVING CREDIT AGREEMENT among MOBILE ENERGY SERVICES COMPANY, L.L.C. MOBILE ENERGY SERVICES HOLDINGS, INC. and THE LENDERS NAMED HEREIN and BANQUE PARIBAS, as Agent dated as of August 1, 1995 - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF INTERPRETATION........................ 1 ARTICLE II COMMITMENTS AND LOANS........................ 5 SECTION 2.1. The Facility................................................ 5 SECTION 2.2. Making Loans................................................ 7 SECTION 2.3. Interest.................................................... 8 SECTION 2.4. Repayment................................................... 9 SECTION 2.5. Prepayments................................................. 9 SECTION 2.6. Fees........................................................ 10 SECTION 2.7. Security.................................................... 10 SECTION 2.8. Payments.................................................... 10 SECTION 2.9. Computation of Interest and Fees............................ 11 SECTION 2.10. Payments on Non-Business Days.............................. 11 SECTION 2.11. Sharing of Payments, Etc................................... 12 SECTION 2.12. Evidence of Debt........................................... 12 SECTION 2.13. Increased Costs............................................ 13 SECTION 2.14. Taxes...................................................... 14 SECTION 2.15. Illegality................................................. 16 SECTION 2.16. Inability to Determine Interest Rate....................... 17 SECTION 2.17. Transfer of Lending Office.................................. 17 ARTICLE III CONDITIONS PRECEDENT........................ 18 SECTION 3.1. Conditions Precedent to Initial Borrowing................... 18 SECTION 3.2. Conditions Precedent to Each Borrowing...................... 19 ARTICLE IV REPRESENTATIONS AND WARRANTIES.................. 19 ARTICLE V COVENANTS............................. 20 -i- Page ARTICLE VI DEFAULTS AND REMEDIES........................ 22 ARTICLE VII THE AGENT............................. 24 SECTION 7.1. Authorization and Action.................................... 24 SECTION 7.2. Agent's Reliance, Etc....................................... 24 SECTION 7.3. Initial Lender and Affiliates............................... 25 SECTION 7.4. Lender Credit Decision...................................... 25 SECTION 7.5. Indemnification............................................. 25 SECTION 7.6. Successor Agent............................................. 26 ARTICLE VIII GUARANTY............................... 26 SECTION 8.1. Guaranty of Payment and Performance......................... 26 SECTION 8.2. Continuance and Acceleration of Obligations upon Certain Events............................................. 26 SECTION 8.3. Recovered Payments.......................................... 27 SECTION 8.4. Evidence of Obligations..................................... 27 SECTION 8.5. Binding Nature of Certain Adjudications..................... 27 SECTION 8.6. Nature of Mobile Energy's Obligations....................... 28 SECTION 8.7. No Release of Mobile Energy................................. 28 SECTION 8.8. Certain Waivers............................................. 29 SECTION 8.9. Independent Credit Evaluation............................... 30 SECTION 8.10. Subordination of Rights Against Company, Other Guarantors and Collateral............................................. 30 SECTION 8.11. Payments by Mobile Energy................................... 30 SECTION 8.12. Continuance of Guaranty; Survival........................... 31 SECTION 8.13. Assignments and Participations.............................. 31 SECTION 8.14. Benefit and Enforcement..................................... 31 ARTICLE IX MISCELLANEOUS........................... 32 SECTION 9.1. Amendments, Etc............................................. 32 SECTION 9.2. Notices, Etc................................................ 32 SECTION 9.3. No Waiver; Remedies......................................... 32 SECTION 9.4. Costs and Expenses.......................................... 33 SECTION 9.5. Application of Monies....................................... 33 SECTION 9.6. Severability................................................ 34 SECTION 9.7. Non-recourse Liability...................................... 34 SECTION 9.8. Binding Effect.............................................. 35 SECTION 9.9. Assignments and Participations.............................. 35 -ii- Page SECTION 9.10. Indemnification............................................ 37 SECTION 9.11. Governing Law.............................................. 39 SECTION 9.12. Headings................................................... 39 SECTION 9.13. Execution in Counterparts.................................. 39 SECTION 9.14. Third Party Beneficiaries.................................. 39 SECTION 9.15. Waiver of Jury Trial....................................... 39 SECTION 9.16. Submission To Jurisdiction; Waivers........................ 39 -iii- REVOLVING CREDIT AGREEMENT, dated as of August 1, 1995, among MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation ("Mobile Energy"), BANQUE PARIBAS (in its individual capacity, the "Initial Lender"), each other lender that becomes a party hereto pursuant to Section 9.9 (together with the Initial Lender, collectively, the "Lenders") and BANQUE PARIBAS, as agent (in such capacity, the "Agent") for the Lenders. W I T N E S S E T H : WHEREAS, the Company owns and operates the Energy Complex (as defined herein) and is financing the acquisition, construction and equipping of the Energy Complex through, among other things, the issue and sale by the Company of the First Mortgage Bonds (as defined herein); WHEREAS, in connection with the financing of certain portions of the Energy Complex, the IDB (as defined herein) will issue the Tax-Exempt Bonds (as defined herein); WHEREAS, the Company may, from time to time after the date of this Agreement, issue additional Indenture Securities (as defined herein), or cause the IDB to issue additional Tax-Exempt Indenture Securities (as defined herein), for the purposes described in the Financing Documents (as defined herein); and WHEREAS, the Company intends to finance certain of its working capital requirements arising in connection with the operation of the Energy Complex pursuant to, and the Company has requested that the Lenders make available to the Company, and the Lenders are willing to make available to the Company, a revolving credit facility of up to the maximum aggregate principal amount of $15,000,000, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF INTERPRETATION (a) For the purposes of this Agreement, except as expressly provided in this Agreement or unless the context otherwise requires, all terms used herein shall have the meanings set forth in Appendix A to the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among First Union National Bank of Georgia, as the Indenture Trustee and Tax-Exempt Indenture Trustee referred to therein, the Initial Lender, The Industrial Development Board of the City of Mobile, Alabama, the 2 Company, Mobile Energy and Bankers Trust (Delaware), as the Collateral Agent referred to therein. (b) The following terms are used in this Agreement with the following respective meanings: "Adjusted Base Rate" means the higher of (i) the Federal Funds Rate plus one-half of one percent (0.50%) and (ii) the Reference Rate. "Adjusted Base Rate Loan" means any Loan the interest on which is, or is to be, as the context may require, computed on the basis of the Adjusted Base Rate. "Borrowing" means a borrowing by the Company consisting of Loans made on the same day by the Lenders. "Closing Date" means the date on which the conditions precedent set forth in Article III have been fulfilled. "Commitment" means, with respect to each Lender, (i) the amount set forth opposite such Lender's name on the signature pages hereof or (ii) if such Lender has entered into one (1) or more Commitment Transfer Supplements, the amount set forth for such Lender in the register maintained by the Agent, as the same may be ratably reduced from time to time pursuant to Section 2.1(c). "Commitment Transfer Supplement" means such document substantially in the form of Exhibit C. "Credit Documents" means this Agreement and each Note. "Default" means an event that with the giving of any required notice or the lapse of any required period of time would constitute an Event of Default. "Eurodollar Business Day" means any Business Day on which dealings in United States dollar deposits are carried on by Banque Paribas in the interbank eurodollar market and on which commercial banks in London are generally open for domestic and foreign exchange business (including dealings in United States dollar deposits). "Event of Default" has the meaning specified in Article VI. "Expiration Date" means the earliest of (i) the Scheduled Expiration Date, (ii) the date on which the Commitments are fully canceled pursuant to Section 2.1(c) and (iii) the occurrence of an Event of Default and the Agent's termination (or any automatic termination) of the obligation of each Lender to make Loans hereunder, in accordance with the provisions of Article VI. 3 "Extension Request" has the meaning specified in Section 2.1(b). "Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Guaranty" means the guaranty of the Obligations by Mobile Energy set forth in Article VIII. "Indemnified Party" has the meaning specified in Section 9.10. "Interest Period" means, with respect to any LIBOR Rate Loan, the period commencing on the date of the making of such Loan and ending on and including the day preceding the same day in the first, second or third calendar month thereafter, as selected by the Company and specified in the related Notice of Borrowing; provided, however, that (i) any Interest Period that would otherwise end on a day that is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day, unless such Eurodollar Business Day falls in a different calendar month, in which case such Interest Period shall end on the next preceding Eurodollar Business Day, and (ii) any Interest Period that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period ends) shall end on the last Eurodollar Business Day of a calendar month. The Company shall select Interest Periods so as not to require a payment or prepayment of any LIBOR Rate Loan other than on the last day of the Interest Period for such LIBOR Rate Loan. "LIBOR Rate" means, with respect to each day during any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16th of one percent (0.0625%)) determined by the Agent to be equal to (i) (A) the arithmetic mean of the rate at which deposits in United States dollars (in the approximate amount of the Loan of Banque Paribas to which such Interest Period applies) are offered to Banque Paribas in the interbank eurodollar market at approximately 11:00 a.m. (New York time), two Eurodollar Business Days prior to the first day of such Interest Period, divided by (B) 100% minus the Reserve Requirement for such day, plus (ii) one percent (1.0000%). 4 "LIBOR Rate Loan" means any Loan the interest on which is, or is to be, as the context may require, computed on the basis of the LIBOR Rate. "Loan" means a loan by a Lender to the Company pursuant to Section 2.1(a). "Loan Repayment Date" means, in respect of each Loan, the Business Day specified as such on the Notice of Borrowing relating thereto; provided, however, that (i) such date shall not be later than the Scheduled Expiration Date, (ii) such date shall not exceed 93 days from the date such Loan is advanced to the Company pursuant to the terms of this Agreement, (iii) in the case of LIBOR Rate Loans, such date shall correspond to the last day of the Interest Period specified in the related Notice of Borrowing and (iv) no more than $5,000,000 principal amount of Loans may be scheduled to mature within any calendar month. "Note" has the meaning specified in Section 2.12(a). "Notice of Borrowing" means a Notice of Borrowing properly completed and executed by an Authorized Officer of the Company substantially in the form of Exhibit B. "Obligations" means all of the obligations of the Mobile Energy Parties to the Lenders and the Agent under the Credit Documents, whether for principal, interest (including post-petition interest, whether or not allowed as a claim), fees, expenses, indemnification or otherwise. "Participant" has the meaning specified in Section 9.9(b). "Purchasing Lender" has the meaning specified in Section 9.9(a). "Reference Rate" means the variable rate of interest per annum officially announced or published by Citibank, N.A. in New York, New York from time to time as its "prime" or "reference" rate for United States dollar loans in the United States, it being understood that the Reference Rate is not necessarily the lowest or best rate actually charged to any customer of Citibank, N.A. and that Citibank, N.A. may make various commercial or other loans at rates of interest having no relationship to such rate. For purposes of this Agreement, each change in the Reference Rate shall be effective as of the opening of business on the date announced as the effective date of the change in such "prime" or "reference" rate. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System. "Regulatory Change" means, subsequent to the date of this Agreement, any adoption of or change in United States 5 (including Federal, state or municipal) or foreign law or regulations or the adoption or change or making of any application, interpretation, directive, request or guideline of or under any United States (including Federal, state or municipal) or foreign law or regulations by any Governmental Authority, in each case whether or not having the force of law. "Required Lenders" means, at any time, Lenders holding Notes evidencing at least 66-2/3% of the aggregate unpaid principal amount of the Loans or, if no Loans are then outstanding, having at least 66-2/3% of the Total Commitment. "Reserve Requirement" means, for any day as applied to a LIBOR Rate Loan, the aggregate (without duplication) of the rates (expressed as a decimal) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D) maintained by a member bank of the Federal Reserve System. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Requirement. "Scheduled Expiration Date" means December 31, 2001, unless extended pursuant to Section 2.1(b), in which case it shall be such extended date. "Total Commitment" means $15,000,000, which is the aggregate amount of the Commitments, as such amount may be reduced from time to time pursuant to Sections 2.1(c) and 2.1(d). ARTICLE II COMMITMENTS AND LOANS SECTION 2.1. The Facility. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Loans to the Company from time to time on any Business Day in the case of Adjusted Base Rate Loans and on any Eurodollar Business Day in the case of LIBOR Rate Loans during the period from the Closing Date to the Expiration Date in an aggregate unpaid principal amount not to exceed at any time such Lender's Commitment. Each Borrowing shall consist of Loans bearing interest at the same rate made on the same day by Lenders ratably according to their respective Commitments. Each Borrowing consisting of Adjusted Base Rate Loans shall be in an amount equal to $50,000 or an integral multiple of $10,000 in excess thereof (or the amount of the unused Total Commitment) and each Borrowing consisting of LIBOR Rate Loans shall be in an amount 6 equal to $200,000 or an integral multiple of $25,000 in excess thereof (or the amount of the unused Total Commitment). There shall not be Loans representing more than five Borrowings outstanding on any date. (b) Subject to the terms and conditions of this Section 2.1(b), the Scheduled Expiration Date may be extended by an additional year from time to time at the written request of the Company (an "Extension Request"). Each Extension Request shall be delivered to the Agent not more than fifteen (15) months and not less than twelve (12) months prior to the Scheduled Expiration Date. If the Agent receives an Extension Request, it will give prompt notice thereof to each Lender, and each Lender shall have the right to approve or reject, in its sole and absolute discretion, such Extension Request by giving the Agent written notice of its decision within sixty (60) days following its receipt of the Agent's notice thereof. If the Lenders unanimously approve such Extension Request, the Agent shall so notify the Company within ninety (90) days following its receipt of such Extension Request and the Scheduled Expiration Date shall, effective from the date of such notice, be the date one (1) year subsequent to the prior Scheduled Expiration Date. If for any reason the Agent does not respond to such Extension Request within ninety (90) days following its receipt thereof or if such Extension Request is not approved by each Lender, such Extension Request shall be deemed to have been rejected. (c) The Company shall have the right, upon at least five (5) Business Days' notice to the Agent, to terminate in whole, or from time to time reduce in part, the unused portion of the Total Commitment, provided that each partial reduction of the unused portion of the Total Commitment shall be in an amount equal to $1,000,000 or an integral multiple of $1,000,000 in excess thereof. Upon receipt of any such notice, the Agent shall promptly notify each Lender of the contents thereof and the amount to which such Lender's Commitment is to be ratably reduced. (d) If an Event of Loss or Event of Eminent Domain shall have occurred in connection with which the Company shall not have fully rebuilt, repaired, restored or replaced the Energy Complex or the part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be), and Loss Proceeds with respect thereto are to be distributed by the Collateral Agent pursuant to Section 6.2(b) of the Intercreditor Agreement, the Total Commitment in effect immediately prior to such distribution shall be automatically and permanently reduced (but not to less than zero) by an amount equal to the Working Capital Facility's Percentage Share of the Excess Loss Proceeds (calculated without regard to the Working Capital Facility Distribution Amount) with respect to such Event of Loss or Event of Eminent Domain. Such reduction shall be effective on the first date on which the Company is required to redeem or prepay such Senior Securities, provided that if at or prior to the time of any such redemption or prepayment of the Senior Securities the Energy Complex has been fully rebuilt, repaired, restored and 7 replaced to the same operating capacities and operating standards and to the same condition as existed prior to the occurrence of such Event of Loss or Event of Eminent Domain and the Company has delivered a written request to the Agent requesting that the Total Commitment not be reduced in connection with such Event of Loss or Event of Eminent Domain, then the Total Commitment shall be reduced pursuant to this paragraph (b) only if the Required Lenders have requested that the Total Commitment be so reduced. SECTION 2.2. Making Loans. (a) The Company shall deliver to the Agent a Notice of Borrowing not later than 11:00 a.m., New York time, (i) at least one (1) Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Adjusted Base Rate Loans and (ii) at least three (3) Eurodollar Business Days prior to the date of the proposed Borrowing in the case of a Borrowing consisting of LIBOR Rate Loans, and, in each case, the Agent shall give each Lender prompt notice thereof by telecopier. Each Lender shall, before 11:00 a.m., New York time, on the date of such Borrowing, make available to the Agent at its address set forth in Section 9.2, in immediately available funds, such Lender's ratable portion of such Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Company by transferring such funds to the Collateral Agent for deposit into the Operating Account or such other account as the Company may designate (in each case, as specified in the applicable Notice of Borrowing), unless the proceeds of such Loans are to be used to pay any Obligations, in which case such proceeds will be applied directly to the payment of such Obligations. (b) Each Notice of Borrowing shall be irrevocable and binding on the Company, unless revoked by the Company in writing (i) in the case of Adjusted Base Rate Loans, at least three (3) Business Days prior to the date of such proposed Borrowing and (ii) in the case of LIBOR Rate Loans, at least five (5) Eurodollar Days prior to the date of such proposed Borrowing. (c) Unless the Agent receives notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with Section 2.2(a), and the Agent may, in reliance upon such assumption, make available to the Company on such date a corresponding amount on behalf of such Lender. If and to the extent that such Lender has not made such ratable portion available to the Agent, and Agent has made such amount available to the Company, the Agent shall first make written demand upon such Lender for payment and shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Company and the Company shall immediately repay such corresponding amount to the Agent; provided, however, that if the Company repays such corresponding amount to the Agent and such Lender subsequently 8 makes available to the Agent its ratable portion of such Borrowing, the Agent shall promptly make the proceeds thereof available to the Company. The Agent shall also be entitled to recover from such Lender or the Company, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Company to the date such corresponding amount is recovered by the Agent at the following interest rates: (i) with respect to interest from the Company, at the applicable interest rate for the type of Loan selected by the Company with respect to such amount; and (ii) with respect to interest from such Lender, at the Federal Funds Rate until and including the second Business Day after demand is made and thereafter at the Adjusted Base Rate. If such Lender pays to the Agent such corresponding amount, such amount so paid shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (d) The obligations of the Lenders to make Loans to the Company pursuant to this Agreement are several and not joint or joint and several, and the failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing. SECTION 2.3. Interest. (a) Unless an Event of Default is continuing, each Loan shall bear interest at the rates set forth below, and the Company shall pay interest on the unpaid principal amount of each Loan made by each Lender from the date of such Loan until the principal amount thereof has been repaid in full, at the times and at the rates per annum set forth below: (i) Adjusted Base Rate Loans shall bear interest at a rate per annum equal at all times to the Adjusted Base Rate in effect from time to time, payable on (A) the related Loan Repayment Date, (B) the date of any prepayment of such Loan pursuant to Section 2.5 and (C) the Expiration Date; (ii) LIBOR Rate Loans shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBOR Rate for such day, payable on (A) the last day of such Interest Period, (B) the date of any prepayment of such Loan pursuant to Section 2.5 and (C) the Expiration Date. (b) On and after the date of the occurrence of any Event of Default caused by the failure to make a monetary payment hereunder, so long as such Event of Default is continuing, to the extent permitted by applicable Law the Loans shall bear interest at a rate per annum equal at all times to the Adjusted Base Rate in effect from time to time plus two percent (2%), payable on demand. 9 SECTION 2.4. Repayment. The Company shall repay each Loan on the earlier of (a) the applicable Loan Repayment Date and (b) the Expiration Date. SECTION 2.5. Prepayments. (a) Subject to the provisions of Section 2.5(d), the Company may, at any time and from time to time on any Business Day in the case of Adjusted Base Rate Loans and on any Eurodollar Business Day in the case of LIBOR Rate Loans, prepay without premium or penalty the outstanding principal amount of the Loans making up one (1) or more Borrowings in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid. The Company shall give the Agent irrevocable prior written notice of any such prepayment not later than 11:00 a.m., New York time, at least one (1) Business Day or Eurodollar Business Day, as the case may be, prior to the date of any such prepayment, such notice stating the proposed date and specifying the Borrowing or Borrowings and aggregate principal amount of the Loans to be prepaid. (b) If at any time the aggregate principal amount of the Loans exceeds the Total Commitment in effect at such time, the Company shall at such time repay or prepay the Loans in an amount equal to the amount of such excess. Any such repayment or prepayment shall by accompanied by the payment of interest on the amount repaid or prepaid. (c) Notwithstanding anything to the contrary contained in this Agreement, the Company shall repay Loans so that, or otherwise ensure that, no Loans are outstanding for a period of five (5) consecutive days during each Fiscal Year subsequent to 1995. (d) The Company agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense that such Lender may sustain or incur as a consequence of (i) default by the Company in making a borrowing of, conversion into or continuation of LIBOR Rate Loans after the Company has given a notice requesting the same in accordance with the provisions of this Agreement, (ii) default by the Company in making payment or any prepayment after the Company has given notice thereof in accordance with the provisions of this Agreement or (iii) the making of a payment of LIBOR Rate Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such payment or prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure), in each case at the applicable rate of interest for such Loans provided for herein over (B) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with 10 leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (e) Each prepayment of Loans shall be applied first to Adjusted Base Rate Loans and then to LIBOR Rate Loans, such application of LIBOR Rate Loans to be made to LIBOR Rate Loans based on the direct order of maturing Interest Periods. In the event that any LIBOR Rate Loan is required to be repaid during an Interest Period therefor as a result of a reduction in the Total Commitment pursuant to Section 2.1(d), then, if no Default or Event of Default is then continuing, the Company may, in lieu of making such repayment of LIBOR Rate Loans, deposit with the Agent an amount of cash equal to the amount of such required repayment to be held by the Agent as cash collateral for payment of the Loans and to be applied to repayment of such LIBOR Rate Loans on the last day of the respective Interest Periods therefor. The Company agrees to execute and record in the appropriate offices such documents as the Agent may request with respect to such cash collateral arrangements, including with respect to the creation and perfection of such liens. SECTION 2.6. Fees. (a) The Company shall pay to the Agent, for the respective accounts of the Lenders, a commitment fee for the period from and including the Closing Date to but excluding the Expiration Date, computed at the rate of .375% per annum on the average daily unused amount of the Total Commitment, payable quarterly in arrears on the last day of each March, June, September and December and on the Expiration Date or such earlier date as the Total Commitment shall terminate as provided herein, commencing on the first of such dates to occur after the Closing Date. (b) The Company shall also pay to Banque Paribas the fees set forth in the separate letter agreement dated August 1, 1995 between the Company and Banque Paribas. SECTION 2.7. Security. The Obligations shall be secured as provided in the Security Documents, and the rights and remedies of the Lenders contained therein shall be exercised as provided in the Intercreditor Agreement. SECTION 2.8. Payments. (a) The Company shall make each payment hereunder and under the Notes not later than 11:00 a.m., New York time, on the day when due in United States dollars to the Agent at its address set forth in Section 9.2, in immediately available funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal, interest or fees ratably (other than amounts payable pursuant to Sections 9.4 and other amounts paid for the account of a specific Lender) to the Lenders and like funds relating to the payment of any other amount payable to any Lender to such Lender, in each case to be applied in accordance with the terms of this Agreement. 11 (b) Unless the Agent receives notice from the Company before the date on which any payment is due to the Lenders hereunder that the Company will not make such payment in full, the Agent may assume that the Company has made such payment in full to the Agent on such date, and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due to such Lender. If and to the extent that the Company has not so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender, together with interest thereon for each day from the date such amount is distributed to such Lender until the date on which such Lender repays such amount to the Agent, at the Federal Funds Rate until (and including) the third (3rd) Business Day after demand is made and thereafter at the Adjusted Base Rate. (c) All payments due by the Company to the Agent or any of the Lenders under the Credit Documents will be made without setoff, counterclaim or other deduction. SECTION 2.9. Computation of Interest and Fees. Interest on LIBOR Rate Loans shall be computed on the basis of a year of three hundred and sixty (360) days and paid for the actual number of days elapsed. Interest on Adjusted Base Rate Loans and all fees shall be computed on the basis of a year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as applicable, and paid for the actual number of days elapsed. Interest on Adjusted Base Rate Loans and fees for any period shall be calculated from and including the first day thereof to but excluding the last day thereof. Interest on LIBOR Rate Loans for any Interest Period shall be calculated from and including the first day thereof to and including the last day thereof. Each determination by the Agent of an interest rate hereunder shall be conclusive (absent manifest error). SECTION 2.10. Payments on Non-Business Days. Whenever any payment hereunder or under any Note is stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees (as the case may be); provided, however, that any payment with respect to any LIBOR Rate Loan stated to be due on a day other than a Eurodollar Business Day shall be made on the immediately preceding Eurodollar Business Day. If no due date is specified for the payment of any amount payable by the Company hereunder, such amount shall be due and payable not later than the later to occur of (a) ten (10) Business Days after receipt by the Company of written demand from the Agent for payment thereof and (b) two (2) Business Days following the next Monthly Transfer Date following such written demand. SECTION 2.11. Sharing of Payments, Etc. If any Lender obtains any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of its Commitment or the Loans made by it (other than pursuant to Section 9.4 and any other payment appropriately made for the 12 account of a specific Lender hereunder), in excess of its ratable share of payments on account of the Commitments or the Loans obtained by all of the Lenders, then such Lender shall be deemed to have received such payment as agent for, and on behalf of, all the Lenders and shall immediately advise the Agent of the receipt of such funds and promptly transmit the amount thereof to the Agent for prompt distribution among the Lenders as provided for in this Agreement and such funds transmitted to the Agent shall be credited as a payment by the Company under this Agreement; provided, however, that such Lender so transmitting funds to the Agent shall not be deemed to have received, and the Company shall be deemed not to have made to such Lender (to the extent funds are transmitted to the Agent), any payment transmitted to the Agent by such Lender pursuant to this Section 2.11; provided further, however, that if all or any portion of such payment is thereafter recovered from such Lender, such credited payment shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. SECTION 2.12. Evidence of Debt. (a) The indebtedness of the Company resulting from all Loans made by each Lender from time to time shall be evidenced by an appropriately completed and executed Revolving Promissory Note substantially in the form of Exhibit A (each a "Note"), delivered by the Company to each Lender. (b) The Agent, on behalf of the Company, shall maintain at the address of the Agent referred to in Section 9.2 a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Agent and the Lenders may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. The books and accounts of the Agent shall be conclusive evidence (absent manifest error) of the amounts of all Loans, fees, interest and other amounts advanced, due, outstanding, payable or paid pursuant to this Agreement or any Note. SECTION 2.13. Increased Costs. (a) In the event that any requirement of law or any change therein or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority: 13 (i) does or shall subject any Lender to any tax (except to the extent such tax is the subject of the agreements set forth in Section 2.14) of any kind whatsoever with respect to this Agreement, any Note or any payments with respect to LIBOR Rate Loans made by it, or changes the basis of taxation of payments to such Lender of principal, fees, interest or any other amount payable hereunder (except for changes in the rate of tax on the overall net income or capital of such Lender); (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender which are not otherwise included in the determination of the LIBOR Rate; or (iii) does or shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by any amount which such Lender deems to be material, of making, renewing or maintaining advances or extensions of credit hereunder or to reduce any amount receivable hereunder, in each case in respect of its LIBOR Rate Loans, then, in any such case, the Company shall pay to such Lender, no later than the later to occur of (A) 10 Business Days after demand by such Lender (through the Agent) in accordance with paragraph (c) of this Section and (B) two (2) Business Days after the next Monthly Transfer Date following such written demand, any additional amounts necessary to compensate such Lender for such additional costs or reduced amount receivable. (b) In the event that any Lender shall have determined that the adoption after the date hereof of any law, rule, guideline or regulation regarding capital adequacy, or any change after the date hereof in any existing or future law, rule, guideline or regulation regarding capital adequacy or in the interpretation or application thereof, or compliance by any Lender or any corporation controlling such Lender with any request or directive made or adopted after the date hereof regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, no later than the later to occur of (i) 10 Business Days after submission by such Lender to the Company (through the Agent) of a written request therefor in accordance with paragraph (c) of this subsection and (ii) two (2) Business Days after the next Monthly Transfer Date following such written demand, the 14 Company shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) A Lender intending to make a claim pursuant to paragraph (a) or (b) of this Section shall deliver to the Company through the Agent, as soon as practicable after becoming aware of the circumstances giving or which shall give rise to such claim, notice of such Lender's intention to make a claim, specifying the event by which it is or shall be entitled to make such claim and setting out in reasonable detail the expected basis and computation of such claim (and the Agent shall promptly upon receipt thereof deliver such notice to the Company); provided that no claim shall be made by any Lender, and the Company shall not be required to indemnify any Lender, with respect to any cost, increased cost or other liability or reduction described in paragraph (a) or (b) of this Section which is incurred by such Lender and which is payable, or which is applicable to any period, more than 90 days prior to the date the Company is first notified by the Agent pursuant to the foregoing provisions of this paragraph (c) that such Lender is incurring such costs, other liability or reduction, as the case may be. (d) A certificate as to any additional amounts payable to any Lender pursuant to this Section 2.13, submitted by such Lender to the Company and showing in reasonable detail that such amounts were computed in accordance with this Section 2.13, shall be conclusive in the absence of manifest error. The provisions of this Section 2.13 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 2.14. Taxes. (a) All payments made by the Company under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority excluding, in the case of the Agent and each Lender, net income and franchise taxes imposed on the Agent or such Lender by the jurisdiction under the laws of which the Agent or such Lender is organized or any political subdivision or taxing authority thereof or therein, or by any jurisdiction in which such Lender's lending office, is located or any political subdivision or taxing authority thereof or therein (all such non- excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Agent or any Lender hereunder or under the Notes, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Taxes, including penalties and expenses related thereto) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. Whenever any Taxes are payable by the Company, as promptly as possible thereafter, the Company shall send to the Agent for its own account a certified copy of an original official receipt 15 received by the Company showing payment thereof. If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Company shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Agent or any Lender as a result of such failure. (b) Each Lender shall, prior to the Closing Date (or, if a Lender has become a party hereto pursuant to Section 9.9, the date upon which such Lender becomes a party hereto), deliver to the Agent and the Company (i) either (A) a letter stating that it is incorporated under the laws of the United States of America or a state thereof or (B) if it is not so incorporated, either two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes or, in the case of a Lender claiming exemption from United States withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest" by the Company under this Agreement, an annual certificate representing that such Lender is not a bank for purposes of Section 881(c) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements, is not a 10-percent shareholder of the Company within the meaning of Section 881(c)(3)(B) of the Code and is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each such Lender shall deliver to the Company and the Agent two further copies of any such form, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Company, and such extensions or renewals thereof as may reasonably be requested by the Company, to the effect that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required that renders any such forms inapplicable or that would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises the Company that it is not capable of receiving payments without any deduction or withholding of United States federal income tax or establishing an exemption from United States backup withholding tax. The provisions of this Section 2.14(b) shall apply to any successor 16 holder of a Note, including without limitation, Purchasing Lenders and Participants pursuant to Section 9.9. (c) Notwithstanding anything to the contrary contained in this Section 2.14, the Company shall not be required to indemnify or reimburse any Lender who has failed to make available to the Agent its ratable portion of any Borrowing on the date required pursuant to this Agreement, after the Agent has made written demand upon such Lender for such payment, for any additional documentary stamp taxes or intangibles taxes incurred by such Lender solely as a result of such failure. SECTION 2.15. Illegality. Notwithstanding any other provision of this Agreement, if any Regulatory Change shall make it unlawful for any Lender to make or maintain LIBOR Loans as contemplated by this Agreement, such Lender shall give telex, telecopy or telephonic notice thereof to the Company and the Agent (specifying the reason for such illegality) as soon as practicable and (a) the commitment of such Lender hereunder to make LIBOR Rate Loans, continue LIBOR Rate Loans as such and convert Adjusted Base Rate Loans to LIBOR Rate Loans shall forthwith be suspended until such time as such Lender may again lawfully make and maintain LIBOR Rate Loans, and (b) such Lender's LIBOR Rate Loans then outstanding, if any, shall be converted automatically to Adjusted Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period (determined by its sole judgment) as required by law. If, as a result of any such Regulatory Change, any such conversion of a LIBOR Rate loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Company shall pay to such Lender such amounts, if any, as might be required pursuant to Section 2.5(d) with respect to such conversion. SECTION 2.16. Inability to Determine Interest Rate. In the event that, prior to the first day of any Interest Period, (a) the Agent shall have determined (which determination shall be conclusive and binding upon the Company) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not for ascertaining the LIBOR Rate for such Interest Period or (b) the Agent shall have received notice from the Required Lenders that the LIBOR Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their affected Loans during such Interest Period, the Agent shall give telex, telecopy or telephonic notice thereof (stating the reason therefor) to the Company and the Lenders as soon as practicable. If such notice is given (i) any LIBOR Rate Loans requested to be made on the first day of such Interest Period shall be made as Adjusted Base Rate Loans, (ii) any Loans that were to have been converted on the first day of such Interest Period to LIBOR Rate Loans shall be converted to or continued as Adjusted Base Rate Loans and (iii) any outstanding LIBOR Rate Loans shall be converted, on the first day of such Interest Period, to Adjusted Base Rate Loans. Until such notice has been withdrawn by the Agent or, in the case of any notice given by the 17 Required Lenders pursuant to clause (b) of the first sentence of this Section, by the Required Lenders, no further LIBOR Rate Loans shall be made or continued as such, nor shall the Company have the right to convert Loans to LIBOR Rate Loans. SECTION 2.17. Transfer of Lending Office. Each Lender agrees that, as promptly as practicable after it shall have notified the Company that additional amounts are or will be due to such Lender under Section 2.13 or 2.14, it will, to the extent not inconsistent with such Lender's internal policies, make, fund or maintain its Loans through another lending office of such Lender if as a result thereof such additional amounts would not be required to be so paid and if, as determined by such Lender in its sole discretion, the making, funding or maintaining of such Loans through such other lending office (i) would be permitted by applicable requirements of law and (ii) would not adversely affect its Loans or such Lender. The Company hereby agrees to pay all reasonable expenses incurred by a Lender in utilizing another lending office of such Lender as provided in this Section. ARTICLE III CONDITIONS PRECEDENT SECTION 3.1. Conditions Precedent to Initial Borrowing. The obligation of each Lender under this Agreement is subject to the satisfaction on the Closing Date of the following conditions precedent: (a) the Agent shall have received the following, each dated on or before the Closing Date, in form and substance satisfactory to the Agent and in the number of originals reasonably required by the Agent: (i) this Agreement and the Notes, duly executed by the Company; (ii) the Security Documents (other than the Indenture and the Tax-Exempt Indenture), duly executed by the parties thereto; (iii) the Indenture and the Tax-Exempt Indenture, duly executed by the parties thereto and certified as to completeness and authenticity by an Authorized Officer of each of the Mobile Energy Parties; and (iv) written opinions of counsel to the Company and Mobile Energy, as to such matters as the Agent may reasonably request; (b) all Contracts referred to in Section 3.1(a)(i), (ii) and (iii) remain in full force and effect; 18 (c) the Company shall have paid all accrued fees and expenses of the Agent and the Lenders as provided in Section 9.4, to the extent one or more statements for such fees and expenses have been presented for payment; (d) the conditions precedent contained in the Underwriting Agreement dated August 15, 1995 between the Mobile Energy Parties and Goldman, Sachs & Co., Bear, Stearns & Co. and Lehman Brothers Inc. shall have been satisfied (without waiver, unless approved by the Agent), and the initial purchase of the First Mortgage Bonds shall have occurred; and (e) the conditions precedent contained in the Bond Purchase Agreement dated August 17, 1995 between Goldman Sachs & Co. and the IDB shall have been satisfied (without waiver, unless approved by the Agent), and the initial purchase of the Tax-Exempt Bonds shall have occurred. SECTION 3.2. Conditions Precedent to Each Borrowing. The obligation of each Lender to make a Loan on the occasion of each Borrowing, including the initial Borrowing, is subject to the satisfaction of the following further conditions precedent: (a) the conditions precedent set forth in Section 3.1 shall have been satisfied (or waived by the Agent in writing as of the Closing Date); (b) the Agent shall have received a Notice of Borrowing with respect to such Loan; (c) the following statements shall be true (and the acceptance by the Company of the proceeds of such Borrowing shall constitute a representation and warranty by the Company that on the date of such Borrowing such statements are true): (i) the representations and warranties of the Mobile Energy Parties and each Affiliate thereof incorporated by reference into this Agreement or contained in any Security Document are true in all material respects on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (ii) no Default or Event of Default has occurred and is continuing; and (d) no payment default shall have occurred and be continuing with respect to any Senior Securities. 19 ARTICLE IV REPRESENTATIONS AND WARRANTIES Each of the Mobile Energy Parties hereby makes, for the benefit of the Agent and the Lenders, all of the representations and warranties of the Mobile Energy Parties made in Article III of the Indenture, in the form of such representations and warranties (including all schedules referred to therein) as they exist on the date of this Agreement and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Agreement has been consented to by the Required Lenders at such time. Such representations and warranties (including all schedules referred to therein) are hereby, mutatis mutandis, incorporated herein by reference (with appropriate substitutions, including the following: (i) the terms "Indenture," "Securities," "Trustee" and "Holder," as they appear in Article III of the Indenture, shall be replaced by the terms "Agreement," "Notes," "Agent" and "Lender," respectively, (ii) the phrase "the purchase and ownership of the Securities" as it appears in Section 3.6(a) of the Indenture shall be replaced by the phrase "the making of Loans", (iii) the phrase "as of the date hereof", as it appears in Sections 3.4 and 3.6 of the Indenture, shall be replaced by the phrase "as of each Borrowing Date", (iv) the phrase "now pending", as it appears in Section 3.5 of the Indenture, shall be replaced by the phrase "pending on each Borrowing Date", (vi) the phrase "the Closing Date", as it appears in Article III of the Indenture, shall be replaced by the phrase "each Borrowing Date", (vii) the reference to "Guaranty" in Section 3.4 of the Indenture shall be deemed to be a reference to the Guaranty under this Agreement and "the Security Register" in Section 10.4 shall be deemed to be a reference to "this Agreement") as if set forth at length in this Agreement. All such representations and warranties shall be deemed to be made on the date of each Borrowing. ARTICLE V COVENANTS So long as any Commitment is in effect or any Obligation remains unpaid, unless compliance has been waived in writing by the Required Lenders: (a) all of the covenants of the Mobile Energy Parties contained in Sections 1.15 and 10.4 and Article V of the Indenture, together with any schedules referred to therein (in the form of such covenants and schedules as they exist as of the date of this Agreement and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Agreement has been consented to by the Required Lenders at such time), are hereby, mutatis mutandis, incorporated herein by reference (with appropriate substitutions, including the 20 following: (i) the term "Indenture", as it appears in Sections 1.15 and 10.4 and Article V (other than Section 5.17) of the Indenture, shall be replaced by the term "Agreement"; (ii) the term "Trustee", as it appears in Article V and Section 10.4 of the Indenture, shall be replaced by the word "Agent"; (iii) the terms "Securities" and "Outstanding Securities", as they appear in Article V (other than Section 5.17) of the Indenture, shall be replaced by the terms "Loans" and "outstanding Loans", respectively; (iv) the term "Event of Default", as it appears in Article V of the Indenture, shall include Events of Default under this Agreement; (v) the phrase "the principal of and premium, if any, and interest on, and all other amounts payable in respect of, the Securities of each series in accordance with their terms and the terms of this Indenture and of the related Series Supplemental Indenture", as it appears in Article V of the Indenture, shall be replaced by the phrase "all of the Obligations in accordance with the terms of this Agreement"; (vi) the phrases "Holders" and "Holder of a Security or an owner of a beneficial interest therein requesting the same in writing", as they appear in Article V and Section 10.4 of the Indenture, shall be replaced by the term "Lender" or "Lenders" and (vii) for purposes of Section 5.17 of the Indenture (A) references to the "Indenture" in clauses (a)(i) and (b)(i) thereof shall be deemed to be references to the Indenture and not this Agreement, (B) references therein to the "final maturity date of the Outstanding Securities" shall be deemed to be references to the later of the final maturity date of the Notes and the final maturity date of the Outstanding Securities, (C) references therein to "any downgrading of the rating on the Outstanding Securities" shall be deemed to be references to any downgrading of the rating on the Outstanding Securities and, if then rated, this Agreement and (D) the reference to "Outstanding Securities" in the second sentence of paragraph (d) thereof shall be deemed to be a reference to the Loans) as if set forth at length in this Agreement, and each of the Mobile Energy Parties will observe and perform all of such incorporated covenants; (b) neither of the Mobile Energy Parties will terminate, amend, replace or otherwise modify, or permit or suffer any termination, replacement or modification of, any provision of any Financing Document to which the Agent is not a party, unless such termination, amendment, replacement or other modification would not, in the reasonable opinion of the Required Lenders, be expected to reduce the likelihood of payment on the Loans or otherwise materially and adversely affect the Agent or the Lenders; (c) the Company will use the proceeds of the Loans only to pay Operation and Maintenance Costs and to pay principal, interest, fees and other amounts payable hereunder; 21 (d) neither of the Mobile Energy Parties will permit any collateral (except any Indenture Securities Collateral and any Tax-Exempt Indenture Securities Collateral other than, in each case, Shared Collateral) to secure any Senior Debt unless such collateral also secures the Obligations or the Guaranty (as the case may be) on a pari passu basis; and (e) without limiting the obligations of the Company pursuant to paragraph (a) above, the Company will deliver to the Agent all financial information, reports, certificates, budgets, requests and other information as it is required to deliver pursuant to Article V and Section 10.4 of the Indenture; and (f) the Company will promptly deliver such additional financial and other information as any Lender may from time to time reasonably request. ARTICLE VI DEFAULTS AND REMEDIES If any one (1) of the following events (each an "Event of Default") shall occur and be continuing: (a) any amount due under any Credit Document shall not be paid in full within fifteen (15) days after its due date; or (b) monies on deposit in the Working Capital Facility Account on any date do not equal the required balance therefor, as provided by Section 3.11(b) of the Intercreditor Agreement, and such deficit shall continue for fifteen (15) or more days, unless on such date the following conditions are satisfied: (i) the Company would be able to borrow Loans (because of availability and satisfaction of conditions set forth in Article III) under this Agreement in an amount equal to the deficiency in such required balance on such date, (ii) none of the payments made on the Senior Securities on the immediately preceding Interest Payment Date or Principal Payment Date, as the case may be, shall have been made from amounts transferred into the Indenture Securities Account or the Tax-Exempt Indenture Securities Account pursuant to Section 3.5(c), 3.6(c), 3.7(b) or 3.8(b) of the Intercreditor Agreement and (iii) there shall be no deficiency in the funding of the Indenture Securities Account and the Tax-Exempt Indenture Securities Account (or any subaccounts therein), excluding, for purpose of calculating any deficiency, any amounts transferred to the Indenture Securities Account and the Tax-Exempt Indenture Securities Account pursuant to Sections 3.5(c), 3.6(c), 3.7(b) and 3.8(b) of the Intercreditor Agreement; or 22 (c) the Company shall fail to perform or observe any covenant or agreement contained in Section 5.1(b), 5.1(c) or 5.1(d) of this Agreement; or (d) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in Section 5.4(e), 5.7(b) (insofar as such failure relates to matters specified in Section 5.8(b)(iv)), 5.8(b) (other than clause (v) thereof), 5.10 or 5.19 of the Indenture, as such covenants and agreements are incorporated in paragraph (a) of Article V hereof by reference; or (e) either of the Mobile Energy Parties shall fail to perform or observe any covenant or agreement contained in (i) Section 5.2, 5.4(a), 5.5, 5.7(a), 5.7(b) (insofar as such failure would reasonably be expected to have a Material Adverse Effect or relates to matters specified in Section 5.8(b)(v)), 5.8(a), 5.8(b)(v), 5.8(c), 5.13, 5.14, 5.15 or 5.16 of the Indenture), (ii) Section 3(e), 3(f), 3(g), 3(h), 3(i) or 3(j) of the Security Agreement or (iii) Section 8, 10, 13, 14 or 15 of the Mortgage and, in the case of clause (i), (ii) and (iii) above, such failure shall continue uncured for thirty (30) or more days after either of the Mobile Energy Parties has knowledge thereof and as such covenants and agreements are incorporated in Article V by reference; or (f) an Event of Default under the Indenture shall have occurred and be continuing and shall not have been waived by the Indenture Trustee until the earlier of (i) the expiration of thirty (30) days after such occurrence and (ii) an acceleration of the Indenture Securities; or (g) an Event of Default under the Tax-Exempt Indenture shall have occurred and be continuing and shall not have been waived by the Tax-Exempt Indenture Trustee until the earlier of (i) the expiration of thirty (30) days and (ii) an acceleration of the Tax-Exempt Indenture Securities; or (h) any grant of a Lien contained in the Security Documents shall cease to be effective to grant a perfected Lien to the Collateral Agent on the Collateral described therein with the priority created therein; provided, however, that the Company shall have ten (10) days from actual knowledge or constructive knowledge thereof to cure any such cessation; then, and in any such event, the Agent shall at the request, or may with the consent, of the Required Lenders, by notice to the Company, (i) declare the obligation of each Lender to make Loans to be terminated, whereupon the same shall forthwith terminate, (ii) declare the Obligations to be forthwith due and payable, whereupon the Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company and (iii) subject to the Intercreditor Agreement, take 23 any other action and exercise any right or remedy available to it, including exercising rights and remedies under the Financing Documents and directing the Collateral Agent to take actions and exercise rights and remedies; provided, however, that upon the occurrence of an Event of Default specified in paragraph (f) or (g) above that arises from an Event of Default under the Indenture described in Section 8.1(n) thereof or arises from an Event of Default under the Tax-Exempt Indenture described in Section 8.1(b) that arises from an Event of Default under the IDB Lease Agreement described in Section 7.1(n) thereof, automatically and without any notice to the Company, (A) the obligation of each Lender to make Loans shall be terminated and (B) the Obligations shall be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company. ARTICLE VII THE AGENT SECTION 7.1. Authorization and Action. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by the Credit Documents (including enforcement of and collection under any Credit Document or Security Document), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to any Credit Document or Security Document or applicable law. In performing its function and duties hereunder, Agent shall act solely as the agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Company or any other party to any Project Document. SECTION 7.2. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with any Credit Document or Security Document, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent (a) may treat any Lender that has signed a Commitment Transfer Supplement as the holder of the applicable portion of the Obligations; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation 24 to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with any Credit Document or Security Document; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Credit Document or Security Document on the part of the Company or any Affiliate thereof or to inspect the property (including the books and records) of the Company or any Affiliate thereof; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Credit Document or Security Document or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of any Credit Document or Security Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier or otherwise) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.3. Initial Lender and Affiliates. With respect to its Commitment, the Loans made by it and the Note issued to it, the Initial Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Initial Lender in its individual capacity. The Initial Lender and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Company, any Affiliate thereof and any Person that may do business with or own securities of the Company or any Affiliate thereof, all as if the Initial Lender were not the Agent and without any duty to account therefor to the Lenders. SECTION 7.4. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance on the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance on the Agent or any other Lender and based on such documents and information as it deems appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.5. Indemnification. The Lenders severally agree to indemnify the Agent (to the extent not promptly reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to their respective Commitments (or, if the Commitments have been fully canceled pursuant to Section 2.1(c), the respective Commitments that were in effect immediately prior to such cancellation), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever that may at any time (including at any time following the payment of any 25 Obligations or termination of this Agreement) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of any Credit Document or Security Document or any action taken or omitted by the Agent under any Credit Document or Security Document; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs and expenses payable by the Company under Section 9.4, to the extent that the Agent is not reimbursed for such costs and expenses by the Company. SECTION 7.6. Successor Agent. The Agent may resign at any time by giving thirty (30) days prior written notice thereof to the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent with the consent of the Company, which consent shall not be unreasonably withheld or delayed. If no successor Agent has been so appointed by the Required Lenders and accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent with the consent of the Company, which shall not be unreasonably withheld or delayed, which successor Agent shall be a commercial bank organized under the laws of the United States of America or of any state thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Credit Documents and the other Project Agreements. After any retiring Agent's resignation as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was acting as the Agent. ARTICLE VIII GUARANTY SECTION 8.1. Guaranty of Payment and Performance. Mobile Energy hereby (a) guarantees to the Agent and each Lender from time to time the due and punctual payment, observance and performance of all of the Obligations in accordance with their respective terms and when and as due (whether at a Loan Repayment Date, by reason of acceleration or otherwise), or deemed to be due pursuant to Section 8.2, and (b) agrees so to pay, observe or perform the same when so due, or deemed to be due, upon demand. SECTION 8.2. Continuance and Acceleration of Obligations upon Certain Events. If (a) any Event of Default specified in paragraph (f) or (g) of Article VI that arises from 26 an Event of Default under the Indenture described in Section 8.1(n) thereof or arises from an Event of Default under the Tax- Exempt Indenture described in Section 8.1(b) that arises from an Event of Default under the IDB Lease Agreement described in Section 7.1(n) thereof shall have occurred and be continuing, (b) any injunction, stay or the like that enjoins any acceleration, or demand for the payment, observance or performance, of any Obligations that would otherwise be required or permitted under the Security Documents shall become effective or (c) any Obligations shall be or be determined to be or become discharged, disallowed, invalid, illegal, void or otherwise unenforceable (whether by operation of any present or future law or by order of any Governmental Authority) against the Company then (i) such Obligations shall, for all purposes of this Agreement, be deemed (A) in the case of clause (c) above, to continue to be outstanding and in full force and effect notwithstanding the unenforceability thereof against the Company and (B) if such is not already the case, to have thereupon become immediately due and payable and to have commenced bearing interest at the rate equal to the Adjusted Base Rate plus two percent (2%) and (ii) the Agent and each Lender may, with respect to such Obligations, exercise all of the rights and remedies hereunder that would be available to it during an Event of Default. SECTION 8.3. Recovered Payments. The Obligations shall be deemed not to have been paid, observed or performed, and Mobile Energy's obligations under the Guaranty in respect thereof shall continue and not be discharged, to the extent that any payment, observance or performance thereof by the Company or any other guarantor, or out of the proceeds of any collateral, is recovered from or paid over by or for the account of the Agent or and Lender for any reason, including as a preference or fraudulent transfer or by virtue of any subordination (whether present or future or contractual or otherwise) of the Obligations, whether such recovery or payment over is effected by any judgment, decree or order of any Governmental Authority, by any plan of reorganization or by settlement or compromise by the Agent or any Lender (whether or not consented to by either of the Mobile Energy Parties or any other guarantor) of any claim for any such recovery or payment over. Mobile Energy hereby expressly waives the benefit of any applicable statute of limitations and agrees that it shall be liable hereunder with respect to any Obligation whenever such a recovery or payment over thereof occurs. SECTION 8.4. Evidence of Obligations. The records of the Agent shall be conclusive evidence (absent manifest error) of the Obligations and of all payments, observances and performances in respect thereof. SECTION 8.5. Binding Nature of Certain Adjudications. Mobile Energy shall be conclusively bound by the adjudication in any action or proceeding, legal or otherwise, involving any controversy arising under, in connection with, or in any way related to, any of the Obligations, and by a judgment, award or decree entered therein, if Mobile Energy shall have had the 27 right, or shall have been given the opportunity, to participate in such action or proceeding and shall have been given notice of such action or proceeding in time to exercise such right or avail itself of such opportunity. SECTION 8.6. Nature of Mobile Energy's Obligations. Mobile Energy's obligations hereunder (a) are absolute and unconditional, (b) are unlimited in amount, (c) constitute a guaranty of payment and performance and not a guaranty of collection, (d) are as primary obligor and not as a surety only, (e) shall be a continuing guaranty of all present and future Obligations and all promissory notes and other documentation given in extension or renewal or substitution for any of the Obligations and (f) shall be irrevocable. SECTION 8.7. No Release of Mobile Energy. The obligations of Mobile Energy under this Guaranty shall not be reduced, limited or terminated, nor shall Mobile Energy be discharged from any thereof, for any reason whatsoever (other than, subject to Sections 8.3 and 8.12, the payment, observance and performance of the Obligations), including (and whether or not the same shall have occurred or failed to occur once or more than once and whether or not Mobile Energy shall have received notice thereof): (a) (i) any increase in the principal amount of, or interest rate applicable to, (ii) any extension of the time of payment, observance or performance of, (iii) any other amendment or modification of any of the other terms and provisions of, (iv) any release, composition or settlement (whether by way of acceptance of a plan of reorganization or otherwise) of, (v) any subordination (whether present or future or contractual or otherwise) of or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, in each case the Obligations; (b) (i) any failure to obtain, (ii) any release, composition or settlement of, (iii) any amendment or modification of any of the terms and provisions of, (iv) any subordination of or (v) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, in each case any guaranties of the Obligations; (c) (i) any failure to obtain or any release of, (ii) any failure to protect or preserve, (iii) any release, compromise, settlement or extension of the time of payment of any obligations constituting, (iv) any failure to perfect or maintain the perfection or priority of any Lien upon, (v) any subordination of any Lien upon or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of any Lien or intended Lien upon, in each case any collateral now or hereafter securing the Obligations or any other guaranties thereof; (d) any termination of or change in any relationship between Mobile Energy and the Company, including any such termination or change resulting from a change in the ownership of Mobile Energy or the Company or from the cessation of any commercial relationship between Mobile Energy and the Company; (e) any exercise of, or any election not or failure to exercise, delay in the exercise of, waiver of, or forbearance or other indulgence with respect to, any right, remedy or power available to the Agent or any Lender, including (i) any election 28 not or failure to exercise any right of setoff, recoupment or counterclaim, (ii) any election of remedies effected by the Agent or any Lender, including the foreclosure upon any real estate constituting collateral, whether or not such election affects the right to obtain a deficiency judgment and (iii) any election by the Agent or any Lender in any proceeding under the Bankruptcy Code of the application of Section 1111(b)(2) of the Bankruptcy Code; and (f) any other act or failure to act or any other event or circumstance that (i) varies the risk of Mobile Energy under this Guaranty or (ii) but for the provisions hereof, would, as a matter of statute or rule of law or equity, operate to reduce, limit or terminate the obligations of Mobile Energy hereunder or discharge Mobile Energy from any thereof. SECTION 8.8. Certain Waivers. Mobile Energy waives (a) any requirement, and any right to require, that any right or power be exercised or any action be taken against the Company, any other guarantor or any collateral for the Obligations or any guaranty thereof, (b) all defenses to, and all setoffs, counterclaims and claims of recoupment against, the Obligations that may at any time be available to the Company or any other guarantor, (c) (i) notice of acceptance of and intention to rely on this Guaranty, (ii) notice of any Loans hereunder and of the incurrence or renewal of any other Obligations, (iii) notice of any of the matters referred to in Section 8.7 and (iv) all other notices that may be required by Law or otherwise to preserve any rights against Mobile Energy under this Guaranty, including any notice of default, demand, dishonor, presentment and protest, (d) diligence, (e) any defense based upon, arising out of or in any way related to (i) any claim that any sale or other disposition of any collateral for the Obligations or any guaranty thereof was not conducted in a commercially reasonable fashion or that a public sale, should the Agent, any Lender or the Collateral Agent (as the case may be), have elected to so proceed, was, in and of itself, not a commercially reasonable method of sale, (ii) any claim that any election of remedies by the Agent, any Lender or the Collateral Agent (as the case may be), including the exercise by the Agent, any Lender or the Collateral Agent (as the case may be) of any rights against any collateral, impaired, reduced, released or otherwise extinguished any right that Mobile Energy might otherwise have had against the Company or any other guarantor or against any collateral, including any right of subrogation, exoneration, reimbursement or contribution or right to obtain a deficiency judgment, (iii) any claim based upon, arising out of or in any way related to any of the matters referred to in Section 8.7 and (iv) any claim that this Guaranty should be strictly construed against the Agent or any Lender and (f) ALL OTHER DEFENSES UNDER APPLICABLE LAW THAT WOULD, BUT FOR THIS CLAUSE (f), BE AVAILABLE TO MOBILE ENERGY AS A DEFENSE AGAINST OR A REDUCTION OR LIMITATION OF ITS OBLIGATIONS HEREUNDER. SECTION 8.9. Independent Credit Evaluation. Mobile Energy has independently, and without reliance on any information supplied by the Agent or any Lender, taken, and will continue to take, whatever steps it deems necessary to evaluate the financial 29 condition and affairs of the Company, and neither the Agent nor any Lender shall have any duty to advise Mobile Energy of information at any time known to it regarding such financial condition or affairs. SECTION 8.10. Subordination of Rights Against Company, Other Guarantors and Collateral. All rights that Mobile Energy may at any time have against the Company, any other guarantor or any collateral for the Obligations or any guaranty thereof (including rights of subrogation, exoneration, reimbursement and contribution and whether arising under Law or otherwise), and all obligations that the Company or any other guarantor may at any time have to Mobile Energy, Mobile Energy's obligations hereunder or any payment made are hereby expressly subordinated to the prior payment, observance and performance in full of the Obligations and any other such Guaranty. Mobile Energy shall not enforce any of the rights, or attempt to obtain payment or performance of any of the obligations, subordinated pursuant to this Section 8.10 until the Obligations have been paid, observed and performed in full, except that such prohibition shall not apply to routine acts, such as the giving of notices and the filing of continuation statements, necessary to preserve any such rights. If any amount shall be paid to or recovered by Mobile Energy (whether directly or by way of setoff, recoupment or counterclaim) on account of any right or obligation subordinated pursuant to this Section 8.10, such amount shall be held in trust by Mobile Energy for the benefit of the Agent and the Lenders, not commingled with any of Mobile Energy's other funds and forthwith paid over to the Agent, in the exact form received, together with any necessary endorsements, to be applied and credited against, or held as security for, the Obligations and the obligations of Mobile Energy hereunder. Notwithstanding the foregoing, nothing herein shall restrict or otherwise limit the ability of Mobile Energy to receive monies distributed thereto by the Collateral Agent pursuant to Section 3.11 of the Intercreditor Agreement, which monies need not be held in trust by Mobile Energy. SECTION 8.11. Payments by Mobile Energy. (a) All payments due to the Agent or any Lender hereunder shall be made to the Agent or such Lender at the address indicated in Section 9.2. A payment shall not be deemed to have been made on any day unless such payment has been received by the Agent or the Lender (as the case may be) at the required place of payment, in lawful money of the United States of America in funds immediately available to the Agent or such Lender (as the case may be). (b) All payments due the Agent or any Lender under this Guaranty, and all of the other terms, conditions, covenants and agreements to be observed and performed by Mobile Energy under this Guaranty, shall be made, observed or performed by Mobile Energy without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim (whether, in any case, in respect of an obligation owed by the Agent or any Lender to Mobile Energy, the Company or 30 any other guarantor and, in the case of a counterclaim, whether sounding in tort, contract or otherwise) or tax. (c) Mobile Energy hereby authorizes the Agent and each Lender, if and to the extent any amount payable by Mobile Energy under this Guaranty is not otherwise paid when due, to charge such amount against any or all of the accounts of Mobile Energy with the Agent or such Lender or any of its Affiliates (whether maintained at a branch or office located within or without the United States), with Mobile Energy remaining liable for any deficiency. (d) Whenever any payment to the Agent or any Lender under this Article VIII would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day; provided, however, that any payment with respect to any LIBOR Rate Loan stated to be due on a day other than a Eurodollar Business Day shall be made on the immediately preceding Eurodollar Business Day. If the date any payment hereunder is due is extended (whether by operation of this Agreement, Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. SECTION 8.12. Continuance of Guaranty; Survival. The obligations of Mobile Energy and the rights of the Agent and the Lenders under this Article VIII shall continue in full force and effect until the payment, observance and performance in full of the Obligations, subject to Section 8.3. SECTION 8.13. Assignments and Participations; Assignments. Mobile Energy may not assign any of its rights or obligations under this Guaranty without the prior written consent of the Agent, and no assignment of any such obligation shall release Mobile Energy therefrom unless the Agent shall have consented to such release in a writing specifically referring to the obligation from which Mobile Energy is to be released. SECTION 8.14. Benefit and Enforcement. This Guaranty is given for the benefit of the Agent and each Lender, each of whom shall be entitled in the same manner as set forth herein to enforce performance and observance of this Guaranty. ARTICLE IX MISCELLANEOUS SECTION 9.1. Amendments, Etc. No amendment or waiver of any provision of this Agreement or any Note, or consent to any departure by either of the Mobile Energy Parties therefrom, shall be effective unless in writing and signed or consented to (in writing) by the Required Lenders (and, in the case of amendments, the Mobile Energy Parties), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, 31 waiver or consent shall, unless in writing and signed or consented to (in writing) by all of the Lenders, do any of the following: (a) waive any of the conditions specified in Article III; (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations; (c) reduce the principal of, or interest on, the Loans or any fees or other amounts payable hereunder; (d) postpone any date fixed for (i) payment of principal of, or interest on, the Loans or (ii) payment of fees or other amounts payable hereunder; (e) change the percentage of the Commitments or of the Loans outstanding, or the number of Lenders, required for the Lenders or any of them to take any action hereunder; or (f) amend this Section 8.1. SECTION 9.2. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including by telecopier) and shall be mailed, telecopied or delivered; if to the Company, to it at 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338, Attention: President, telephone: 770-673-7781; telecopier: 770-392-7644, with a copy to it at P.O. Box 2747, 200 Bay Bridge Road, Mobile, Alabama 36652, Attention: Vice President and General Manager, telephone: 334-330-3600, telecopier: 334-452-6337; if to Mobile Energy, to it at 900 Ashwood Parkway, Suite 450, Atlanta, Georgia 30338, Attention: President, telephone: 770-673-7781; telecopier: 770-392-7644; if to any Lender other than the Initial Lender, to it at the address or telecopier number set forth below its name in the Commitment Transfer Supplement by which it became a party hereto; if to the Agent or Initial Lender, to it at 787 Seventh Avenue, New York, New York 10019, telephone 212-841-2000, telecopier 212-841-2555, Attention: Project Finance Group; or, as to each party, to it at such other address or telecopier number as designated by such party in a written notice to the other parties. All such notices and communications shall be deemed received, (a) if personally delivered, upon delivery, (b) if sent by first class mail, on the third Business Day following deposit into the mails and (c) if sent by telecopier, upon acknowledgment of receipt thereof by the recipient, except that notices and communications to the Agent pursuant to Article II or VII shall not be effective until received by the Agent. SECTION 9.3. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, and no single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. SECTION 9.4. Costs and Expenses. Whether or not any Loans are made hereunder, the Company shall pay to the Agent on demand (a) all reasonable costs and expenses of the Agent and the Lenders in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for the Agent and the Lenders with respect thereto and 32 with respect to advising the Agent and the Lenders as to their rights and responsibilities, or the perfection, protection or reservation of rights or interests, under this Agreement, the Notes, the Security Documents and the other documents to be delivered hereunder and (b) all reasonable costs and expenses of the Agent and the Lenders (including the reasonable fees and out-of-pocket expenses of counsel for the Agent and the Lenders) in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes, the Security Documents and the other documents to be delivered hereunder, whether in any action, suit or litigation, any bankruptcy, insolvency or similar proceeding or otherwise. The Company will pay, indemnify, and hold each Lender and the Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions (whether sounding in contract, in tort or on any other ground), judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of, or in any other way arising out of or relating to, this Agreement, the Notes, the other Financing Documents or the use of the proceeds of the Loans or any other documents contemplated by or referred to herein or therein or any action taken or omitted to be taken by any Lender or the Agent with respect to any of the foregoing, provided, however, that the Company shall not be required to indemnify the Agent or any Lender for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent caused by the Agent's or such Lender's willful misconduct or gross negligence. In addition, the Company shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of any of the aforementioned documents, and the Company agrees to indemnify and hold the Agent and the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any of the foregoing. SECTION 9.5. Application of Monies. If any sum paid or recovered in respect of the Obligations is less than the amount then due, the Agent may apply that sum to principal, interest, fees or any other amount due under this Agreement in such proportions and order and generally in such manner as the Agent shall determine. SECTION 9.6. Severability. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions of this Agreement or affecting the validity, enforceability or authorization of such provision in any other jurisdiction. SECTION 9.7. Non-recourse Liability. Satisfaction of the Obligations (including those under the Guaranty) shall be had solely from the assets of the Mobile Energy Parties. No recourse shall be had to (a) any assets or properties of any Members 33 (other than Mobile Energy as provided in Article VIII) or of the stockholders of Mobile Energy, other than their respective interests in the Collateral, (b) any Member (other than Mobile Energy as provided in Article VIII) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Company, Mobile Energy and, in respect of any Southern Guaranty on deposit in the Maintenance Reserve Account or the Distribution Account, Southern) and, in the event of non-performance by either of the Mobile Energy Parties of any of the Obligations, no judgment for any deficiency upon the Obligations shall be obtainable by the Lenders or the Agent against any Member (other than Mobile Energy as provided in Article VIII) or any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Company, Mobile Energy and, in respect of any Southern Guaranty on deposit in the Maintenance Reserve Account or the Distribution Account, Southern) (other than Mobile Energy as provided in Article VIII and, in respect of any Southern Guaranty on deposit in the Maintenance Reserve Account or the Distribution Account, Southern). Notwithstanding anything in this Section 9.7 to the contrary (i) satisfaction of the Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company, (ii) nothing contained herein or in the Notes shall limit or otherwise prejudice in any way the right of the Agent, the Collateral Agent or any Lender to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party or to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Collateral granted hereunder or under the Security Documents and (iii) any limitations of liability herein shall not apply to any Person if and to the extent that such Person commits fraud or wilful misrepresentations, including those contained in Officer's Certificates issued from time to time. SECTION 9.8. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company, the Agent, the Lenders and their respective successors and permitted assigns, except that the Company shall not have the right to assign any of its rights and obligations hereunder without the prior written consent of all of the Lenders. SECTION 9.9. Assignments and Participations. (a) Any ------------------------------ Lender may at any time (with the prior written consent of the Company, unless such sale is to a Lender or an Affiliate of a Lender, such consent not to be unreasonably withheld or delayed, the prior written consent of the Agent, such consent not to be unreasonably withheld or delayed, and the prior written consent of the Initial Lender) sell to one (1) or more banks or other entities (a "Purchasing Lender") all or any part of its rights 34 and obligations under the Credit Documents (which, except in the case of an assignment to a Person that, immediately before such assignment, was a Lender, shall be equal to at least $2,500,000) pursuant to a Commitment Transfer Supplement, executed by such Purchasing Lender, such transferor Lender, the Agent and the Initial Lender (and, in the case of a Purchasing Lender that is not then a Lender or an Affiliate thereof, by the Company). Upon (i) the execution of such Commitment Transfer Supplement and (ii) delivery of a copy thereof to the Company and payment of the amount of the purchase price for its participation to such transferor Lender, such Purchasing Lender shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement, to the same extent as if it were an original party hereto with the Commitment as set forth in such Commitment Transfer Supplement, which shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitments arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under the Credit Documents. Upon the consummation of any transfer pursuant to this Section 9.9, the transferor Lender, the Agent and the Company shall make appropriate arrangements so that, if required, a replacement Note is issued to such transferor Lender and a new Note or, as appropriate, a replacement Note, is issued to such Purchasing Lender, in each case, in principal amounts reflecting their Commitments. (b) Any Lender may, from time to time, sell or offer to sell participating interests in any Loans owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interests and obligations of such Lender hereunder, to one (1) or more banks or other entities (each, a "Participant"), on such terms and conditions as may be determined by the selling Lender, without the consent of the Company. The selling Lender shall notify the Company of the identity of each Participant within thirty (30) days following such participation; provided, however, that failure to give such notice within such thirty (30) day period will not affect the validity or effectiveness of such participation. The grant of such participation shall not relieve any such Lender of its obligations, or impair the rights of any such Lender, hereunder. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender shall remain solely responsible for the performance of such Lender's obligations under this Agreement, such Lender shall remain the holder of any such Note for all purposes under this Agreement, and the Company, the Agent and the Lenders will continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and such Lender shall retain the sole right and responsibility to exercise the rights of such Lender, and enforce the obligations of the Company, including the right to approve any amendment, modification, supplement or waiver of any provision of any Credit Document and the right to take action under Article VI hereof and such Lender shall not grant any such Participant any voting rights or veto power over 35 any such action by such Lender under this Agreement (provided that such Lender may agree not to consent to any modification, amendment or waiver of this Agreement, without the consent of the Participant, that would alter the principal of or interest on the Loans, postpone the date fixed for any payment of principal of or interest thereon, release any Collateral or extend the Scheduled Expiration Date). No Participant shall have any rights under this Agreement to receive payment of principal, interest or any other amount except through a Lender and as provided in this Section 9.9. The Company also agrees that each Participant shall be entitled to the benefits of Sections 2.5(d), 2.13, 2.14, 2.15 and 2.16 with respect to its participation granted hereunder, provided that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the Lender transferring such participation would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred. (c) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.9, disclose to the Purchasing Lender or Participant or proposed Purchasing Lender or Participant any information relating to the Company furnished to such Lender by or on behalf of the Company. (d) Nothing herein shall prohibit any Lender from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. (e) In the event any Lender notifies the Company pursuant to Section 2.15 that it may no longer make or maintain LIBOR Rate Loans or demands payment of additional amounts pursuant to Section 2.13 or 2.14, the Company, at its expense, at any time within 180 days after such demand, so long as no Default or Event of Default shall have occurred and be continuing, may require such Lender to sell in accordance with the foregoing provisions of this Section 9.9, at par plus accrued interest, without recourse or warranty and pursuant to a Commitment Transfer Supplement, its rights and obligations hereunder (including its Commitment and the Loans at the time owing to it and the Notes held by it) to a Qualified Financial Institution specified by the Company that is willing to purchase such rights and obligations on the terms hereof and is reasonably acceptable to the Agent, provided that (i) such assignment shall not conflict with or violate any requirement of law applicable to or binding on such assigning Lender, and (ii) the Company shall have paid to such assigning Lender all amounts (other than interest) accrued and owing hereunder to it (including, without limitation, amounts owing pursuant to Sections 2.5(d), 2.13 and 2.14). Notwithstanding anything set forth above in this subsection 9.9(e) to the contrary, the Company shall not be entitled to require an assignment under this Section 9.9(e) with respect to any Lender demanding payment under Section 2.13 or 2.14 if (x) prior to any such requirement by the Company, such Lender shall have changed its lending office so as to eliminate the incurrence of the costs in respect of which such payment was 36 demanded or (y) the circumstances giving rise to such Lender's demand for payment of such additional amounts are applicable to all the Lenders. As used herein, "Qualified Financial Institution" means (a) any bank that has capital, surplus and undivided profits of at least $500,000,000 and that is either organized under the laws of the United States or any state thereof or has a branch office or agency located in the United States, and (b) any other bank or financial institution approved by the Agent and the Company (which approval will not be unreasonably withheld). SECTION 9.10. Indemnification. Each of the Mobile Energy Parties agrees to indemnify and hold harmless the Agent and each Lender and each of their respective officers, directors, employees, agents and Affiliates (each, an "Indemnified Party") from and against any and all direct (as opposed to consequential) claims, damages, losses, liabilities, costs and expenses whatsoever that an Indemnified Party may incur (or that may be claimed against an Indemnified Party by any Person) arising under, relating to or resulting from any demand, claim, suit, proceeding or action of any kind or nature whatsoever of any third party (including without limitation, any holder of any securities issued on behalf of the Company, any trustee on behalf of any such holders or any underwriter, placement agent or remarketing agent for such securities) against or affecting an Indemnified Party (1) with respect to the execution, delivery, enforcement and performance of this Agreement, the other Project Documents, any other documents related to the Energy Complex entered into by the Company or the transactions contemplated hereby or thereby, (2) with respect to the offering and sale of any securities, (3) with respect to a default by the Company in the performance of its respective agreements, rights or obligations contained in this Agreement, the other Project Documents or and any other documents related to the Project entered into by the Company, or any other instrument or agreement entered into by the Company in connection herewith or therewith, (4) resulting from injury to or death of any person whomsoever, and damage to or loss or destruction of any property whatsoever, which in any way arises in connection with, is incidental to or is caused by the construction or operation of the Energy Complex or any activity on or near the Site or the Energy Complex, (5) in any way relating to or arising out of the Project, or the manufacture, financing, construction, purchase, acceptance, rejection, ownership, acquisition, delivery, nondelivery, preparation, installation, storage, maintenance, repair, transfer of title, abandonment, possession, rental, use, operation, environmental clean-up, condition, sale, return, importation, exportation or other application or disposition of all or any part of any interest in the Site or the Energy Complex, (6) resulting from the violation of any environmental law or the existence or release of any hazardous materials at the Site or the Energy Complex or any other property of the Company (including, without limitation, clean-up costs, response costs, costs of corrective action and natural resources damages) or (7) any use of the proceeds of a Loan; provided, however, that the 37 Mobile Energy Parties shall not be required to indemnify any Indemnified Party for any claims, damages, losses, liabilities, costs or expenses to the extent caused by such Indemnified Party's willful misconduct or gross negligence. The Mobile Energy Parties, upon demand by any Indemnified Party at any time, shall also reimburse such party for any reasonable legal or other expenses incurred in connection with investigating or defending against any of the foregoing. If any action, suit or proceeding arising from any of the foregoing is brought against any Indemnified Party, such Indemnified Party shall promptly notify the Mobile Energy Parties in writing, enclosing a copy of all papers served, but the omission so to notify the Mobile Energy Parties of any such action shall not relieve it of any obligation to indemnify such Indemnified Party; provided, however, that the Mobile Energy Parties shall not be liable for any settlement of any such action effected without either of the Mobile Energy Party's prior written consent, not to be unreasonably withheld. If any such action shall be brought against any Indemnified Party and it shall notify either of the Mobile Energy Parties of the commencement thereof, either of the Mobile Energy Parties shall be entitled to participate in and, to the extent that it shall wish, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Party, and after notice from such Mobile Energy Party to such Indemnified Party of such Mobile Energy Party's election so to assume the defense thereof, the Mobile Energy Parties shall not be liable to such Indemnified Party for any subsequent legal or other expenses attributable to such defense, except as provided below, other than reasonable costs of investigation subsequently incurred by such Indemnified Party in connection with the defense thereof. The Indemnified Party shall have the right to employ its own counsel in any such action where either of the Mobile Energy Parties has assumed the defense, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been authorized by either of the Mobile Energy Parties, (ii) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between either of the Mobile Energy Parties and the Indemnified Party in the conduct of the defense of such action (in which case the Mobile Energy Parties shall not have the right to direct the defense of such action on behalf of the Indemnified Party) or (iii) the Mobile Energy Parties shall not in fact have employed counsel reasonably satisfactory to the Indemnified Party to assume the defense of such action, provided that the Mobile Energy Parties shall not be required to pay the fees and expenses of more than one such separate counsel for all the Lenders. SECTION 9.11. Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CONFLICT- OF-LAW PRINCIPLES THEREOF. SECTION 9.12. Headings. The section and subsection headings used herein have been inserted for convenience of reference only and do not constitute matters to be considered in interpreting this Agreement. 38 SECTION 9.13. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one (1) and the same agreement. SECTION 9.14. Third Party Beneficiaries. Nothing contained in this Agreement or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors and permitted assigns, any benefits or any legal or equitable right, remedy or claim under this Agreement or the Notes. SECTION 9.15. Waiver of Jury Trial. THE MOBILE ENERGY PARTIES, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. SECTION 9.16. Submission To Jurisdiction; Waivers. Each of the Company and Mobile Energy hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Financing Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person at its address set forth in Section 9.2 or at such other address of which the Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages, other 39 than, in the case of punitive damages, with respect to any Lender or the Agent which engages in willful misconduct. 40 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: /s/ Name: Christopher J. Kysar Title: Vice President MOBILE ENERGY SERVICES HOLDINGS, INC. By: /s/ Name: Christopher Kysar Title: Vice President Commitment $15,000,000.00 BANQUE PARIBAS, as Agent and as a Lender By: /s/ Name: Glenn R. Tobias Title: Group Vice President By: Name: Francis Ballard, Jr. Title:Vice President THIS REVOLVING PROMISSORY NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS REVOLVING PROMISSORY NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT. Exhibit A REVOLVING PROMISSORY NOTE $15,000,000.00 New York, New York August 24, 1995 FOR VALUE RECEIVED, the undersigned, MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), hereby unconditionally promises to pay to the order of BANQUE PARIBAS (the "Lender") the lesser of (i) the principal sum of fifteen million dollars ($15,000,000.00) and (ii) the aggregate unpaid principal amount of the Loans made by the Lender to the Company under the Credit Agreement referred to below, on the dates and in the amounts specified therein. The Company further promises to pay interest on the daily unpaid principal amount hereof from time to time outstanding on the dates and at the rates specified in the Credit Agreement. This Note is hereby expressly limited so that in no contingency or event, whether by reason of acceleration of the maturity of any indebtedness evidenced hereby or otherwise, shall the interest contracted for or charged or received by the Lender exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lender in excess of the maximum lawful amount, the interest payable to the Lender shall be reduced to the maximum amount permitted under applicable law, and the amount of interest for any subsequent period, to the extent less than that permitted by applicable law, shall to that extent be increased by the amount of such reduction. Each holder hereof is authorized to endorse on the schedule attached hereto, or on a continuation thereof, the date each such interest payment is due and the amount of each such interest payment determined in accordance with the Credit Agreement. All such notations shall constitute conclusive evidence (absent manifest error) of the accuracy of the information so recorded and be enforceable against the Company with the same force and effect as if such amounts were each set forth in a separate note executed by the Company. All payments due hereunder shall be made without setoff, counterclaim or deduction of any nature to Banque Paribas, as 2 Agent under the Credit Agreement, at 787 Seventh Avenue, New York, New York 10019, in lawful money of the United States of America and in immediately available funds, or at such other place and in such other manner as may be specified by the Agent pursuant to the Credit Agreement. Each holder hereof is authorized to endorse on the schedule attached hereto, or on a continuation thereof, the date and amount of each Loan made to the Company and each payment or prepayment of principal thereof, provided that the failure of such holder to make, or any error in making, any such recordation or endorsement shall not affect the obligations of the Company hereunder or under the Credit Agreement. All such notations shall constitute conclusive evidence (absent manifest error) of the accuracy of the information so recorded and be enforceable against the Company with the same force and effect as if such amounts were each set forth in a separate note executed by the Company. This Note is the "Note" of the Company to the Lender referred to in, evidences each Loan made by the Lender to the Company under, is subject to the provisions of, and entitles its holder to the benefits of, the Revolving Credit Agreement dated as of August 1, 1995 (the "Credit Agreement") among the Mobile Energy Parties, the Lender and the other lender parties thereto, and Banque Paribas, as Agent for the Lender and such other lenders, as the same may be amended, supplemented or otherwise modified from time to time and to which reference is hereby made for a more complete statement of the terms and conditions under which each Loan evidenced hereby is to be made and repaid. Capitalized terms in this Note that are not specifically defined herein shall have the meanings ascribed to them in the Credit Agreement. The Credit Agreement provides for, among other things, the acceleration of the maturity of the unpaid principal amount hereof upon the occurrence of certain stated events and for voluntary prepayments in certain circumstances and upon certain terms and conditions. The obligations of the Company under the Credit Agreement and this Note are secured as provided under, and the holder hereof is entitled to the benefit of, the Security Documents. In addition to any and all costs, fees and expenses for which the Company is liable under the Credit Agreement, the Company promises to pay all costs and expenses, including reasonable attorneys' fees and disbursements, incurred in the collection and enforcement hereof or any appeal of any judgment rendered hereon. The Company hereby expressly waives diligence, presentment, protest, demand, dishonor, nonpayment and notice of every kind to the fullest extent permitted by applicable law. No failure or delay by any holder of this Note to exercise any right or remedy under this Note or any other document or instrument entered into 3 pursuant to the Credit Agreement shall operate or be construed as a waiver or modification hereof or thereof. This Note shall be binding upon the successors and permitted assigns of the Company and shall inure to the Lender and its successors, endorsees and permitted assigns. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby. Recourse under this Note is limited in accordance with Section 9.7 of the Credit Agreement, and the provisions of Section 9.7 of the Credit Agreement are incorporated herein by reference. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CONFLICT-OF-LAW PRINCIPLES THEREOF. The Company hereby expressly and irrevocably agrees and consents that any suit, action or proceeding arising out of or related to this Note may be instituted in any state or federal court (at Lender's option) sitting in the County of New York, State of New York, and, by the execution and delivery of this Note, the Company expressly waives any objection that it may have now or hereafter to the venue or to the jurisdiction of any such suit, action or proceeding, and irrevocably submits generally and unconditionally to the jurisdiction of any such court in any such suit, action or proceeding. All excise tax due on this Note has been paid by the Company and proper stamps affixed to the Mortgage securing this Note. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: _______________________ Name: Title: SCHEDULE
Total Principal Principal Amount of Unpaid Amount of Date Amount Principal Paid Principal Date Interest Amount of Loans Notation Made of Loan or Prepaid Balance Payment is Due Interest Due Outstanding Made by ---- ------- ---------- ------- -------------- ------------ ----------- -------
Exhibit B NOTICE OF BORROWING [Mobile Energy Services Company, L.L.C. Letterhead] [Date - at least one (1) Business Day (or three (3) Eurodollar Business Days for LIBOR Rate Loans) prior to proposed date of Borrowing] Banque Paribas, as Agent 787 Seventh Avenue New York, New York 10019 Attention: Ladies and Gentlemen: Pursuant to the Revolving Credit Agreement, dated as of August 1, 1995 among Mobile Energy Services Company, L.L.C. (the "Company"), Mobile Energy Services Holdings, Inc., the financial institutions named therein (the "Lenders") and Banque Paribas, as Agent for the Lenders (as the same may be amended, modified or supplemented from time to time, the "Credit Agreement") (capitalized terms used herein, unless otherwise noted, shall have the meanings ascribed to them in the Credit Agreement). The Company hereby requests that the Lenders make available to the Company on ______, the following amount: Funds required by the Company to pay for Operation and Maintenance Costs $______ Funds required by the Company to pay Obligations under the Credit Agreement $______ Total Funds Required $______ This Borrowing shall consist of [choose Adjusted Base Rate Loans or LIBOR Rate Loans - if LIBOR Rate Loans, specify Interest Period of one (1), two (2) or three (3) months] with a Loan Repayment Date of [Date - not later than the Scheduled Expiration Date; not later than 93 days from date of Borrowing; no more than $5,000,000 may be scheduled for repayment within any calendar month; if LIBOR Rate Loans, must correspond with last day of specified Interest Period]. 2 Attached hereto are invoices or other evidence of amounts due evidencing the uses contemplated for the requested Borrowing. We request that $______ of the funds representing the requested Borrowing be deposited in the Operating Account established and created under the Intercreditor Agreement and $______ of the funds representing the requested Borrowing be deposited in account no. ______, located at __________, ABA no. _______ (which may be the Company's checking account). In connection with this request for a Borrowing, the Company further certifies that the proceeds of the Borrowing being requested herein are to be applied for the uses permitted by the Credit Agreement. The Company hereby certifies that, as of the date of this request for a Borrowing, the Company is in compliance, subject to the satisfaction or waiver by the Agent, with all conditions precedent set forth in Section [in the case of the initial Borrowing, 3.1 and] 3.2 of the Credit Agreement. MOBILE ENERGY SERVICES COMPANY, L.L.C. By: _____________________________ Name: Title: cc: Bankers Trust (Delaware), as Collateral Agent Exhibit C Form of Commitment Transfer Supplement COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among each Transferor Lender set forth in Item 2 of Schedule I hereto (each, a "Transferor Lender"), each Purchasing Lender set forth in Item 3 of Schedule I hereto (each, a "Purchasing Lender") and Banque Paribas, as the Initial Lender and as Agent under the Credit Agreement described below. W I T N E S S E T H: WHEREAS, this Commitment Transfer Supplement is being executed and delivered in accordance with Section 9.9 of the Revolving Credit Agreement dated as of August 1, 1995 among (i) Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), (ii) Mobile Energy Services Holdings, Inc., an Alabama corporation, (iii) Banque Paribas, in its individual capacity as initial lender (the "Initial Lender"), and the other Lenders named therein (collectively, the "Lenders") and (iv) Banque Paribas, as agent for the Lenders (the "Agent") (terms defined therein being used herein as therein defined); and WHEREAS, each Purchasing Lender desires to purchase and assume from its respective Transferor Lender certain rights, obligations and commitments under the Credit Agreement and, if it is not already a Lender party to the Credit Agreement, desires to become a Lender party to the Credit Agreement; and WHEREAS, each Transferor Lender desires to sell and assign to its respective Purchasing Lender, certain rights, obligations and commitments under the Credit Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Upon receipt by Agent of [ ] ([ ]) fully executed originals of this Commitment Transfer Supplement, to each of which is attached a fully completed Schedule I and Schedule II, and each of which has been executed by each Transferor Lender, each Purchasing Lender and any other Person required by the Credit Agreement to execute this Commitment Transfer Supplement, Agent will transmit to the Company, each Transferor Lender and each Purchasing Lender a Transfer Effective Notice, substantially in the form of Schedule IV hereto (a "Transfer Effective Notice"). Such Transfer Effective Notice shall set forth, among other things, the date on which the transfer effected by this Commitment Transfer Supplement shall become effective (the "Transfer Effective Date"), which date shall be the 2 date hereof. From and after the Transfer Effective Date each Purchasing Lender shall be a Lender party to the Credit Agreement for all purposes thereof. 2. Each Purchasing Lender shall pay to each of its respective Transferor Lenders an amount in United States dollars equal to the purchase price, as agreed between such Transferor Lender and each such Purchasing Lender (the "Purchase Price"), for the portion being purchased (such Purchasing Lender's "Purchased Percentage") by such Purchasing Lender of the Commitment of, and outstanding Loans and other amounts owing to, the respective Transferor Lender under the Credit Agreement and the Notes (the "Outstanding Obligations"). Each Purchasing Lender shall pay the appropriate Purchase Price to its respective Transferor Lender(s), in immediately available funds, at or before 12:00 noon, local time of the appropriate Transferor Lender, on the Transfer Effective Date. Effective upon the Transfer Effective Date, each Transferor Lender hereby irrevocably sells, assigns and transfers to each of its respective Purchasing Lenders, without recourse, representation or warranty other than as set forth in Section 8, and each such Purchasing Lender hereby irrevocably purchases, takes and assumes from its respective Transferor Lender(s), such Purchasing Lender's Purchased Percentage of the Commitment of, and presently outstanding Loans and other amounts owing to, each such Transferor Lender under the Credit Agreement and the Notes. 3. Each Transferor Lender has made arrangements with its respective Purchasing Lender(s) with respect to (a) the portion, if any, to be paid, and the date or dates for payment, by such Transferor Lender to its respective Purchasing Lender(s) of any fees heretofore received by such Transferor Lender pursuant to the Credit Agreement prior to the Transfer Effective Date that apply to periods subsequent to the Transfer Effective Date and (b) the portion, if any, to be paid, and the date or dates for payment, by each such Purchasing Lender to its respective Transferor Lender(s) of fees or interest received by each such Purchasing Lender pursuant to the Credit Agreement from and after the Transfer Effective Date that apply to periods prior to the Transfer Effective Date. 4. All payments of principal that would otherwise be payable, and all interest, fees and other amounts that would otherwise accrue, from and after the Transfer Effective Date to or for the account of any Transferor Lender pursuant to the Credit Agreement and the Notes shall instead be payable and accrue to or for the account of, the Transferor Lender(s) and the Purchasing Lender(s) in accordance with their respective interests as reflected in this Commitment Transfer Supplement. 5. On or prior to the Transfer Effective Date, each Transferor Lender will deliver to the Agent its Note. On or prior to the Transfer Effective Date, the Company will deliver to the Agent a new Note for each Purchasing Lender and each Transferor Lender (if applicable), in each case in principal amounts reflecting the revised Commitments of such Lenders (as adjusted pursuant to this Commitment Transfer Supplement). Promptly after the Transfer Effective Date, the Agent will send to each Transferor Lender (if applicable) and Purchasing Lender its new Note with the superseded Note of each Transferor Lender attached to the new Note (or if there is more than one (1) new Note, the superseded Note attached to one (1) of such new Notes and copies thereof attached to all other new Notes). 3 6. Concurrently with the execution and delivery hereof, the Transferor Lenders will provide to each Purchasing Lender (if it is not already a Lender party to the Credit Agreement) copies of all documents delivered to the Transferor Lenders evidencing satisfaction of the conditions precedent set forth in the Credit Agreement. 7. Each of the parties to this Commitment Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Commitment Transfer Supplement. 8. By executing and delivering this Commitment Transfer Supplement, each Transferor Lender and each Purchasing Lender confirms to and agrees with each other, the Agent, the Initial Lender and the Lenders as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby, free and clear of any adverse claim, each such Transferor Lender makes no representation or warranty and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the Notes or any other instrument or document furnished pursuant thereto, (b) each such Transferor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement, the Notes or any other instrument or document furnished pursuant thereto, (c) each such Purchasing Lender confirms that it has received a copy of the Credit Agreement, together with copies of such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment Transfer Supplement, (d) each such Purchasing Lender will, independently and without reliance upon Agent, its respective Transferor Lender(s) or any other Lender or the Initial Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, (e) each such Purchasing Lender appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof together with such powers as are reasonably incidental thereto and (f) each such Purchasing Lender agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender. 9. Schedule II hereto sets forth for each Transferor Lender and each Purchasing Lender the revised Commitment of each Transferor Lender and each Purchasing Lender, as well as certain administrative information with respect to each Purchasing Lender. 10. Notwithstanding anything to the contrary contained in this Commitment Transfer Supplement, if the long-term debt rating of any Purchasing Lender shall, at any time, be less than a rating of BBB or the equivalent thereof by S&P or Baa or the equivalent thereof by Moody's, then the Initial Lender may, in its sole and absolute discretion, purchase all or any part (as determined by the Initial Lender) of such Purchasing Lender's participating interest hereunder (the "Purchased Interests") by providing such Purchasing Lender with at least two Business Days' prior notice of such purchase and making a payment to such Purchasing 4 Lender equal to all outstanding amounts owing to it under the Credit Agreement in respect of the Purchased Interests on the date of such purchase as set forth in such notice. Upon any such purchase of the Purchased Interests, such Purchasing Lender shall no longer have any rights or obligations as a Purchasing Lender hereunder or as a Lender under the Credit Agreement or under any other instruments or documents furnished pursuant thereto with respect to the Purchased Interests. The Initial Lender may, in its sole and absolute discretion, retain for its own account and/or sell its interest in all or any portion of the Purchased Interests. 11. THIS COMMITMENT TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CONFLICT-OF-LAW PRINCIPLES THEREOF. 12. This Commitment Transfer Supplement may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute one (1) and the same document. 13. Execution of this Commitment Transfer Supplement by the Agent and the Company as set forth below shall constitute any consent of such Person required pursuant to Section 9.9 of the Credit Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. Schedule I to Commitment Transfer Supplement COMPLETION OF INFORMATION AND SIGNATURES FOR COMMITMENT TRANSFER SUPPLEMENT Re: Revolving Credit Agreement with Mobile Energy Services Company, L.L.C. Item 1 Date of Commitment Transfer Supplement: [Insert date of Commitment Transfer Supplement] Item 2 Transferor Lenders: [Insert names of Transferor Lenders] Item 3 Purchasing Lenders: [Insert names of Purchasing Lenders] Item 4 Signatures of Parties to Commitment Transfer Supplement: ______________________, as a Transferor Lender By: ________________________ Name: Title: ______________________, as a Purchasing Lender By: ________________________ Name: Title: BANQUE PARIBAS, as the Initial Lender and Agent By: _________________________ Name: ___________________ Title: __________________ CONSENTED TO AND ACKNOWLEDGED: MOBILE ENERGY SERVICES COMPANY, L.L.C. 2 By: ____________________________ Name: ______________________ Title: _____________________ ACCEPTED FOR RECORDATION IN REGISTER: BANQUE PARIBAS, as Agent By: ___________________________ Name: ______________________ Title: _____________________ 3 Schedule II to Commitment Transfer Supplement COMMITMENT AMOUNTS AND PROPORTIONATE SHARES Names of Transferor Lenders Revised Commitment ---------- $----- ---------- $----- Names of Purchasing Lenders New Commitment ---------- $----- [NAME PURCHASING LENDER] Address for Notices: Attention: Telex: Answerback: Telephone: Telecopier: Clearing Account: [Insert Acct. #] Schedule III to Commitment Transfer Supplement TRANSFER EFFECTIVE NOTICE [Date] Transferor Lenders: __________ Purchasing Lenders: __________ Re: Revolving Credit Agreement with Mobile Energy Services Company, L.L.C. The undersigned, as Agent under the Revolving Credit Agreement, dated as of August 1, 1995, among (i) Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), (ii) Mobile Energy Services Holdings, Inc., an Alabama corporation, (iii) Banque Paribas, as initial lender, and the other Lenders named therein (collectively, the "Lenders"), and (iv) Banque Paribas, as agent for the Lenders (the "Agent"), acknowledges receipt of [ ] ([ ]) copies of the Commitment Transfer Supplement as described in Annex I hereto, each fully executed. Terms defined in such Commitment Transfer Supplement are used herein as therein defined. 1. Pursuant to such Commitment Transfer Supplement, you are advised that the Transfer Effective Date will be the date hereof. 2. Pursuant to such Commitment Transfer Supplement, each Transferor Lender is required to deliver to Agent on or before the Transfer Effective Date its Note. 3. Pursuant to such Commitment Transfer Supplement, the Company is required to deliver to the Agent on or before the Transfer Effective Date the following Notes: [Describe each new Note for Transferor Lender (if applicable) and Purchasing Lender as to principal amount and payee.] 2 4. Pursuant to such Commitment Transfer Supplement, each Purchasing Lender is required to pay its Purchase Price, in immediately available funds, to the appropriate Transferor Lender at or before 12:00 noon, local time of the appropriate Transferor Lender, on the Transfer Effective Date. Very truly yours, BANQUE PARIBAS, as Agent By: ______________________ Name: ______________ Title: _____________ ANNEX I INFORMATION IDENTIFYING COMMITMENT TRANSFER SUPPLEMENT Re: Revolving Credit Agreement with Mobile Energy Services Company, L.L.C. Item 1 Date of Commitment Transfer Supplement: __________ Item 2 Transferor Lenders: __________ Item 3 Purchasing Lenders: __________ EX-4.7 8 Exhibit 4.7 - ------------------------------------------------------------------------------ LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES, RENTS, ISSUES AND PROFITS and SECURITY AGREEMENT AND FIXTURE FILING among MOBILE ENERGY SERVICES COMPANY, L.L.C. and THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA as Mortgagors and BANKERS TRUST (DELAWARE) as Mortgagee Dated as of August 1, 1995 Location: County of Mobile State of Alabama - ------------------------------------------------------------------------------- THIS INSTRUMENT IS FILED AND SHALL CONSTITUTE A FIXTURE FILING IN ACCORDANCE WITH THE PROVISIONS OF SECTION 7-9-402(6) OF THE CODE OF ALABAMA. THIS INSTRUMENT IS A "CONSTRUCTION MORTGAGE" AS DEFINED IN SECTION 7-9-313(1)(C) OF THE CODE OF ALABAMA AND SECURES, AMONG OTHER OBLIGATIONS, AN OBLIGATION INCURRED FOR THE CONSTRUCTION OF AN IMPROVEMENT ON LAND. THIS INSTRUMENT WAS PREPARED BY AND SHOULD BE RETURNED TO T. BRUCE McGOWIN, ESQ., HAND, ARENDALL, BEDSOLE, GREAVES & JOHNSTON, L.L.C., 3000 FIRST NATIONAL BANK BUILDING, MOBILE, ALABAMA 36602. TABLE OF CONTENTS Page CERTAIN DEFINITIONS....................................................... 3 GRANTING CLAUSE........................................................... 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF MORTGAGOR.................... 9 1. Rights and Obligations................................................ 9 2. Payments.............................................................. 9 3. Compliance With Law................................................... 9 4. Warranty of Title..................................................... 9 5. No Actions or Proceedings............................................. 10 6. After-Acquired Property............................................... 10 7. Maintenance and Modification of Collateral by Mortgagor............................................................. 10 8. Liens................................................................. 10 9. Taxes and Governmental and Utility Charges............................ 11 10. Condemnation.......................................................... 11 11. Leases and Rents...................................................... 12 12. Concerning the Conveyance Leases...................................... 13 13. Transfer or Encumbrance of the Collateral............................. 15 14. Advances.............................................................. 15 15. Indemnification; Waiver of Offset..................................... 16 16. Security Agreement.................................................... 17 17. Performance of Other Agreements....................................... 18 MORTGAGE EVENTS OF DEFAULT/REMEDIES....................................... 21 18. Mortgage Events of Default............................................ 21 19. Mortgagee's Right to Cure Defaults.................................... 21 20. Non-Waiver............................................................ 22 21. Remedies.............................................................. 22 22. Mortgagor as Tenant Holding Over...................................... 27 23. Leases................................................................ 27 MISCELLANEOUS............................................................. 27 24. Filing of Mortgage, etc............................................... 27 25. Usury Laws............................................................ 27 26. Option To Release Certain Real Estate................................. 28 27. Release of Collateral................................................. 29 28. Severability.......................................................... 29 29. Notices............................................................... 29 30. Amendments, Changes and Modifications................................. 29 31. Fixture Financing Statement........................................... 29 32. Invalidity of Certain Provisions...................................... 30 33. No Merger............................................................. 30 34. Matters in Bankruptcy................................................. 30 35. Environmental Matters................................................. 30 36. Estoppel Affidavits................................................... 31 37. Assignment............................................................ 31 -i- 38. Entire Agreement...................................................... 31 39. Action Affecting the Collateral....................................... 31 40. Actions by Mortgagee to Preserve the Collateral....................... 31 41. Remedies Not Exclusive................................................ 32 42. Relationship.......................................................... 32 43. Time of the Essence................................................... 32 44. Severance of Counterclaims............................................ 32 45. Notice Limiting Advances.............................................. 33 46. Governing Law......................................................... 33 47. Shared Draftsmanship.................................................. 33 48. No Third Party Beneficiary............................................ 33 49. Security Only......................................................... 33 50. Release by Mortgagee.................................................. 33 51. Further Assurances.................................................... 33 52. Limitation of Liability of Mortgagee.................................. 33 53. Conflict with Intercreditor Agreement................................. 34 54. Effect of Termination of Intercreditor Agreement...................... 34 55. IDB Joinder........................................................... 34 56. Limited Recourse...................................................... 34 APPENDIX A - Defined Terms EXHIBIT A - Leased Premises EXHIBIT B - Conveyance Leases EXHIBIT C - Easement Premises EXHIBIT D - Easements -ii- This LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES, RENTS, ISSUES AND PROFITS AND SECURITY AGREEMENT AND FIXTURE FILING (this "Mortgage"), made as of the first day of August, 1995, by and between MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as a mortgagor, having its usual place of business at 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338 (together with its permitted successors and assigns, the "Company"), THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA, having its usual place of business at 451 Government Street; Mobile, Alabama 36602, as a mortgagor (the "IDB" and, singularly or plurally, as applicable, with the Company, the "Mortgagors"), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, having its usual place of business at Four Albany Street, New York, New York 10006, not individually, but solely in its capacity as Collateral Agent under the Intercreditor Agreement referred to below for each of the Indenture Trustee, the Tax-Exempt Indenture Trustee and the Working Capital Facility Provider referred to below (the "Collateral Agent"). W I T N E S S E T H : WHEREAS, the Mortgagors hold certain interests in certain real property that are being mortgaged to the Collateral Agent pursuant to this Mortgage; WHEREAS, the Company holds interests in certain real property described in Exhibit A (collectively, the "Leased Premises") and in certain facilities constructed on the Leased Premises (collectively, the "Facilities"), under and pursuant to the documents described in Exhibit B (collectively, the "Conveyance Leases"); WHEREAS, the Company further holds interests in certain real property described in Exhibit C (collectively, the "Easement Premises"), under and pursuant to the documents described in Exhibit D (collectively, the "Easements"); WHEREAS, the Facilities are and will be constructed upon the Leased Premises and the Easement Premises (the Leased Premises, the Easement Premises and the Easements collectively, the "Site"); WHEREAS, the IDB holds interests in certain real property described in Exhibit A-2, and in certain facilities and assets constructed on the Leased Premises (collectively, the "IDB Properties"); WHEREAS, the Company will issue certain bonds in connection with the Site and the Facilities in a principal amount equal to $255,210,000 (the "First Mortgage Bonds"); WHEREAS, the First Mortgage Bonds are to be issued pursuant to that certain Trust Indenture, dated as of August 1, 1995 (the "Indenture"), by and among the Company, MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation ("Mobile Energy"), and FIRST UNION NATIONAL BANK OF GEORGIA, as trustee (the "Indenture Trustee"); WHEREAS, the proceeds of the First Mortgage Bonds will be used to, among other things, (a) repay to The Southern Company, a Delaware corporation ("Southern"), a bridge loan in the principal amount of $190,000,000 and distribute to the Company's owners approximately $10,600,000, which, in turn will be dividended to Southern, (b) repay to Southern Electric International, Inc., a Delaware corporation ("Southern Electric"), approximately $200,000 representing certain costs incurred by Southern Electric associated with the offering of the First Mortgage Bonds and the Tax-Exempt Bonds, (c) transfer approximately $9,200,000 to the Company for deposit into the Capital Budget Subaccount (as defined herein) to finance Project Costs (as defined herein), (d) apply approximately $1,400,000 pay outstanding attorneys' fees associated with the acquisition of the Energy Complex (as defined herein), (e) apply approximately $9,300,000 to pay certain financing costs incurred in connection with the transactions contemplated by the Financing Documents (as defined herein), including certain financing costs incurred in connection with the offering of the Tax-Exempt Bonds and (f) apply approximately $32,300,000 to pay breakage costs in connection with the termination of the interest rate hedging arrangements entered into in connection with the acquisition of the Site and the Facilities; WHEREAS, concurrently with the issuance of the First Mortgage Bonds, the IDB will issue a series of tax-exempt bonds (the "Tax-Exempt Bonds") for the purpose of refunding $85,000,000 of the IDB's Variable Rate Demand Solid Waste Revenue Refunding Bonds (Scott Paper Project) Series 1984 A, B, C, D and E; WHEREAS, the IDB will issue the Tax Exempt Bonds pursuant to that certain Amended and Restated Trust Indenture, dated as of August 1, 1995 (the "Tax-Exempt Indenture"), by and between the IDB and FIRST UNION NATIONAL BANK OF GEORGIA, as trustee (the "Tax-Exempt Indenture Trustee"), in a principal amount equal to $85,000,000; and payments on the Tax-Exempt Bonds shall be made from, and secured by, payments made by the Company pursuant to that certain Amended and Restated Lease Agreement, dated as of August 1, 1995 (the "IDB Lease Agreement"), by and among the IDB, the Company and Mobile Energy; WHEREAS, BANQUE PARIBAS (together with its permitted successors and assigns or any other Person (as defined herein) providing funds for the working capital needs of the Company in accordance with the Financing Documents, the "Working Capital Facility Provider") will provide up to $15,000,000 (multiplied by the Working Capital Escalation Factor (as defined herein) as in effect the, Working Capital Facility -2- Commitment (as defined herein) is first established) of funds for the working capital needs of Mortgagee pursuant to that certain Revolving Credit Agreement, dated as of August 1, 1995 (or any other Contract (as defined herein) pursuant to which funds for the working capital needs of Mortgagee are provided in accordance with the Indenture and the Tax-Exempt Indenture, the "Working Capital Facility"), by and between the Company and the Working Capital Facility Provider; WHEREAS, as security for the Company's obligations under the Indenture in connection with the issuance of the First Mortgage Bonds, the Indenture Trustee has required that Mortgagors grant Mortgagee a first priority mortgage and lien on and security interest in the Collateral (as defined herein); WHEREAS, as security for the Company's obligations under the IDB Lease Agreement in connection with the issuance of the Tax-Exempt Bonds, the Tax-Exempt Indenture Trustee has required that Mortgagors grant to Mortgagee a first priority mortgage and lien on and security interest in the Collateral; WHEREAS, as security for the Company's obligations under the Working Capital Facility, the Working Capital Facility Provider has required Mortgagors to grant to Mortgagee a first priority mortgage and lien on and security interest in the Collateral; WHEREAS, pursuant to that certain Intercreditor and Collateral Agency Agreement, dated as of August 1, 1995 (the "Intercreditor Agreement"), by and among the Indenture Trustee (on behalf of the holders from time to time of the Indenture Securities (as defined herein), the Tax-Exempt Indenture Trustee (on behalf of the holders from time to time of the Tax-Exempt Indenture Securities (as defined herein), the Working Capital Facility Provider (the Trustee, the Tax-Exempt Trustee and the Working Capital Facility Provider, collectively, the "Senior Secured Parties"), the Collateral Agent, the IDB, the Company and Mobile Energy, the Senior Secured Parties have required Mortgagors to grant to Mortgagee a first priority mortgage and lien on and security interest in the Collateral; and WHEREAS, this Mortgage is intended to ratably secure each of the Secured Obligations (as defined herein) pari passu. NOW, THEREFORE, in consideration of the premises set forth above, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and FOR THE PURPOSE OF SECURING the payment and performance of the Secured Obligations, which Secured Obligations may increase, decrease and increase again, from time to time, Mortgagors and Mortgagee hereby agree as follows: -3- CERTAIN DEFINITIONS For all purposes of this Mortgage, except as otherwise expressly provided in this Mortgage or unless the context otherwise requires, all terms used herein shall have the meanings set forth in Appendix A. GRANTING CLAUSE In order to secure the payment of all Financing Liabilities (as defined in Appendix A, and including advances, obligations or value relating to future advances, open-end revolving and other lines of credit) and other sums, amounts and expenses incurred hereunder and under the other Financing Documents by Mortgagee according to the terms hereof, together with interest thereon, and to secure the payment of such additional advances as may be made pursuant to and in accordance with the Financing Documents to Mortgagors (it being agreed that Financing Liabilities shall include advances under the Working Capital Facility), for any purpose, provided that all such advances are to be made within such lesser period of time as may be provided by Law as a prerequisite for the sufficiency of actual notice or record notice of the optional additional advances as against the rights of creditors or subsequent purchasers for valuable consideration, and to secure all other obligations under the Financing Documents (all of the aforesaid are hereinafter referred to collectively as the "Secured Obligations"), (i) the Company has bargained and sold and hereby irrevocably grants, bargains, sells, remises, releases, conveys, warrants, assigns, transfers, mortgages, pledges, delivers, grants a security interest, sets over and confirms unto Mortgagee for the benefit and use of the Senior Secured Parties forever, with warranties of title as set forth in Section 4, subject to the terms and conditions hereinafter set forth, all rights, title and interests of the Company in all its property (real and personal) of whatsoever nature and wherever located, and whether now held, owned or hereafter acquired, including without limitation, all interest of the Company in the properties, estates, rights and interests described in (a)-(x) below (except as to property, estate, rights and interest expressly excluded herefrom), and (ii) the IDB has bargained and sold and hereby irrevocably grants, bargains, sells, remises, releases, conveys, warrants, assigns, transfers, mortgages, pledges, delivers, grants a security interest, sets over and confirms unto Mortgagee for the benefit and use of the Senior Secured Parties forever, with warranties of title as set forth in Section 4, subject to the terms and conditions hereinafter set forth, all right, title and interest of the IDB, whether now held, owned or hereafter acquired in and to all property, estate, rights and interests of the IDB in the properties, estates, rights and interests described in (a)-(x) below (except as to property, estate, rights and interests expressly excluded herefrom) (all such property, estate, rights and interests hereby granted by the Company and the IDB not expressly excluded herefrom being hereinbefore and hereinafter collectively referred to as the "Collateral"). -4- The Collateral shall include: (a) any and all of the estate, right, title and interest of IDB in and to the IDB Properties; (b) any and all of the estate, right, title and interest of each Mortgagor in the Leased Premises, including the leasehold estate created by the Conveyance Leases and any fee estate, right, title and interest in the Leased Premises that either of them may acquire during the term of this Mortgage; (c) any and all of the estate, right, title and interest of each Mortgagor under and pursuant to, and all modifications, extensions and renewals of, the Easements and the rights created thereunder; (d) any and all of the estate, right, title and interest of each Mortgagor under and pursuant to, and all modifications, extensions and renewals of, each of the Conveyance Leases, including (i) all monies and claims for monies due and to become due thereunder and (ii) all rights of either of them to exercise any remedy, election or option or to make any decision or determination or to give any notice, consent, waiver or approval under or in respect of any of the Conveyance Leases; (e) any and all of the estate, right, title and interest of each Mortgagor in the buildings, improvements and fixtures now or hereafter located on the Site (hereinafter referred to as the "Improvements"); (f) any and all of the estate, right, title, interest, claim or demand of any nature whatsoever of each Mortgagor, either in Law or in equity, in possession or expectancy, in and to the Collateral and in all replacements, substitutes, renewals, betterments and extensions of, and all additions and appurtenances to, any of the Collateral, or any part thereof (including any subsequent fee interest of either of them), and all conversions of the security constituted thereby, which, immediately upon such conversion, and in each case without further mortgage, conveyance, assignment or other act by either of them shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by such Mortgagor and specifically described herein; (g) any and all of the estate, right, title and interest of each Mortgagor in the easements, rights-of-way, gores of land, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights and powers, and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments, revocable consents, options, appendages and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Collateral (including any and -5- all development rights, air rights, water rights, minerals, mineral rights or similar or comparable rights of any nature whatsoever now or hereafter appurtenant to the Leased Premises or now or hereafter transferred to the Leased Premises, together with any and all rights of each Mortgagor to renew, extend, supplement, amend, cancel or terminate the same (which rights to renew, extend, supplement, amend, cancel or terminate shall be subject to the approval required under the Intercreditor Agreement), and each Mortgagor's estate, right, title and interest in all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Site to the center line thereof; (h) any and all of the estate, right, title and interest of each Mortgagor in all machinery, apparatus, equipment, fittings, fixtures and other property of every kind and nature whatsoever owned by either of them, or in which either of them has or shall have an interest, now or hereafter located upon the Site and/or the Improvements or appurtenances thereto, and usable in connection with the present or future operation and occupancy of the Site and/or the Improvements and/or the Facilities and all equipment, materials, supplies, apparatus and other items now or hereafter attached to, installed in or used (temporarily or permanently) on or in connection with the present or future operation and occupancy of the Site and/or the Improvements and/or the Facilities, of any nature whatsoever, owned by either of them, or in which either of them has or shall have an interest, now or hereafter located upon the Site and/or the Improvements and/or the Facilities and all renewals, replacements and substitutions thereof and additions thereto owned by either of them or in which either of them has or shall have an interest, including any and all partitions, ducts, shafts, pipes, radiators, conduits, wiring, floor coverings, awnings, motors, engines, boilers, stokers, pumps, dynamos, transformers, turbines, generators, fans, blowers, vents, switchboards, elevators, mail or coal conveyors, escalators, compressors, furnaces, cleaning equipment, call and sprinkler systems, fire extinguishing apparatus, water and other tanks, heating, ventilating, plumbing, laundry, incinerating, air conditioning and air cooling systems and water, gas, telephone, telecommunications, telemetry and electric equipment (hereinafter collectively referred to as the "Equipment"), and the right, title and interest of either of them in and to any of the Equipment that may be subject to any security agreements (as defined in the Uniform Commercial Code as in effect in the State of Alabama (the "UCC")), superior in lien to the lien of this Mortgage; (i) any and all of the estate, right, title, interest, claim or demand of any nature whatsoever of each Mortgagor, in Law or in equity, in and to all awards or payments, including interest thereon, and the right to receive the same, which may be made with respect to the Collateral, from the exercise of the right of eminent domain, condemnation or otherwise -6- (including any transfer made in lieu of the exercise of said right), changes of grade of street or for any other injury to or decrease in the value of the Collateral now or hereafter located thereon, whether direct or consequential, which said awards and payments are hereby assigned, and Mortgagee is hereby authorized to collect and receive the proceeds thereof (which shall be applied according to the provisions of the Intercreditor Agreement) and to give proper receipts and acquittances therefor; (j) any and all of the estate, right, title, interest, claim or demand of any nature whatsoever of each Mortgagor, in Law or in equity, in and to all refunds or rebates of taxes or charges in lieu of taxes, now or hereafter assessed or levied against the Collateral (which shall be applied according to the provisions of the Intercreditor Agreement); (k) any and all of the estate, right, title, claim, demand and interest of each Mortgagor in and to all leases (including oil, gas and other mineral leases), lettings, occupancy agreements, subleases, franchises, licenses, concessions, permits, contracts and other agreements affecting the use or occupancy of the Collateral, or any part thereof, now or hereafter entered into and any renewals or extensions thereof (hereinafter referred to collectively as the "Leases") and all right, title and interest of either of them thereunder, including the right to receive the rents, issues and profits of the Collateral (subject to the terms and conditions hereinafter set forth), including the proceeds of all minerals, steam, electricity, hydrocarbons, green liquor and similar substances produced from the Collateral and all delay rentals and bonuses from any steam, electricity, and any oil, gas or other mineral lease (hereinafter referred to collectively as the "Rents"); (l) any and all of the estate, right, title, interest, claim or demand of any nature whatsoever of each Mortgagor, in Law or in equity, in and to all "accounts," "inventory", "equipment" and "general intangibles" (as such quoted terms are defined in the UCC as in effect on the date hereof) and all contract rights in connection therewith, now or hereafter owned by either of them, or in which either of them now has or hereafter shall have any right, title or interest, now or hereafter located upon, arising in connection with or concerning the Collateral; provided, however, that no Debt Service Reserve Account, Tax-Exempt Debt Service Reserve Account or Mill Owner Maintenance Reserve Account, nor (except in the case of the Mill Owner Maintenance Reserve Account, to the extent in excess of $2 million) any monies contained therein or hereafter transferred thereto or deposited therein (nor any right to receive monies thereunder), shall be included in the Collateral and no mortgage, lien or security interest therein shall be deemed to be created hereby; -7- (m) any and all of the estate, right, title, interest, claim or demand of any nature whatsoever of each Mortgagor, in Law or in equity, in and to the Intercreditor Agreement Accounts, together with any right to payment for goods sold or leased or for services rendered in connection with the Intercreditor Agreement Accounts, whether or not it has been earned by performance; (n) any and all of the estate, right, title, interest, claim or demand of any nature whatsoever of each Mortgagor, in Law or in equity, in and to all proceeds of and any unearned premiums on any insurance policies covering the Collateral and title thereto, including the right to receive the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to or impairment of title to the Collateral (which shall be applied according to the provisions of the Intercreditor Agreement); (o) to the extent permitted by Law, the nonexclusive right, in the name and on behalf of each Mortgagor, to appear in and defend any action or proceeding brought with respect to the estate, right, title or interest of either of them in and to the Collateral and to commence any action or proceeding to protect the estate, right, title or interest of Mortgagee in and to the Collateral (subject, however, to the provisions of this Mortgage hereinafter set forth and the provisions of the Intercreditor Agreement); (p) any and all of each Mortgagor's right, title and interest in and to all plans and specifications prepared for construction of the Facilities, Improvements or other development of the Collateral (including all amendments, modifications, supplements, general conditions and addenda thereof or thereto) and all studies, data and drawings (including architectural, engineering, mechanical and electrical drawings) related thereto, and all contracts and agreements of either of them relating to the aforesaid plans and specifications or to the aforesaid studies, data and drawings or to the construction of the Facilities and Improvements on the Collateral; (q) any and all of each Mortgagor's right, title and interest in and to all contracts with property managers, surveyors, real estate advisors and consultants, real estate brokers and other like agents and professionals that relate to any part of the Collateral, including any of the Improvements constructed or to be constructed on the Collateral, and all maps, reports, surveys, and studies of or relating to any of the Collateral, now or hereafter owned by either of them or in which either of them has or hereafter shall have an interest and now or hereafter in the possession of either of them or any such agent or professional; -8- (r) to the extent permitted by Law, any and all of each Mortgagor's right, title and interest in and to all present and future Governmental Approvals in any way relating or pertaining to the Collateral; provided, however, that any of the Governmental Approvals that by their terms or by operation of Law would become void, voidable, terminable or revocable or would constitute a breach or default thereunder if pledged or assigned hereunder or if a security interest therein were granted hereunder are expressly excepted and excluded from the lien and terms of this Mortgage to the extent necessary to avoid such voidness, voidability, terminability, revocability, breach or default; (s) any and all of each Mortgagor's right, title and interest in and to all warranties, indemnities and guarantees of contractors, subcontractors, materialmen, vendors and suppliers relating to the Improvements and the Facilities; (t) any and all right, title and interest of each Mortgagor in and under the "Collateral" described in the Security Agreement; (u) to the extent permitted by Law, any and all of each Mortgagor's rights to file for record a notice limiting the maximum principal amount that may be secured by this Mortgage and any and all of each Mortgagor's rights under applicable Law to reject any of the Financing Documents in the event of bankruptcy; (v) to the extent permitted by Law, any and all of each Mortgagor's rights and remedies at any time arising under or pursuant to Section 365(h) of the United States Bankruptcy Code, including all of the Company's and the IDB's rights to remain in possession of all or any part of the Collateral; (w) any and all right, title and interest hereafter acquired by each Mortgagor in and to any and all of the real and personal property described in paragraphs (a) through (u) above, whether pursuant to any option contained in any of the Conveyance Leases or otherwise; and (x) any and all of the estate, right, title, interest, claim or demand of any nature whatsoever of each Mortgagor, in Law or in equity, in and to all products and proceeds of any of the Collateral herein described. TO HAVE AND TO HOLD the above granted and described Collateral unto Mortgagee and its successors and assigns, on behalf of the Senior Secured Parties and their successors and assigns, forever, to secure the Secured Obligations, subject to the terms and conditions hereinafter set forth. SUBJECT only to Permitted Liens and the matters described in Exhibit A-2, which describes the IDB Properties. -9- PROVIDED HOWEVER, that the mortgage, lien and security interest granted hereby in favor of Mortgagee shall be released without condition as to monies deposited into any Indenture Account or Tax-Exempt Indenture Account or into the Mill Owner Maintenance Reserve Account upon, in each case, the deposit of such monies therein, and the Collateral shall not include, and no Security Interest is granted hereby in, any right, title or interest of Debtor in any Indenture Account or Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account, all sums of money, from any source whatsoever, now or hereafter transferred to or deposited into any Indenture Account or Tax-Exempt Indenture Account (or delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee for deposit therein) or, except to the extent monies on deposit therein exceed $2,000,000, the Mortgagee's right to receive such excess from the Mill Owner Maintenance Reserve Account, including, in each case, all credit balances therein, any and all cash and investments at any time on deposit in any Indenture Account or any Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account, and any and all interest, dividends and other income derived from such monies and investments on deposit therein and all certificates, passbooks and instruments representing any Indenture Account or Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any Indenture Account or Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account. PROVIDED FURTHER, HOWEVER, that the mortgage, lien and security interest granted hereby by the IDB in favor of Mortgagee shall be, and shall at all times continue to be, subject and subordinate in all respects the matters set forth in Exhibit A-2 hereto, including, in each case, any renewal, modification, extension, substitution, replacement or consolidation thereof. Such subordination shall not be affected by any further advance, repayment and readvance or prepayment under or in respect of any instrument secured by the Tax-Exempt Indenture. PROVIDED FURTHER, HOWEVER, that if the Secured Obligations are paid in full in accordance with the Financing Documents, then this Mortgage shall cease, terminate and be void in accordance with Section 50 of this Mortgage. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MORTGAGORS 1. Rights and Obligations. This Mortgage shall not be construed to be a consent by Mortgagee to any contract, lease, license, permit or governmental action or to impose any obligation with respect to the same. 2. Payments. The Company shall pay all sums, including interest, secured hereby when due, as provided for in the Financing -10- Documents and in this Mortgage, and any renewal, extension or modification of any thereof. 3. Compliance With Law. The Company shall comply with all applicable Law and Governmental Approvals to the extent contemplated hereby or by any of the other Financing Documents. 4. Warranty of Title. (a) The Company is the sole owner and holder of the entire tenant's interest under the Conveyance Leases, free and clear of any Liens and encumbrances except for Permitted Liens. (b) The Company has full right, power and authority to mortgage its right, title and interest in and under the Conveyance Leases to Mortgagee pursuant hereto, and each lessor under the Conveyance Leases (a "Ground Lessor") has granted its express consent to this Mortgage. (c) Each of the Conveyance Leases is in full force and effect and such Mortgagor has not waived any of its rights thereunder. (d) Neither the Company nor, to the knowledge of the Company, any Ground Lessor is in material default with respect to any of the terms of any of the Conveyance Leases and the Company knows of no acts or occurrences constituting a material default thereunder. (e) The Company knows of no adverse claim to the title or possession of the Company or any Ground Lessor with respect to any part of the Site, except for Permitted Liens. (f) The Company has received no notice from any Ground Lessor terminating any of the Conveyance Leases or demanding performance or compliance with any of the terms, covenants or conditions thereof. (g) Since the Company acquired its interest in the Facility, no fire or casualty has affected the Site and the Company knows of no proposed condemnation or eminent domain proceeding or settlement in lieu thereof that may affect the Site. (h) (i) The Company is now, and after giving effect to this Mortgage, will be, in a solvent condition, (ii) the execution and delivery of this Mortgage by the Company does not constitute a "fraudulent conveyance" within the meaning of Title 11 of the United States Code as now constituted or under any other applicable Law and (iii) no bankruptcy or insolvency proceedings are pending or contemplated by or, to the knowledge of the Company, threatened against the Company. 5. No Actions or Proceedings. There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company, the Facilities, the Site or the Collateral, or that involve the validity or -11- enforceability of this Mortgage or the priority of the lien hereof, at Law or in equity, or before or by any Governmental Authority. 6. After-Acquired Property. Unless expressly excluded hereby, all property at any time acquired by the Company shall, immediately upon the acquisition thereof by the Company and without any further act, become and be subject to the lien of this Mortgage as Collateral, as fully and completely as though now owned by the Company, and specifically described in the granting clauses hereof. 7. Maintenance and Modification of Collateral by Mortgagor. (a) The Company agrees that at no time will the Company permit waste to be committed upon the Collateral and the Company will operate and maintain the Collateral or cause the Collateral to be operated and maintained pursuant to Section 5.6 of the Indenture and Section 4.6 of the IDB Lease Agreement and to any comparable provision of the Working Capital Facility. The Company agrees that it shall not modify, nor cause to be modified, the Collateral, or any part thereof, except as expressly permitted by the other Financing Documents. (b) Any property for which a substitution or replacement is made as permitted by the Financing Documents may be disposed of by the Company in any manner and in the sole discretion of the Company free and clear of the lien of this Mortgage. 8. Liens. The Company will not permit any mechanic's, materialmen's or other Lien or encumbrance, other than Permitted Liens, to be established or remain against the Collateral, and if any such liens are filed, the Company shall promptly have them removed by bond or otherwise. 9. Taxes and Governmental and Utility Charges. (a) The Company will pay or cause to be paid, before the date when interest (provided that "interest" shall not include discounts for early payment under the Law of the State of Alabama (the "State")) and penalties become due thereon, all taxes and governmental and utility charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Collateral or any part thereof (other than taxes or charges that are the subject of a Good Faith Contest), including, without limiting the generality of the foregoing, (i) all ad valorem taxes levied against the Collateral and any other taxes levied upon the Collateral that, if not paid, will become a Lien on the receipts from the Collateral or against the Collateral or any interest therein or the revenues derived therefrom; (ii) all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Collateral that, if not paid, will become a Lien on the receipts from the Collateral or a Lien against the Collateral or any interest therein or the revenues derived therefrom; and (iii) all assessments and charges lawfully made by any Governmental Authority for public improvements that may be -12- secured by a Lien on the Collateral, provided that, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Company shall be obligated to pay only such installments when and as they are required to be paid. (b) In the event of the passage after the date of this Mortgage of any Law of the State or in any other state in which the Collateral is located, changing in any way the Laws now in force for the taxation of mortgages, deeds of trust or debts secured thereby, for state or local purposes, or the manner of the operation of any such taxes so as to adversely affect the interest of Mortgagee, then and in such event, the Company shall bear and pay the full amount of such taxes; provided, however, that if for any reason payment by the Company of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the loan or indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of this Mortgage, or otherwise, Mortgagee may, at its option, either (i) exercise its remedies under Section 21 as soon as the failure to pay such taxes results in a Mortgage Event of Default (as defined herein) or (ii) waive, as directed by the Required Senior Creditors in Senior Creditor Certificates, any such Mortgage Event of Default and any payment received from the Company to the extent of such unlawful or usurious amount and the Company shall concurrently therewith pay the remaining lawful and non-usurious portion or balance of said taxes. 10. Condemnation. Notwithstanding any taking by any public or other body given the power of eminent domain through eminent domain, condemnation or otherwise, the Company shall continue to pay the Secured Obligations at the time and in the manner provided for their payment in the Financing Documents, and the Secured Obligations shall not be reduced until, and only to the extent that, any award of payment therefor shall have been actually received and applied by Mortgagee in accordance with the Intercreditor Agreement to the discharge of the Secured Obligations. The Company shall file and prosecute its claim or claims for any award or payment in a Good Faith Contest and shall cause the same to be collected and paid over to Mortgagee for application as set forth in the Intercreditor Agreement. Each Mortgagor hereby irrevocably authorizes and empowers Mortgagee in the name thereof or otherwise to collect and receive any such award or payment and to file and prosecute such claim or claims if (a) either Mortgagor fail to do so within a reasonable time prior to the expiration of the period allowed therefor by applicable Law or (b) a Mortgage Event of Default hereunder has occurred and is continuing. Although it is hereby expressly agreed that the same shall not be necessary in any event, the Company shall, upon demand of Mortgagee upon advice of counsel, make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such award or payment to Mortgagee free and clear of any encumbrances of any kind or nature whatsoever. -13- 11. Leases and Rents. (a) Except as provided in the Financing Documents, the Company shall not lease or sublease, as lessor, all or any portion of the Leased Premises. (b) Each Mortgagor hereby assigns to Mortgagee, as security for the payment and performance of the Secured Obligations, any and all of each Mortgagor's right, title and interest in and to the Leases and the Rents. Subject to the terms of this Section 11(b), Mortgagee shall refrain from exercising the right to enter the Leased Premises for purposes of collecting the Rents and grants to the Company the right and license to collect the Rents, as to all of the Collateral except the IDB Properties, and grants to the IDB the right and license to collect the Rents related to the IDB Properties. The Company shall hold the Rents, or an amount sufficient to discharge all sums currently due on the Secured Obligations, in trust for use in payment of the Secured Obligations. The right of the Company to collect the Rents may be revoked by Mortgagee upon the occurrence and during the continuation of any Mortgage Event of Default by the Company herein by giving written notice of such revocation to the Company. Following such notice, Mortgagee may collect, retain and apply the Rents during the continuation of such Mortgage Event of Default toward payment of the Secured Obligations according to the Financing Documents and in such order, priority and proportions, or to the operation, maintenance and repair of the Leased Premises, as Mortgagee shall deem proper irrespective of whether Mortgagee shall have commenced a foreclosure of this Mortgage or shall have applied or arranged for the appointment of a receiver. Except to the extent permitted or authorized by the Financing Documents, neither Mortgagor shall, without the consent of Mortgagee, which consent shall not be unreasonably withheld, make, or suffer to be made, any Leases or modify or cancel any Leases or accept prepayments of installments of the Rents for a period of more than one month in advance or further assign the whole or any part of the Rents. The Company shall (i) fulfill or perform each and every provision of the Leases on the part of either Mortgagor to be fulfilled or performed, (ii) promptly send copies of all notices of default that either Mortgagor shall send or receive under the Leases to Mortgagee and (iii) enforce, short of termination of the Leases, the performance or observance of the provisions thereof by the other parties thereto. (c) The Company agrees that it will not further pledge or assign its interest in any of the Leases, or further assign the Rents, so long as any of the Secured Obligations remain unpaid except as otherwise permitted by the Financing Documents. (d) Nothing contained in this Section 11 shall be construed as imposing on Mortgagee any of the obligations of the parties under the Leases. -14- (d) The assignment of the Leases and Rents in this Section 11 is intended to be an absolute present assignment from each Mortgagor to Mortgagee and not merely a passing of a security interest. 12. Concerning the Conveyance Leases. Notwithstanding anything contained herein to the contrary, and in addition to any rights, privileges and remedies granted to Mortgagee elsewhere in this Mortgage, Mortgagee shall have, and the Company hereby grants to Mortgagee, any and all rights, privileges and remedies of leasehold mortgagees provided for in each of the Conveyance Leases (including the Company's renewal rights, if any) without the necessity of particularly specifying any or all of such rights, privileges and remedies that are or could be granted to leasehold mortgagees pursuant to any of the Ground Leases. The Company hereby represents, warrants, covenants and agrees that: (a) This Mortgage is lawfully executed and delivered in conformity with each of the Conveyance Leases. (b) The Company shall promptly pay or cause to be paid, when due and payable, the net rent, additional rents, taxes and all other sums and charges mentioned in and made payable by the Company under each of the Conveyance Leases. (c) The Company shall promptly perform and observe, or cause to be performed and observed, all of the terms, covenants and conditions required to be performed and observed by the Company under each of the Conveyance Leases, within the periods provided therein, and will do all things necessary to preserve and to keep unimpaired its rights under each of the Conveyance Leases. Notwithstanding the foregoing, a failure by the Company to comply with the provisions of this Section 12(c) shall not be deemed to be a Mortgage Event of Default unless and until an "Event of Default" has occurred under any of the Conveyance Leases, which has not been waived or cured. (d) The Company shall promptly notify Mortgagee in writing of any default by the Company in the performance or observance of any of the terms, covenants, or conditions on the part of the Company to be performed or observed under any of the Conveyance Lease. (e) The Company shall (i) promptly notify Mortgagee in writing of the receipt by the Company of any notice of termination of any of the Conveyance Leases or any notice noting or claiming any default by the Company under any of the Conveyance Leases; (ii) promptly deliver to Mortgagee a copy of each such notice; and (iii) promptly deliver to Mortgagee a copy of any material notice sent to any Ground Lessor, including any notice of election or the exercise of any rights of renewal under said instrument. -15- (f) The Company shall not, without the prior written consent of Mortgagee, terminate, modify or surrender any of the Conveyance Leases or suffer or permit any termination, modification or surrender thereof. (g) The Company shall, within ten (10) days after written demand from Mortgagee, use its good faith efforts to obtain from each Ground Lessor and deliver to Mortgagee a certificate stating that such instrument is in full force and effect, is unmodified, that no notice of termination thereon has been served, stating the date to which the rent has been paid and stating whether or not there are any defaults thereunder and specifying the nature of such defaults, if any. (h) The Company shall furnish to Mortgagee, within five (5) business days after demand therefor, proof of payment of all items that are required to be paid by the Company pursuant to each of the Conveyance Leases. (i) The Company shall not consent to any waiver, modification or cancellation of any provision of any of the Conveyance Leases nor to the subordination of any of the Conveyance Leases to any other interest or instrument whatsoever, including any Lien (other than Permitted Liens) on the fee estate of any Ground Lessor under any of the Conveyance Leases without obtaining the prior written consent of Mortgagee thereto. (j) The Company does hereby irrevocably appoint and constitute Mortgagee as its true and lawful attorney-in-fact in its name, place and stead to perform and comply with all obligations of such Mortgagor under all of the Conveyance Leases without relying on any grace period provided therein, to do and take, without the obligation to do so, any action Mortgagee deems necessary or desirable to prevent or cure any default by the Company under each of the Conveyance Leases, including any act, deed, matter or thing whatsoever that the Company may do in order to cure a default under any of the Conveyance Leases, to enter in and upon the Leased Premises or any part thereof to such extent and as often as Mortgagee, in its sole discretion, deems necessary or desirable in order to prevent or cure any default by the Company under any of the Conveyance Leases or to perform or complete any obligation of the Company pursuant thereto. The Company shall, within five (5) business days after written request is made therefor by Mortgagee, execute and deliver to Mortgagee or to any Person that Mortgagee shall designate, such further instruments, agreements, powers, deeds, conveyances or the like as may be necessary to complete or perfect the interest, rights or powers of Mortgagee pursuant to this Section 12 or as may be reasonably required by Mortgagee. The Company hereby ratifies all that Mortgagee shall do or cause to be done as the Company's attorney-in-fact consistent with the foregoing. The Company also authorizes Mortgagee, upon the occurrence and -16- during the continuance of a Mortgage Event of Default, to communicate in its own name with any party to any Project Document at any time, with regard to any matter relating to such Project Document. (k) Until and unless Mortgagee shall elect otherwise by written notice to the Company and either of the Ground Lessors, Mortgagee shall be the "Leasehold Mortgagee" for all purposes of each of the Conveyance Leases. The Company shall deliver all necessary notices, and take all such other actions, as may be necessary from time to time, in order to designate Mortgagee as the "Leasehold Mortgagee" under each of the Conveyance Leases. (l) If the Company or the IDB acquires the estate of the landlord under any of the Conveyance Leases (i) there shall be no merger between such acquired estate and the estate of either of the Company or the IDB under any of the Conveyance Leases unless all Persons (including Mortgagee) having an interest in any of the Conveyance Leases shall consent thereto in writing and (ii) this Mortgage and the lien hereof shall, ipso facto, without the necessity of any further conveyance, simultaneously with such acquisition, be spread to cover such acquired estate and as so spread shall, be prior to the Lien of any mortgage placed on the acquired estate subsequent to the date of this Mortgage. (m) The generality of the provisions of this Section 12 relating to the Conveyance Leases shall not be limited by other provisions of this Mortgage setting forth particular obligations of the Company that are also required of the Company as the lessee under any of the Conveyance Leases. (n) If any of the Conveyance Leases shall be terminated prior to the natural expiration of its term due to default by either of the Company or the IDB, and if, pursuant to any provision of any of the Conveyance Leases, Mortgagee or its designee shall acquire from the applicable Ground Lessor a new lease of any part of the Site, the Company and the IDB shall have no right, title or interest in or to such new lease or the leasehold estate created thereby, or renewal privileges therein contained. (o) The Company shall at all times cause the Company's estate, rights, title and interest in, to and under the Leased Premises to be subject to no interests, Liens, charges or encumbrances other than the interest of any Ground Lessor under the applicable Conveyance Leases and any of the Permitted Liens. The Company shall defend the Company's estate, rights, title and interest in, to and under the Leased Premises and the interest in, to and under the Leased Premises and the priority thereof, and the priority and validity of the Lien hereof, against the claims of all Persons except as aforesaid. -17- 13. Transfer or Encumbrance of the Collateral. Except to the extent permitted by the Financing Documents, no part of the Collateral shall in any manner be further encumbered, sold, transferred, leased, subleased, assigned or conveyed, or permitted or suffered to be further encumbered, sold, transferred, assigned or conveyed. 14. Advances. If the Company fails to pay or cause to be paid, subject to any right hereunder to contest, any claim, Lien or encumbrance (other than Permitted Liens), or, prior to delinquency, any tax or assessment, or, when due, any insurance premium, or to keep the Collateral in repair, or shall commit or permit waste, or if there shall be commenced any action or proceeding affecting the Collateral or any part thereof or the title thereto, or the interest of Mortgagee therein, including condemnation or eminent domain proceedings, bankruptcy or reorganization proceedings or any proceeding regarding an Environmental Requirement, then Mortgagee or any Senior Secured Party (upon written notice to Mortgagee and each other Senior Secured Party), at its option, may, but shall not be required to, pay said claim, Lien, encumbrance, tax, assessment or premium, with right of subrogation thereunder, following a Mortgage Event of Default and during the continuation thereof, or at such earlier time as permitted by any Consent to Assignment of a Project Contract to Mortgagee, may make such repairs and take such steps as it deems advisable to prevent or cure such waste, and may appear in any such action or proceeding and retain counsel therein, and take such action therein as Mortgagee or such Senior Secured Party deems advisable, and for any of said purposes Mortgagee or such Senior Secured Party may advance such sums of money, including all costs, attorneys' fees and other items of expense as it deems necessary. The Company shall pay or cause to be paid, upon demand, to Mortgagee or such Senior Secured Party, as the case may be, all sums of money so advanced, together with interest on each such advance at an interest rate per annum equal to the yield on the First Mortgage Bonds plus three percent (3%), and the repayment of such advances shall be secured hereby and by the other Security Documents. In making any payment or securing any performance relating to any obligation of either Mortgagor under this Mortgage, Mortgagee, as long as it acts in good faith, shall be the sole judge of the legality, validity and amount of any Lien or encumbrance and of all other matters necessary to be determined in satisfaction thereof. No such action of Mortgagee shall be considered a waiver of any right accruing to it hereunder. Mortgagee shall not be held accountable for any delay in making any such payment, which delay may result in any additional interest, costs, charges or expenses. 15. Indemnification; Waiver of Offset. (a) If Mortgagee is made a party defendant to any litigation, proceeding, action, suit, claim, demand or judgment of any nature or form, by or on behalf of any person, concerning this Mortgage or the Leased Premises or any part thereof, including any eminent domain, condemnation or other proceeding, any proceeding, action, -18- suit, claim, demand or judgment arising in any manner from an Environmental Requirement concerning the Leased Premises, and any contest, action or proceeding pursuant to Sections 39, 40 and 41, then the Company shall indemnify, defend and hold Mortgagee harmless from any and all liability, loss or expense by reason of said litigation, proceeding, action, suit, claim, demand or judgment (including any appeals therefrom), including attorneys' fees and expenses incurred by Mortgagee in any such litigation, proceeding, action, suit, claim, demand or judgment (including any appeals therefrom), but excluding liability for gross negligence or willful misconduct by Mortgagee other than gross negligence or willful misconduct imputed to Mortgagee solely by reason of its interest in the Leased Premises, whether or not any such litigation, proceeding, action, suit, claim or demand is prosecuted to judgment. If Mortgagee commences an action against either Mortgagor to enforce any of the terms hereof by reason of a default of the Company hereunder, or for the recovery of any sum secured hereby, or if the Company breaches any term of this Mortgage, the Company shall pay to Mortgagee attorneys' fees and disbursements (including any of the same incurred on appeal), and the right to such attorneys' fees and expenses shall be deemed to have accrued on the commencement of such action and shall be enforceable whether or not such action is prosecuted to judgment. (b) The Company waives any and all right to claim or recover against Mortgagee, and its directors, officers, employees and representatives, for loss of or damage to the Company, the Collateral or any part thereof, the Company's property or the property of others under the Company's control, from any cause to the extent insured against or required to be insured against by the provisions of the Financing Documents. 16. Security Agreement. This Mortgage constitutes both a real property mortgage and a "security agreement," within the meaning of the UCC, and the Collateral includes both real and personal property any and all other rights and interests, whether tangible or intangible in nature, of each Mortgagor in the Collateral. Information relative to the security interest created hereby may be obtained by application to Mortgagee at the address provided in the introductory clause. Each Mortgagor, by executing and delivering this Mortgage, has granted as security for the Secured Obligations a lien on and security interest in such of the Collateral as is governed by the UCC in favor of Mortgagee. During a Trigger Event Period, Mortgagee, in addition to any other rights and remedies that it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to Mortgagee upon default under the UCC, including, without limiting the generality of the foregoing, the right to take possession of such of the Collateral as is governed by the UCC or any part thereof and such other rights specified in Section 21(a)(ii)(C), and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation thereof. Upon request or demand of Mortgagee, the Company shall at its expense assemble such of the Collateral as is governed by the UCC and make -19- it available to Mortgagee on demand and shall reimburse Mortgagee for any and all expense, including legal expenses and attorneys' fees, incurred or paid by Mortgagee in protecting its interest in such of the Collateral as is governed by the UCC and in enforcing the rights granted hereunder with respect to such of the Collateral as is governed by the UCC. Any notice of sale, disposition or other intended action by Mortgagee with respect to such of the Collateral as is governed by the UCC sent to either Mortgagor in accordance with the provisions of this Mortgage at least ten (10) days prior to such action shall constitute reasonable notice to such Mortgagor. Any method of sale or disposition or other intended action in accordance with the UCC shall conclusively be deemed to be commercially reasonable within the meaning of the UCC unless objected to in writing by either the Company or the IDB within ten (10) days after receipt by such Mortgagor of such notice. The proceeds of any sale or disposition of such of the Collateral as is governed by the UCC, or any part thereof, shall be applied by Mortgagee to the payment of the Secured Obligations in such order, priority and proportions as set forth in Article VI of the Intercreditor Agreement. Notwithstanding anything contained in this Section 16 to the contrary, with respect to any Collateral that is also defined as "Collateral" under the Security Agreement, Mortgagee hereby reserves, and Mortgagee shall be entitled to exercise, each of its rights, powers and remedies under the Security Agreement with respect to such Collateral. At the request of Mortgagee upon advice of counsel, each Mortgagor will execute one or more Financing Statements and renewals and amendments thereof pursuant to the UCC of any jurisdiction deemed applicable by Mortgagee in form satisfactory to Mortgagee, and the Company will pay the cost of filing the same in all public offices wherever filing is deemed by Mortgagee to be necessary or desirable. The Company covenants to execute and deliver Mortgagee, upon demand, such additional assurances, writings and other instruments as may be reasonably required by Mortgagee to effect the purpose hereof or to perfect the interest of Mortgagee in any security hereby given, including a copy of any opinion it may deliver to the Indenture Trustee in connection with the Indenture and a reliance letter addressed to it in connection therewith. Each Mortgagor hereby appoints (such appointment being coupled with an interest), until the Secured Obligations are paid in full, Mortgagee as attorney-in-fact for such Mortgagor and to execute in the name thereof any financing statements or other comparable documents reasonably deemed by Mortgagee to be necessary or desirable to perfect or protect or continue the lien and security interest hereby granted. Each Mortgagor hereby ratifies all that Mortgagee shall do or cause to be done as such Mortgagor's attorney-in-fact consistent with the foregoing. -20- 17. Performance of Other Agreements. (a) The Company shall (i) pay all rents, fees, additional rents and other sums required to be paid by the Company, as grantee, under and pursuant to the provisions of the Easements, (ii) diligently perform and observe all of the terms, covenants and conditions of the Easements on the part of the Company, as grantee, to be performed and observed, unless such performance or observance shall be waived, excused or otherwise not required by the grantor under the Easements, to the end that all things shall be done that are necessary to keep unimpaired the rights of the Company, as grantee, under the Easements and (iii) promptly notify Mortgagee of the giving of any notice by the grantor under any of the Easements to the Company of any default by the Company, as grantee, in the performance or observance of any of the terms, covenants or conditions of any of the Easements on the part of the Company, as grantee, to be performed or observed and deliver to Mortgagee a true copy of each such notice. The Company shall not, except to the extent permitted or authorized by the Financing Documents, surrender any of the Easements or terminate or cancel any of the Easements or take any action to modify, change, supplement, alter or amend any of the Easements, in any respect, either orally or in writing, and the Company hereby assigns to Mortgagee, as further security for the payment of the obligations evidenced by the Financing Documents and for the performance and observance of the terms, covenants and conditions of this Mortgage, all of the rights, privileges and prerogatives of the Company, as grantee, to surrender any of the Easements or to terminate, cancel, modify, change, supplement, alter or amend any of the Easements, and any such surrender of any of the Easements or termination, cancellation, modification, change, supplement, alteration or amendment of any of the Easements without the prior consent of Mortgagee, as directed by Required Senior Creditors in Senior Creditor Certificates, and such other Persons as shall be required by any Financing Document shall be void and of no force and effect. If the Company shall default in the performance or observance of any term, covenant or condition of any of the Easements on the part of the Company, as grantee, to be performed or observed, and such default continues beyond applicable grace periods, then, without limiting the generality of the other provisions of this Mortgage, and without waiving or releasing the Company from any of its obligations hereunder, Mortgagee shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be reasonably necessary (or, during a Trigger Event Period, pay any sums and perform any act or take any action) to cause all of the terms, covenants and conditions of the Easements on the part of the Company, as grantee, to be performed or observed to be promptly performed or observed on behalf of the Company to the end that the rights of the Company in, to and under the Easements shall be kept unimpaired and free from any default. If Mortgagee shall make any payment or perform any act or take action in accordance with the preceding sentence, Mortgagee will notify such Mortgagor of the making of any such payment, the performance of any such act or the taking of any such action. In -21- any such event, Mortgagee and any person designated by Mortgagee shall have, and are hereby granted, the right to enter upon the Collateral or any part thereof at any time and from time to time for the purpose of taking or performing any such action. If any grantor under any of the Easements shall deliver to Mortgagee a copy of any notice of default sent by said grantor to the Company, such notice shall constitute full protection to Mortgagee for any action taken or omitted to be taken by Mortgagee, in good faith, consistent with the foregoing, in reliance thereon. The Company shall, from time to time, use reasonable efforts to obtain from the grantors under the Easements such certificates of estoppel with respect to compliance by the Company with the terms of the Easements as may be requested by Mortgagee. The Company shall exercise each individual option, if any, to extend or renew the term of the Easements in conformance with such option upon demand by Mortgagee made at any time, and, until the Secured Obligations are paid in full, the Company hereby expressly authorizes and appoints Mortgagee its attorney-in-fact to exercise, either jointly or individually, any such option in the name of and upon behalf of the Company if the Company fails to do so within a reasonable time prior to the expiration thereof, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest. (b) The Company shall not, without Mortgagee's prior consent, as directed by Required Senior Creditors in Senior Creditor Certificates, elect to treat any of the Easements as terminated under Subsection 365(h)(1) or any other provision of the Bankruptcy Code, after rejection or disaffirmance of any such Easements by the grantor thereunder or by any trustee of such party, and any such election made without such consent shall be void and ineffective. (c) Subject to the Company's right to seek and retain certain offsets as permitted hereunder, the Company hereby assigns, transfers and sets over to Mortgagee as security all of the Company's claims and rights to the payment of damages that may hereafter arise as a result of any rejection or disaffirmance of any of the Easements by the grantor thereof or by any trustee of such party, pursuant to the Bankruptcy Code. Mortgagee shall have and is hereby granted the right to proceed, in its own name or in the name of either the Company in respect of any claim, suit, action or proceeding relating to the rejection or disaffirmance of any Easements (including the right to file and prosecute, to the exclusion of such Mortgagor, any proofs of claim, complaints, motions, applications, notices and other documents) in any case in respect of such grantor under the Bankruptcy Code, (i) if the Company fails to do so within a reasonable time prior to the expiration of the period allowed therefor by applicable Law, except in the case of any such Trigger Event that shall have resulted from a Bankruptcy Event in respect of the Mortgagor or Mobile Energy, or (ii) during a Trigger Event Period. This assignment constitutes a present, irrevocable, non-exclusive and unconditional assignment of the foregoing claims, rights and remedies, and shall continue in effect until the Secured Obligations shall have been satisfied and discharged in full. Any amounts received by Mortgagee as damages -22- arising out of any such rejection of any Easements shall be applied in accordance with the provisions of Article VI of the Intercreditor Agreement. (d) In the event that, pursuant to Section 365(h)(2) or any other provision of the Bankruptcy Code, the Company seeks to offset against the rent or other sums payable under any of the Easements the amount of any damages caused by the nonperformance by the grantor thereunder of such grantor's obligations under any of the Easements after rejection or disaffirmance thereof under the Bankruptcy Code, the Company shall, prior to effecting such offset, notify Mortgagee in writing of such Mortgagor's intent to do so, setting forth the amounts proposed to be so offset and the basis therefor. Mortgagee shall, as directed by Required Senior Creditors in Senior Creditor Certificates, have the right to object in writing (stating the reasons therefor) to all or any part of such offset, and, in the event of such objection, the Company shall not effect any offset of the amounts so objected to by Mortgagee. If Mortgagee shall have failed to object as aforesaid within twenty (20) days after such notice, Mortgagee's consent will be deemed to have been given and the Company may proceed to effect such offset in the amounts set forth in such notice. If, in the good faith business judgment of the Company, such offset is justified and Mortgagee has received the aforesaid notices and has not objected but its time to do so has not expired, then the Company shall have the right to make such offset and the Company shall set aside the offset amount as a reserve to be paid only if Mortgagee objects within the aforesaid time. The Company shall indemnify and hold Mortgagee and each of its officers, directors, employees and agents harmless from and against any and all claims, demands, actions, suits, proceedings, damages, losses, costs and expenses of every nature whatsoever (including reasonable legal fees and disbursements) arising from or relating to any such offset by the Company. (e) The Company shall, promptly after obtaining knowledge thereof, use good faith efforts to give prompt oral notice to Mortgagee of any actual or contemplated filing by or against any grantor of any Easement of a petition under the Bankruptcy Code, and give prompt written notice thereof to Mortgagee of such actual or contemplated filing. The aforesaid written notice shall set forth any information reasonably available to the Company concerning the date or anticipated date of such filing, the court in which such petition was filed or is expected to be filed, and the relief sought or reasonably expected to be sought therein. The Company shall, promptly after receipt thereof, deliver to Mortgagee any and all notices, summonses, applications and other documents received by the Company in connection with any such petition and any proceedings related thereto. (f) Subject to the second sentence of this Section 17(f), in the event that any action, proceeding, motion or notice shall be commenced or filed in respect of any grantor under any Easement or any part thereof, in connection with any case under the Bankruptcy -23- Code, Mortgagee shall have, and is hereby granted, the option, to the exclusion of each Mortgagor, exercisable upon notice from Mortgagee to such Mortgagor, to conduct and control any such litigation with counsel of Mortgagee's choice. Mortgagee may proceed, in its own name or in the name of either Mortgagor, in connection with any such litigation, (i) if such Mortgagor fails to do so within a reasonable time prior to the expiration of the period allowed therefor by applicable Law and Mortgagee, if so directed to proceed by Required Senior Creditors in Senior Creditor Certificates or (ii) during a Trigger Event Period, and such Mortgagor agrees to execute any and all powers, authorizations, consents and other documents required by Mortgagee in connection therewith. The Company shall, upon demand, pay to Mortgagee all costs and expenses (including reasonable legal fees and disbursements) paid or incurred by Mortgagee in connection with the prosecution or conduct of any such proceedings, and, to the extent permitted by law, such costs and expenses shall be deemed expenses incurred in upholding the lien of this Mortgage and added to the Secured Obligations. The Company shall not, without the prior consent of Mortgagee (which consent of Mortgagee shall not be unreasonably withheld), commence any action, suit, proceeding or case, or file any application or make any motion, in respect of any of the Easements in any such case under the Bankruptcy Code. (g) In the event that a petition under the Bankruptcy Code shall be filed by or against either Mortgagor, and such Mortgagor, or anyone claiming through or under such Mortgagor or a trustee in bankruptcy shall have the right to reject any of the Easements pursuant to Section 365(a) or any other provision of the Bankruptcy Code, such Mortgagor shall give Mortgagee at least ten (10) days' prior written notice of the date on which application shall be made to the court for authority to reject any such Easement; provided, however, that if a trustee in bankruptcy shall have a right to reject any Easement in less than ten (10) days, then such Mortgagor shall give such notice to Mortgagee immediately upon such Mortgagor's obtaining knowledge of such application. Mortgagee shall have the right, but not the obligation (subject to the rights of a trustee in bankruptcy), to exercise such right, as directed by Required Senior Creditors in Senior Creditor Certificates, and such Mortgagor hereby assigns such right to Mortgagee. If at any time any grantor under any Easements, or anyone holding by, through or under the grantor under any Easements or a trustee in bankruptcy, shall elect to reject such Easements pursuant to Section 365(a) or any other provision of the Bankruptcy Code, thereby giving to such Mortgagor the right to elect to treat such Easements as terminated pursuant to Section 365(h)(1) or any other provision of the Bankruptcy Code, Mortgagee shall have the right to exercise such right (i) if such Mortgagor fails to do so within a reasonable time prior to the expiration of the period allowed therefor by applicable Law and Mortgagee is so directed to proceed by Required Senior Creditors in Senior Creditor Certificates or (ii) during a Trigger Event Period, and such Mortgagor hereby assigns said right to Mortgagee on a non-exclusive basis. If either of the assignments provided for in this Section 17(g) is held to be -24- enforceable, then such Mortgagor, anyone claiming by, through or under such Mortgagor or a trustee in bankruptcy, shall not exercise rights purportedly assigned to such Mortgagor without the prior consent of Mortgagee, and if Mortgagee shall give such consent, such Mortgagor, anyone claiming by, through or under such Mortgagor or a trustee in bankruptcy shall promptly exercise either of such rights. (h) To the extent permitted by applicable law, each Mortgagor hereby assigns, transfers and sets over to Mortgagee the right, as directed by Required Senior Creditors in Senior Creditor Certificates, on a non-exclusive basis, to apply to the Bankruptcy Court under Section 365(d)(4) or any other provision of the Bankruptcy Code for an order extending the period during which any Easements may be rejected or assumed after the entry of any order for relief under Chapter 7 or Chapter 11 of the Bankruptcy Code in respect thereof. MORTGAGE EVENTS OF DEFAULT/REMEDIES 18. Mortgage Events of Default. The occurrence of and continuation of any Trigger Event shall be deemed a "Mortgage Event of Default" under this Mortgage. 19. Mortgagee's Right to Cure Defaults. During a Trigger Event Period, Mortgagee or any Senior Secured Party (upon notice to Mortgagee and each other Senior Secured Party) may remedy the same in accordance with the applicable provisions hereof and of the Intercreditor Agreement and for such purpose shall have the right to enter upon the Collateral or any portion thereof without thereby becoming liable to such Mortgagor or any person in possession thereof holding under such Mortgagor. 20. Non-Waiver. The failure of Mortgagee to insist upon strict performance of any term of this Mortgage shall not be deemed to be a waiver of any term of this Mortgage. The Company shall not be relieved of either the Company's obligation to pay or perform the Secured Obligations at the time and in the manner provided in the Financing Documents by reason of (i) the failure to comply with any request of either Mortgagor to take any action to foreclose this Mortgage or otherwise enforce any of the provisions hereof or of the Financing Documents or any other mortgage, deed of trust, security agreement, instrument or document evidencing, securing or guaranteeing payment of the Secured Obligations or any portion thereof, (ii) the release, regardless of consideration, of the whole or any part of the Collateral or any other security for the Secured Obligations or (iii) any agreement or stipulation between Mortgagee and any subsequent owner or owners of the Collateral or other Person extending the time of payment or otherwise modifying or supplementing the terms of this Mortgage, any other Financing Document or any other mortgage, deed of trust, security agreement, instrument or document evidencing, securing or guaranteeing payment or performance of the Secured Obligations or any portion thereof, without first having obtained the consent of either the Company or -25- the IDB (but without prejudice to the rights of the Company or the IDB under the Financing Documents), and in the latter event, such Mortgagor shall continue to be obligated to pay the Secured Obligations at the time and in the manner provided in the Financing Documents and this Mortgage, as so extended, modified and/or supplemented, unless expressly released and discharged from such obligation by Mortgagee in accordance with the directions given pursuant to the Intercreditor Agreement. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien or other interest in the Collateral, Mortgagee may, in accordance with the directions given pursuant to the Intercreditor Agreement, release any Person at any time liable for the payment of the Secured Obligations or any portion thereof or all or any part of the security held for the Secured Obligations and may extend the time of payment or otherwise modify the terms of the Financing Documents, without in any manner impairing or affecting this Mortgage or the lien thereof or the priority of this Mortgage as so extended and modified, as security for the Secured Obligations over any such subordinate Lien or interest. Mortgagee may resort for the payment of the Secured Obligations to any other security held by Mortgagee in such order and manner as Mortgagee may, in accordance with the directions given pursuant to the Intercreditor Agreement, elect. Mortgagee may take action to recover the Secured Obligations, or any portion thereof, or to enforce any covenant hereof in each case in accordance with the terms hereof and of the Intercreditor Agreement, without prejudice to the right of Mortgagee thereafter to foreclose this Mortgage. Mortgagee shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every additional right and remedy now or hereafter afforded by Law or equity, subject to the terms of the Intercreditor Agreement with respect to the exercise thereof. The rights of Mortgagee under this Mortgage shall be separate, distinct and cumulative, and none shall be given effect to the exclusion of the others. No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. 21. Remedies. (a) Subject to Section 8.2 of the Indenture and Section 7.2 of the IDB Lease Agreement and to any comparable provision of the Working Capital Facility, during a Trigger Event Period, Mortgagee may, to the maximum extent permitted by Law, exercise any right, power or remedy permitted to it hereunder, under any other Security Documents or by Law, and, without limiting the generality of the foregoing, Mortgagee may, personally or by its agents, to the maximum extent permitted by Law, do any or all of the following: (i) without assuming liability for the performance of any of the Company's or the IDB's obligations hereunder or under the Project Contracts, enter and take possession of the Collateral or any part thereof, exclude such Mortgagor and all persons claiming under such Mortgagor whose claims are junior -26- to this Mortgage, wholly or partly therefrom, and use, operate, manage and control the same either in the name of such Mortgagor or otherwise as Mortgagee shall deem best, and upon such entry, from time to time at the expense of the Company and the Collateral, make all such repairs, replacements, alterations, additions or improvements to the Collateral or any part thereof and, whether or not Mortgagee has so entered and taken possession of the Collateral or any part thereof, collect and receive all the Rents and apply the same, to the extent permitted by Law, to the payment of all expenses that Mortgagee may be authorized to make under this Mortgage, the remainder to be applied to the payment of the Secured Obligations until the same shall have been repaid in full; if Mortgagee demands or attempts to take possession of the Collateral or any portion thereof in the proper exercise of any rights hereunder, the Company and the IDB shall promptly turn over and deliver complete possession thereof to Mortgagee; and (ii) with or without entry: (A) subject to applicable Law, sell all or any part of the Collateral for cash (1) to the highest bidder at public auction in front of the courthouse door in the county or counties, as may be required, where the Collateral is located, whether in person or by auctioneer, after having first given notice of the time, place and terms of sale, together with a description of the property to be sold, by publication once a week for three (3) successive weeks prior to such sale in some newspaper published in such county or counties, as may be required, and, upon payment of the purchase money, Mortgagee or any Person conducting the sale for Mortgagee is authorized to execute and deliver to the purchaser at such sale a deed to the Collateral so purchased, (2) otherwise at an auction or foreclosure sale held at such place or places and time and upon such notice and otherwise in such manner as may be required by Law or (3) in the absence of any such requirements, as Mortgagee may deem appropriate and in accordance with the provisions hereof (and in taking such action, Mortgagee may act in accordance with an opinion of counsel, upon which Mortgagee may conclusively rely) and, in the case of any of clauses (1), (2) or (3) above, from time to time adjourn any such sale by announcement at the time and place specified for such sale or for such adjourned sale without further notice, except as may be required by Law; (B) proceed to protect and enforce its rights under this Mortgage, by suit for specific performance of any covenant contained herein or in any other Security Document or in aid of the execution of any power granted herein or in any other Security Document, or for the foreclosure of this Mortgage (as a mortgage or -27- otherwise) and the sale for cash of the Collateral under the judgment or decree of a court of competent jurisdiction, or for the enforcement of any other right as Mortgagee shall deem most effectual for such purpose (and in taking such action, Mortgagee may act in accordance with an opinion of counsel, upon which Mortgagee may conclusively rely); provided, however, that in the event of a sale, by foreclosure or otherwise, of less than all of the Collateral, this Mortgage shall continue as a lien on and security interest in the remaining portion of the Collateral, and Mortgagee shall not be obligated to sell upon credit unless Mortgagee shall have expressly consented in writing to a sale upon credit; or (C) exercise any or all of the remedies available to a secured party under the UCC, including: (1) either personally or by means of a court appointed receiver, without notice to or demand upon the Company or the IDB take possession of all or any portion of the Collateral as shall be covered by the UCC and exclude therefrom such Mortgagor and all persons claiming under such Mortgagor, and thereafter hold, store, use, operate, manage, maintain and control, make repairs, replacements, alterations, additions and improvements to, and exercise all rights and powers of such Mortgagor in respect of, any portion of the Collateral as shall be covered by the UCC; if Mortgagee demands or attempts to take possession of any portion of the Collateral, as shall be covered by the UCC in the proper exercise of any rights hereunder, each Mortgagor shall promptly turn over and deliver complete possession thereof to Mortgagee; (2) without notice to or demand upon the Company or the IDB, make such payments and do such acts as Mortgagee (and in taking such action, Mortgagee may act in accordance with an opinion of counsel, upon which Mortgagee may conclusively rely) may deem necessary to protect its lien on and security interest in any portion of the Collateral as shall be covered by the UCC, including paying, purchasing, contesting or compromising any encumbrance that is prior to or superior to the lien and security interest granted hereunder, and in exercising any such powers or authority paying all expenses incurred in connection therewith; (3) require the Company to assemble the Collateral as shall be covered by the UCC, or any portion thereof, at a place designated by Mortgagee -28- and reasonably convenient to each Mortgagor and Mortgagee, and promptly to deliver the portions of the Collateral as may be covered by the UCC to Mortgagee, or an agent or representative designated by it; Mortgagee, and its agents and representatives, shall have the right to enter upon the Site and property of such Mortgagor to exercise Mortgagee's rights hereunder; (4) sell, lease or otherwise dispose of such portions of the Collateral as may be covered by the UCC, with or without having such portions of the Collateral as may be covered by the UCC at the place of sale, and upon such terms and in such manner as Mortgagee may determine (and Mortgagee may be a purchaser at any such sale); and (5) unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Mortgagee shall give each Mortgagor at least ten (10) days' prior notice of the time and place of any sale or other intended disposition, such Mortgagor agreeing that such ten (10) day notice period is sufficient to constitute a commercially reasonable sale of the Collateral. (b) During a Trigger Event Period, or upon the actual or threatened waste to any part of the Collateral, Mortgagee, to the maximum extent permitted by Law and upon application to a court of competent jurisdiction, shall be entitled to the appointment of a receiver of the Collateral, without notice or demand, and without regard to the adequacy of the security for the Secured Obligations or the solvency of the Company or the IDB. Notwithstanding the foregoing, in the event of threatened waste to any part of the Collateral (but not actual waste), during a Trigger Event Period, Mortgagee shall provide notice to each of the Company and the IDB of its intent to appoint a receiver and shall permit such Mortgagor a reasonable period of time to eliminate such threatened waste prior to the appointment of said receiver. The Company and the IDB hereby irrevocably consent to the appointment of a receiver pursuant to this Section 21(b) and, except as otherwise hereinbefore specifically provided or as required by Law, waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of a mortgagee in case of entry and shall continue as such and exercise all such powers until the date of confirmation of sale of the Collateral, unless such receivership is sooner terminated. Specifically, Mortgagee or any receiver shall be entitled to take possession of the Collateral from the owners, tenants and/or occupants of the whole or any part thereof and to collect and receive the Rents and the value of the use and occupation of the Collateral, or any part thereof, from the -29- then owner, tenants and/or occupants thereof for the benefit of Mortgagee. (c) In any sale under any provision of this Mortgage during a Trigger Event Period or pursuant to any judgment or decree of court thereafter granted, the Collateral, to the maximum extent permitted by Law, may be sold in one or more parcels or as an entirety and in such order as Mortgagee may elect, without regard to the right of either Mortgagor or any person claiming under such Mortgagor to the marshalling of assets. The purchaser at any such sale shall take title to the Collateral or the part thereof so sold free and discharged of the estate of either Mortgagor therein, the purchaser being hereby discharged from all liability to see to the application of the purchase money. Any person, including Mortgagee and any Senior Secured Parties, may purchase at any such sale if the highest bidder therefor. The purchaser of the Collateral or any successor shall succeed to all rights of either Mortgagor, including any rights to proceeds of insurance and in and to all policies or certificates of insurance assigned and delivered to Mortgagee pursuant to this Mortgage and the Financing Documents. Upon the completion of any such sale by virtue of this Section 21(c), Mortgagee shall, to the extent permitted by applicable Law, execute and deliver to such purchaser an appropriate instrument that shall effectively transfer all of each Mortgagor's estate, right, title, interest, property, claim and demand in and to the Collateral or portion thereof so sold. During a Trigger Event Period, Mortgagee is hereby irrevocably appointed the attorney-in-fact of each Mortgagor in its name and stead to make all appropriate transfers and deliveries of the Collateral or any portions thereof so sold and, for that purpose, Mortgagee may execute all appropriate deeds and other instruments of transfer, and may substitute one or more persons with like power. The Company and the IDB hereby ratify all that said attorneys or such substitute or substitutes shall lawfully do or cause to be done as such Mortgagor's attorney-in-fact consistent with the foregoing. Nevertheless, the Company and the IDB shall ratify and confirm, or cause to be ratified and confirmed, any such sale or sales by executing and delivering, or by causing to be executed and delivered, to Mortgagee or to such purchaser or purchasers all such instruments as may be advisable (in accordance with an opinion of counsel, upon which Mortgagee may conclusively rely) for such purpose, and as may be designated in such request. The Company and the IDB also authorize said attorneys or such substitute or substitutes, during a Trigger Event Period, to communicate in its own name with any party to any Project Contracts at any time, with regard to any matter relating to such Project Contracts. Any sale or sales made under or by virtue of this Mortgage, whether under the power of sale hereunder, or by virtue of judicial process or a judgment or decree of purchase and sale, to the extent not prohibited by Law, shall operate to divest all the estate, right, title, interest, property, claim and demand whatsoever, whether at Law or in equity, of either Mortgagor in, to and under the Collateral, or any portions thereof so sold, and shall be a perpetual bar both at Law and in equity against such Mortgagor and -30- against any and all persons claiming or who may claim to have any rights with respect to the sale, or any part thereof, by, through or under such Mortgagor. The powers and agency herein granted are coupled with an interest and are irrevocable. Upon a sale of the Collateral, in whole or in part, under and by virtue of the provisions of this Mortgage, every purchaser shall have immediate and peaceable possession of the Collateral to the extent sold; and if either Mortgagor shall remain in possession after the effective date of such sale, such possession shall be as a tenancy at sufferance only, giving unto the purchaser all remedies by way of summary possession or otherwise under applicable Law for recovery of possession. (d) All rights of action under this Mortgage or the other Security Documents may, to the extent permitted by applicable Law, be enforced by Mortgagee without the possession or production thereof at any trial or other proceeding relative thereto. (e) Mortgagee shall have the right, from time to time, to bring an appropriate action to recover any sums required to be paid by the Company under the terms of this Mortgage, as they become due, without regard to whether or not the Secured Obligations secured by this Mortgage shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of foreclosure, or any other action, for any default by either Mortgagor existing at the time the earlier action was commenced. (f) Mortgagee may exercise any and all rights granted to "Leasehold Mortgagee" under any of the Conveyance Leases. (g) Mortgagee may consult, at the Company's expense, with counsel (who may or may not be counsel to the Company), and the opinion of such counsel shall be full and complete authorization and protection, and Mortgagee shall be entitled to conclusively rely on such opinion of counsel, in respect of any action taken or not taken or suffered by Mortgagee under this Mortgage. The proceeds of any foreclosure, collection, recovery, receipt, appropriation, realization or sale pursuant to this Section 21 shall be applied by Mortgagee in accordance with Article VI of the Intercreditor Agreement. 22. Mortgagor as Tenant Holding Over. In the event of any foreclosure sale by Mortgagee, either Mortgagor shall be deemed a tenant holding over and shall forthwith deliver possession to the purchaser or purchasers at such sale or be summarily dispossessed according to provisions of Law applicable to tenants holding over. 23. Leases. Mortgagee is authorized (but not obligated) to subordinate this Mortgage to any Leases and to foreclose this Mortgage subject to the rights of any tenants of the Collateral, provided that the failure to so subordinate or to make any such tenants parties to any such foreclosure proceedings and to foreclose their rights will not be, nor be asserted to be by either -31- Mortgagor, a defense to any proceedings instituted by Mortgagee to collect the Secured Obligations. MISCELLANEOUS 24. Filing of Mortgage, etc. The Company forthwith, upon the execution and delivery of this Mortgage and thereafter, from time to time, will cause this Mortgage and any security instrument creating a Lien or evidencing or perfecting the Lien hereof upon the Collateral and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future Law in order to publish notice of and fully to protect, preserve and perfect the Lien hereof upon, and the interest of Mortgagee in the Collateral. The Company will pay all filing, registration or recording fees, and all expenses incurred by Mortgagee incident to the preparation, execution and acknowledgment of this Mortgage, any mortgage or deed of trust supplemental hereto, any security instrument with respect to the Collateral and any instrument of further assurance, and all Federal, State, County, City and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Mortgage, any mortgage or deed of trust supplemental hereto, any security instrument with respect to the Collateral or any financing statement, continuation statement or other instrument of further assurance, including all documentary stamp taxes and intangible personal property taxes, if any. The Company shall hold harmless and indemnify Mortgagee, its successors and assigns, against any liability, damages, legal expenses, interest and penalties, and intervening Liens, incurred by reason of the imposition of any tax on the making and recording of this Mortgage, including, but not limited to, annual mortgage privilege or recordation tax, or surety bonds for the same. 25. Usury Laws. This Mortgage and the other Financing Documents are subject to the express condition that at no time shall either Mortgagor be obligated or required to pay interest on the principal balance due under the Secured Obligations at a rate that could subject the holders of the Secured Obligations to either civil or criminal liability as a result of being in excess of the maximum interest rate that such Mortgagor is permitted by Law to contract or agree to pay. If by the terms of this Mortgage or any other Financing Document, either Mortgagor is at any time required or obligated to pay interest on the principal balance due under any Financing Document at a rate in excess of such maximum rate, the rate of interest under the Financing Document shall be deemed to be immediately reduced to such maximum rate and the interest payments in excess of such maximum rate shall be applied toward reduction of principal. 26. Option To Release Certain Real Estate. Notwithstanding any other provisions of this Mortgage, Mortgagee hereby agrees, at any time and from time to time, provided each Mortgagor is not in default under any of the provisions of this Mortgage, and that no Mortgage Event of Default then exists (of which a Responsible -32- Officer of Mortgagee has actual knowledge), to release from this Mortgage any part of the Site with respect to which fee title is to be conveyed to a railroad, public utility or public body in order that railroad service, utility services or roads may be provided for the Collateral, upon receipt of: (a) Copies of the instrument of release, in recordable form; (b) A certificate of such Mortgagor (i) stating that such Mortgagor is not in default under any of the provisions of this Mortgage and that no Mortgage Event of Default then exists, (ii) giving an adequate legal description of that portion of the Site to be released, (iii) stating the purpose for which the release is desired and (iv) requesting such release; (c) If applicable, a copy of the instrument conveying the portion of the Site to be released; (d) Any instrument or instruments required by the terms of such release; (e) A certificate of the Independent Engineer stating that, in its opinion, (i) the release of the portion of the Site so proposed to be released is necessary or desirable in order to obtain railroad service, utility services or roads to benefit the Collateral, (ii) the release so proposed to be made will not impair the use or usefulness of the Collateral as a facility for the purposes for which it was designed and will not materially impair the means of ingress there into and egress therefrom and (iii) the release so proposed to be made is not reasonably expected to result in a Material Adverse Effect or materially increase the likelihood of the future occurrence of a Material Adverse Effect; and (f) an opinion of counsel that the release is permitted by the Financing Documents, all necessary consents, if any, have been obtained and all conditions precedent to such release have been satisfied; provided, however, that if the portion of the Site to be released has transportation or utility facilities located upon it, such Mortgagor shall retain an easement to use such facilities to the extent necessary for the efficient operation of the Collateral. Mortgagee agrees that upon receipt of the items required in this Section 26, it will promptly execute and deliver to such Mortgagor the proposed release prepared by such Mortgagor covering the portion of the Site to be released. In the event of any such release, such Mortgagor shall not be entitled to any postponement, abatement or diminution of amounts payable on account of the indebtedness secured hereby. The Company shall pay all costs (including reasonable legal fees and expenses, transfer taxes, and recording fees) relating to such release. -33- 27. Release of Collateral. (a) The Company shall not sell, lease (as lessor), transfer or dispose of any of the Collateral except in accordance with the Financing Documents. (b) Upon the request of the Company, subject to compliance with the Financing Documents, Mortgagee shall, at the Company's sole cost and expense, deliver and cause to be delivered to the Company such instruments prepared by the Company as are reasonably necessary to confirm the release of removed items of the Equipment from the lien of this Mortgage and cancel any security interest with respect thereto, provided that such request complies with the Financing Documents. The Company shall pay all costs (including reasonable legal fees, transfer taxes, and recording fees) relating to such release. 28. Severability. In the event that any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Mortgage, but this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein. 29. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given three (3) Business Days after mailing by registered mail, postage prepaid, addressed as follows: if to the Company, to it at the address of its usual place of business in the first paragraph of this Mortgage, Attention: President, together with a copy to it at 200 Bay Bridge Road, Mobile, Alabama 36652, Attention: Vice President and General Manager; if to the IDB, to it at the address of its usual place of business in the first paragraph of this Mortgage, Attention: Secretary; and if to Mortgagee, to it c/o Bankers Trust Company at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group. Any party hereto may, by written notice given hereunder, designate any additional or different addresses to which subsequent notices, certificates or other communications shall be sent. 30. Amendments, Changes and Modifications. This Mortgage may not be effectively amended, restated, changed or otherwise modified, or terminated, except as permitted under the other Financing Documents. Each Mortgagor shall join in any such amendment, change, modification or termination if required for such agreement to be effective under applicable Law. No waiver of any term, covenant or provision of this Mortgage shall be effective unless given in writing by Mortgagee, and if so given by Mortgagee, shall be effective only in the specific instance in which given. 31. Fixture Financing Statement. This Mortgage shall be recorded in the Office of the Judge of Probate, Mobile County, Alabama and, from the date of its recording, this Mortgage shall be -34- effective as a fixture financing statement filed with respect to all property constituting part of the Collateral that is or is to become fixtures. For the purposes of the foregoing, each Mortgagor is the debtor (with its address as set forth in the preamble of this Mortgage), Mortgagee is the secured party (with its address as set forth in the preamble of this Mortgage), and one of more of Scott, S.D. Warren and Alabama State Docks Department, an agency of the State of Alabama, is the record owner of the fee interest in the parcels comprising the Site. Each Mortgagor has an interest of record in each such parcel of real property in which such Mortgagor has granted a security interest in fixtures to Mortgagee. 32. Invalidity of Certain Provisions. If the lien of this Mortgage is invalid or unenforceable as to any part of the Collateral, the unsecured or partially secured portion of the Secured Obligations shall be completely paid prior to the payment of the remaining and secured or partially secured portion of the Secured Obligations and all payments made on the Secured Obligations, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid on and applied to the full payment of that portion of the Secured Obligations that is not secured or fully secured by the lien of this Mortgage. 33. No Merger. If both the lessor's and lessee's estates under any lease or any portion thereof that constitutes a part of the Collateral shall, at any time, become vested in one owner, this Mortgage and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger and in such event Mortgagee shall continue to have and enjoy all of the rights and privileges of Mortgagee as to the separate estates. In addition, upon the foreclosure of the lien of this Mortgage on the Collateral pursuant to the provisions hereof, any leases or subleases then existing and created by either Mortgagor shall not be destroyed or terminated by application of the Law of merger or as a matter of Law or as a result of such foreclosure unless Mortgagee or any purchaser at any such foreclosure sale shall so elect. No act by or on behalf of Mortgagee or any such purchaser shall constitute a termination of any lease or sublease unless Mortgagee or such purchaser shall give written notice thereof to such tenant or subtenant. 34. Matters in Bankruptcy. To the extent permitted by applicable laws, each Mortgagor hereby assigns to Mortgagee (a) its right under Section 365 of the United States Bankruptcy Code and other applicable Laws to elect to assume or reject any or all of the Conveyance Leases in the event of the bankruptcy or insolvency of such Mortgagor and to elect to remain in possession under each of the Conveyance Leases in the event of the bankruptcy of the lessor thereunder; and (b) its claims and rights to the payment of the damages arising from a rejection, if any, of any of the Conveyance Leases under Section 365 of the United States Bankruptcy Code or other applicable Laws, it being agreed, however, that provided no Mortgage Event of Default shall have occurred, -35- Mortgagee shall not make any decisions that affect any of the Conveyance Leases in the event of the bankruptcy of the lessor thereunder, without such Mortgagor's prior consent. 35. Environmental Matters. (a) The Company shall comply, and shall use its best efforts to cause all other Persons occupying or conducting operations on the Site or at the Facilities to comply, in all material respects with all Environmental Requirements pursuant to Section 5.7 of the Indenture and Section 4.7 of the IDB Lease Agreement and to any comparable provision of the Working Capital Facility. (b) The Company shall indemnify and hold Mortgagee and its officers, directors, employees and agents harmless from and against any and all damages, penalties, fines, claims, Liens, suits, liabilities, costs (including cleanup costs) judgments and expenses (including attorneys', consultants' or experts' fees and expenses) of every kind and nature suffered by or asserted against Mortgagee as a direct or indirect result of (i) any warranty or representation made by the Company regarding compliance with Environmental Requirements being false or untrue in any respect or (ii) the Company, any of the Facilities, the Site or any other Person occupying or conducting operations on the Site or at the Facilities, that fail to comply with any Environmental Requirement, including any Environmental Requirement relating to the elimination or removal of Hazardous Materials. (c) The Company's obligations to Mortgagee and its officers, directors, employees and agents under this Section 35 shall not be limited to any extent by the term of the First Mortgage Bonds, the Tax Exempt Bonds or the other Financing Documents, and shall continue, survive, and remain in full force and effect notwithstanding payment in full and satisfaction of the Mortgage or any other Financing Document or foreclosure under this Mortgage or delivery of a deed-in-lieu of foreclosure. 36. Estoppel Affidavits. The Company, within ten (10) days after written request from Mortgagee, shall furnish a written statement, setting forth the unpaid principal of, and interest on, the Secured Obligations and confirming that no offsets or defenses exist against payments owing to Mortgagee, including principal or interest. 37. Assignment. Mortgagee may assign this Mortgage to any successor Collateral Agent under and in accordance with the Intercreditor Agreement. 38. Entire Agreement. Each Mortgagor acknowledges that the Financing Documents set forth the entire agreement and understanding of such Mortgagor and Mortgagee with respect to the matters set forth therein, and no oral or other agreements, understanding, representations or warranties exist with respect to -36- those matters other than those set forth in the Financing Documents. 39. Action Affecting the Collateral. (a) The Company agrees to appear in and contest any action or proceeding purporting to adversely affect the security hereof or the rights or powers of Mortgagee and to pay all costs and expenses of Mortgagee, including costs of evidence of title and attorneys' fees and expenses, in any such action or proceeding in which Mortgagee may appear. (b) Mortgagee shall have the right to appear in and defend any action or proceeding brought with respect to the Collateral and to bring any action or proceeding, in the name and on behalf of either Mortgagor or Mortgagee, that Mortgagee determines to be necessary or reasonably advisable to protect its interest in the Collateral (i) if such Mortgagor fails to defend or bring such action or proceeding, as appropriate, in a prompt and diligent manner, or thereafter fails to proceed with diligence in the defense or prosecution of the same or (ii) during a Trigger Event Period. 40. Actions by Mortgagee to Preserve the Collateral. Except as hereinbefore expressly provided, during a Trigger Event Period, Mortgagee or any Senior Secured Party (upon notice to Mortgagee and each other Senior Secured Party), without obligation so to do and without notice to or demand upon either Mortgagor and without releasing such Mortgagor from any obligation, may make any payment or do any act as and in the manner provided in the Financing Documents in such manner and to such extent as Mortgagee or such Senior Secured Party may deem necessary to protect the security hereof. In connection therewith (without limiting any general powers of Mortgagee or such Senior Secured Party), each of Mortgagee and such Senior Secured Party shall have and is hereby given the right, but not the obligation, (i) to the fullest extent permitted in Law and in accordance with the Intercreditor Agreement and the other Project Documents, to make additions, alterations, repairs and improvements to the Collateral that it may consider necessary to keep the Collateral in good condition and repair and (ii) in exercising such powers, to pay necessary expenses, including engagement of counsel or other necessary or desirable consultants. The Company shall, immediately upon demand therefor by Mortgagee or such Senior Secured Party, pay all costs and expenses incurred by Mortgagee or such Senior Secured Party in connection with the exercise by Mortgagee or such Senior Secured Party of the foregoing rights, including costs of evidence of title, court costs, appraisals, surveys and attorneys' fees and expenses. 41. Remedies Not Exclusive. Mortgagee shall be entitled to enforce payment and performance of any indebtedness or obligations secured hereby and to exercise all rights and powers granted under this Mortgage or under any other Security Document or any other -37- agreement or any Laws now or hereafter in force, notwithstanding some or all of the indebtedness and obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, Lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its enforcement, whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect Mortgagee's right to realize upon or enforce any other security now or hereafter held by Mortgagee, it being agreed that Mortgagee shall be entitled to enforce this Mortgage and any other security now or hereafter held by Mortgagee in such order and manner as it may in its absolute discretion determine. No remedy herein conferred upon or reserved is intended to be exclusive of any other remedy herein or by Law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at Law or in equity or by statute. Every right, power or remedy given by any of the Security Documents to Mortgagee may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Mortgagee. 42. Relationship. Nothing herein is intended to create, or shall in any event or under any circumstance be construed as creating, a partnership, joint venture, tenancy-in- common, joint tenancy or other relationship of any nature whatsoever between Mortgagee and each Mortgagor other than as lender and borrower. 43. Time of the Essence. TIME IS OF THE ESSENCE WITH RESPECT TO EACH AND EVERY COVENANT, AGREEMENT AND OBLIGATION OF EACH MORTGAGOR UNDER THIS MORTGAGE AND THE OTHER FINANCING DOCUMENTS. 44. Severance of Counterclaims. In the event of foreclosure of this Mortgage, any and all counterclaims filed by either Mortgagor against Mortgagee, to the extent permitted by Law, shall be severed by the court having jurisdiction over the foreclosure action, for all purposes from the basic foreclosure action, on an ex parte basis and without notice to such Mortgagor. Each Mortgagor, by its execution and delivery hereof, hereby expressly consents and agrees to such severance. 45. Notice Limiting Advances. Each Mortgagor hereby waives the right to limit the maximum principal amount that may be secured by this Mortgage and in accordance with the other Financing Documents and agrees that all sums advanced under and pursuant to this Mortgage and any Financing Document shall be secured hereby. The filing or attempted filing of any notice limiting, or purporting to limit, the maximum principal amount that may be secured by this Mortgage shall be a Mortgage Event of Default. 46. Governing Law. THIS MORTGAGE IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA. 47. Shared Draftsmanship. If there shall be any ambiguity in the terms of this Mortgage, the doctrine of construction that holds that the language of the document shall be construed against its -38- drafter shall not apply as all parties have shared in the drafting of this Mortgage. 48. No Third Party Beneficiary. This Mortgage and the other Security Documents are for the sole benefit of each Mortgagor, Mortgagee, and all Senior Secured Parties, and are not for the benefit of any third party, and no third party shall gain any subrogation rights against either Mortgagor or in, to or with respect to any portion of the Collateral by reason of this Mortgage or the provisions hereof. 49. Security Only. This Mortgage is granted for security purposes only. Accordingly, except as otherwise permitted by the Security Documents or as otherwise specifically provided in this Mortgage, Mortgagee shall not, except during a Trigger Event Period, enforce either Mortgagor's rights with respect to the Collateral. 50. Release by Mortgagee. Upon the payment, performance and satisfaction in full of the Secured Obligations, as set forth above in the granting clause of this Mortgage, Mortgagee shall at the Company's request and expense, promptly release the lien of this Mortgage or reconvey the Collateral to either Mortgagor or the person or persons entitled thereto by an appropriate instrument duly acknowledged and in proper form for recording. 51. Further Assurances. The Company shall, at the sole cost of the Company and without expense to Mortgagee, on demand, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances as Mortgagee shall, from time to time, reasonably require for better assuring, conveying, assigning, transferring and confirming unto Mortgagee the property and rights hereby mortgaged or assigned or intended now or hereafter so to be, or that the Company may be or may hereafter become bound to convey, mortgage or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage. 52. Limitation of Liability of Mortgagee. Notwithstanding anything to the contrary contained herein or in any of the other Financing Documents, this Mortgage has been executed by Bankers Trust Company not in its individual capacity but solely as Mortgagee in its capacity as Collateral Agent under the Intercreditor Agreement and, except in the case of its gross negligence or willful misconduct, Bankers Trust Company in its individual capacity shall have no liability for the representations, warranties, covenants, agreements or other obligations of Mortgagee hereunder or in any certificates, notices or agreements delivered pursuant hereto. For all purposes of this Mortgage, in the performance of its duties or obligations hereunder, Mortgagee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VII of the Intercreditor Agreement. -39- 53. Conflict with Intercreditor Agreement. Notwithstanding anything to the contrary contained herein or in any of the other Financing Documents, all rights, duties, obligations and indemnities of Mortgagee hereunder (including the standard of care pursuant to which it acts) shall be governed by the provisions of the Intercreditor Agreement, including the exercise of any and all remedies hereunder. In the event of a conflict between this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. 54. Effect of Termination of Intercreditor Agreement. Notwithstanding anything to the contrary contained herein, if the Intercreditor Agreement shall be terminated while this Mortgage remains in effect, each reference in this Mortgage to a Trigger Event shall be deemed to be a reference to an Event of Default and no Senior Creditor Certificates under the Intercreditor Agreement shall be required to be received by Mortgagee prior to its exercise of remedies hereunder and the term "Mortgage Event of Default" shall be deemed to include any Event of Default and the term "Trigger Event Period" shall be deemed to mean the period commencing upon the occurrence of any Event of Default and continuing for so long as such Event of Default continues. 55. IDB Joinder. Mortgagee acknowledges and agrees that IDB is joined as a party to this instrument solely for the purpose of conveying its right, title, interest and estate in and to the IDB Properties and the other Collateral to the lien, encumbrance, and effect of this Mortgage, as security for the Secured Obligations, but the IDB shall not be responsible for paying any sums of money or taking any affirmative actions whatsoever under or pursuant to the terms of this Mortgage to perform any covenants or obligations hereunder or to comply with any conditions or requirements hereunder. No money judgment shall ever be sought or obtained by Mortgagee against IDB for any liabilities or obligations under this Mortgage. Mortgagee also agrees with IDB that prior to exercising any rights or remedies against the IDB Properties hereunder, Mortgagee shall give written notice to IDB at the address indicated in the introductory paragraph hereof specifying the nature of any breach or default hereunder, and shall permit IDB to cure such breach or default within the period permitted for the Company. 56. Limited Recourse. Satisfaction of the obligations of the Company (including pursuant to the Guaranty) and the IDB under this Mortgage shall be had solely from the assets of the IDB mortgaged herein and the general assets of the Mobile Energy Parties. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in the Guaranty or of the stockholders of Mobile Energy, other than their respective interests in the Collateral, (b) any Member (other than Mobile Energy as provided in the Guaranty) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member or of the Company (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern). -40- Notwithstanding anything in this Section 56 to the contrary, (i) nothing contained herein or in the Securities shall limit or otherwise prejudice in any way the satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its right of the Trustee, the Collateral Agent or any Holder to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty) to which such Person is a party) or limit or otherwise prejudice in any way the right of the Holders, the Trustee or the Collateral Agent to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize upon the Indenture Securities Collateral granted hereunder or under the Security Documents and: (ii) any limitations of liability herein shall not apply if and to the extent that any Person commits fraud or wilful misrepresentations, including those contained in Officer's Certificates issued from time to time. -41- IN WITNESS WHEREOF, the parties hereby have caused this Mortgage to be duly executed as of the date first written above. MORTGAGORS: MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company By: /s/ Name: Christopher J. Kysar Title: Vice President THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA By: /s/ Name: Clarence Boll, Jr. Title: Vice President MORTGAGEE: BANKERS TRUST (DELAWARE), as Collateral Agent By: /s/ Name: James H. Stallkamp Title: President STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Christopher J. Kysar whose name as Vice President of Mobile Energy Services Company, L.L.C., an Alabama limited liability company, is signed to the foregoing Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said limited liability company. Given under my hand and seal this the 24th day of August, 1995. /s/ (seal) Notary Public STATE OF ALABAMA ) ) ss.: COUNTY OF MOBILE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Clarence Boll, Jr. whose name as Vice President of The Industrial Development Board of the City of Mobile, Alabama, a public corporation organized under the laws of the State of Alabama, is signed to the foregoing Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. Given under my hand and seal this the 17 day of August, 1995. /s/ (seal) Notary Public STATE OF DELAWARE ) ) ss.: COUNTY OF NEW CASTLE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that James H. Stallkamp whose name as President of Bankers Trust (Delaware), a Delaware banking corporation, is signed to the foregoing Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said banking corporation. Given under my hand and seal this the 21 day of August, 1995. /s/ (seal) Notary Public Appendix A DEFINED TERMS For purposes of any Financing Document (as defined herein), terms used in such Financing Document (including terms used herein) that are not otherwise defined therein shall have the following meanings, subject to any provisions contained in such Financing Document that affect the construction or interpretation of such terms. Except as otherwise expressly provided in any such Financing Document, if and to the extent that such Financing Document shall be amended, restated, supplemented or otherwise modified from time to time pursuant to the terms and provisions thereof, this Appendix A shall be, or be deemed to have been, amended, restated, supplemented or otherwise modified concurrently with the execution and delivery of such amendment, restatement, supplement or other modification in order to conform the terms herein and therein, mutatis mutandis, to the terms set forth in or required by such amendment, restatement, supplement or other modification. Except as otherwise expressly provided in any such Financing Document: (a) the terms used in such Financing Document have the meanings assigned to them in this Appendix A and include the plural as well as the singular; provided, however, that, in the case of the Indenture, all such terms that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (b) (i) all accounting terms not otherwise defined in such Financing Document have the meanings assigned to them, (ii) all financial statements and all certificates and reports as to financial matters required to be delivered to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), under such Financing Document shall be prepared and (iii) all calculations made for the purpose of determining compliance with such Financing Document shall (except as otherwise expressly provided herein) be made, in the case of clauses (i), (ii) and (iii) above, in accordance with, or by application of, GAAP applied on a basis consistent (except inconsistencies that are disclosed in writing to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), and are in accordance with GAAP as certified by a firm of independent certified public accountants of recognized national standing) with that used in the preparation of the then most recent corresponding financial statements furnished under such Financing Document to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be); -45- (c) all references in such Financing Document to any designated "Article," "Section," "Appendix," "Schedule," "Exhibit" and other subdivision are to the designated Article, Section, Appendix, Schedule, Exhibit and other subdivision, respectively, of such Financing Document; (d) all references in such Financing Document to (i) the words "herein," "hereof" and "hereunder" and other words of similar import refer to such Financing Document as a whole and not to any particular Article, Section or other subdivision and (ii) the term "this Agreement" or "this Indenture" means such Financing Document as a whole, including Appendices, Schedules and Exhibits thereto; (e) all references in such Financing Document to any Project Document or other Contract defined or referred to therein shall include such Contract (and, in the case of the Senior Securities or any other instrument, any other instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified, or as such Contract may have been replaced (including (i) in the case of an Energy Services Agreement or the Master Operating Agreement, any replacement Contract therefor then satisfying the Restricted Payment Alternative Agreement Requirements with respect thereto and (ii) in the case of any Project Contract, any replacement Contract therefor then satisfying the Event of Default Alternative Agreement Requirements with respect thereto), from time to time; (f) all references in such Financing Document to any Person (including any of its capacities) shall include the permitted successors and assigns of such Person (including in such capacity) in accordance with the terms of such Financing Document and the other Project Documents and, in the case of any Governmental Authority, any Person succeeding to its functions and capacities; (g) all references in such Financing Document to any Law shall include such Law or any successor Law as amended, supplemented or otherwise modified and in effect from time to time, and any other Law in substance substituted therefor; (h) any item or list of items set forth following the word "including," "include" or "includes" in such Financing Document is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included," such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such item or items similar to such items; -46- (i) all references in such Financing Document to the Collateral Agent, the Indenture Trustee, the Tax-Exempt Indenture Trustee, the IDB or the Working Capital Facility Provider shall be deemed to refer to each such Person however designated in the Financing Documents so that (i) references to rights or duties of the Collateral Agent under such Financing Document shall be deemed to include the rights or duties of such Person as the "Secured Party" under the Security Agreement and as the "Mortgagee" under the Mortgage, (ii) references to rights or duties of the Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement, (iii) references to rights or duties of the Tax-Exempt Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement and (iv) references to rights or duties of the Working Capital Facility Provider under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement; provided, however, that, if such Financing Document is (A) the Security Agreement, references to rights or duties of the "Secured Party" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent, (B) the Mortgage, references to rights or duties of the "Mortgagee" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent and (C) the Working Capital Facility, references to rights or duties of the "Agent" thereunder or a Lender shall be deemed to include the rights or duties of such Person as the Working Capital Facility Provider; (j) all terms defined in such Financing Document shall have the meanings therein ascribed to them when used in any certificate, opinion or other document delivered pursuant thereto and, in the case of the Indenture and the Tax-Exempt Indenture, in the Senior Securities; (k) all references in such Financing Document to the knowledge of any Person that is a corporation, limited liability company or partnership, or any other Person that is not an individual, with respect to any subject or event (including the occurrence or non-occurrence of any circumstance, the failure to perform or observe, or the satisfaction of, any covenant or agreement or the pending or threatened nature of any action) shall be deemed to mean that an Authorized Officer of such Person (or, if such Person is the Company, the Plant Manager thereof) has actual knowledge or awareness of such subject or event or when notice of such subject or event shall have been given, or deemed to have been given, to such Person in accordance with the provisions of such Financing Document; and -47- (l) all references in such Financing Document to the Project Contracts shall be deemed to exclude any Project Contract (and the Consent to Assignment (if any) with respect thereto) (i) after the date on which such Project Contract (A) may have been terminated in accordance with Section 5.10 of the Indenture or Section 4.10 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), (B) shall have reached its stated termination date (if any) or (C) (other than in the case of the Energy Services Agreements and the Master Operating Agreement in connection with a Mill Closure) shall have been fully and finally performed by all parties thereto and (ii) after the date of any disposition of the Company's rights and obligations under such Project Contract in accordance with Section 5.8 of the Indenture or Section 4.8 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), except, in the case of clauses (i) and (ii) above, if and to the extent that any provisions of such Project Contract so excluded provide that the rights and obligations of any Person that is a party to such Contract shall survive the termination thereof. "Accounts" means, collectively, the Intercreditor Agreement Accounts, the Indenture Accounts and the Tax-Exempt Indenture Accounts. "Act" has the meaning specified (a) in the case of any Holder of Indenture Securities, in Section 1.4 of the Indenture and (b) in the case of any Holder of Tax-Exempt Indenture Securities, in Section 1.4 of the Tax-Exempt Indenture. "Additional Available Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies neither constituting Revenues nor otherwise required (except pursuant to the provisions of Section 3.10 of the Intercreditor Agreement) to be deposited into any Account that are deposited into the Loss Proceeds Account as other amounts available to the Company and necessary for the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of securities or partnership or other ownership interests or by contract or otherwise. Notwithstanding the foregoing, Southern, Mobile Energy, Southern Electric, the Operator and each Person owning, directly or indirectly, five percent (5%) or more of the membership interests in the Company shall be deemed to be an Affiliate of the Company. -48- "Affiliate Subordinated Debt" means any unsecured, subordinated loan or loans to the Company from any of its Affiliates pursuant to a Subordinated Loan Agreement, fully subordinated as to payment and exercise of remedies and payable only from monies otherwise distributable by the Company from the Distribution Account in accordance with the Intercreditor Agreement. "Aggregate Demand" has the meaning specified in the Master Operating Agreement. "Alabama Act" means Ala. Code ss. 11-54-80 to ss. 11-54-101. "Annual Budget" means the operating plan and budget for the Energy Complex developed by the Company for operation of the Energy Complex for any Fiscal Year, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Approved Institutional Investor" has the meaning specified (a) in the case of the Tax-Exempt Bonds, in the Limited Offering Memorandum dated August 17, 1995 relating to the initial offering thereof and (b) in the case of any other Tax-Exempt Indenture Securities, in any other offering memorandum relating to the initial offering of such Tax-Exempt Indenture Securities. "Articles of Organization" means the Articles of Organization of the Company dated July 13, 1995. "Authenticating Agent" means any Person acting as Authenticating Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Authorized Agent" means any Paying Agent, Authenticating Agent or Security Registrar or other agent appointed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or the Company or the IDB (as the case may be) in accordance with the Indenture or the Tax-Exempt Indenture (as the case may be) to perform any function that such indenture authorizes such agent to perform. "Authorized Officer" means (a) in the case of a corporation (including Mobile Energy) or limited liability company (including the Company), the chief executive officer, the president, the chief financial officer, a vice president, the treasurer or an assistant treasurer of such corporation or limited liability company and (b) in the case of any general or limited partnership, any Person authorized by the managing general partner (or such other Person that is responsible for the management of such partnership) to take the applicable action on behalf of such partnership or any officer (with a title specified in clause (a) above) of such partnership's -49- managing general partner (or such other Person that is responsible for the management of such managing general partner). "Authorized Representative" means, in respect of any Person, the individual or individuals authorized to act on behalf of such Person by the board of directors, manager, management committee, board of control or any other governing body of such Person as designated from time to time in a certificate of such Person, which shall include or attach thereto specimen signatures, delivered to the Collateral Agent upon which the Collateral Agent may conclusively rely. "Authorized Trust Officer" means any officer of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or any other individual who shall be duly authorized by appropriate corporate action on the part of either such trustee to authenticate Senior Securities. "Automatic Acceleration Default" has the meaning specified (a) in the case of the Indenture, in Section 8.2(a) thereof and (b) in the case of the Tax-Exempt Indenture, in Section 8.2(a) thereof. "Available Amount" means, at any time, (a) in the case of any Reserve Account Letter of Credit, the undrawn stated amount of such Reserve Account Letter of Credit at such time and (b) in the case of any Southern Guaranty, an amount equal to the "Available Amount" set forth therein (as such amount may be increased or decreased in accordance with such Southern Guaranty). "Bankruptcy Code" means the Federal Bankruptcy Code of 1978. "Bankruptcy Event" means, in respect of any Person, (a) such Person's general inability, or its admission of its inability, to pay its debts as such debts become due, (b) the application by such Person for or its consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (c) the commencement by such Person of a voluntary case under the Bankruptcy Code, (d) the making by such Person of a general assignment for the benefit of its creditors, (e) the filing of a petition by such Person seeking to take advantage as a debtor of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, winding-up or readjustment of debts, (f) the failure by such Person to controvert in a timely and appropriate manner, or its acquiescence in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, (g) the taking of any corporate or other action by such Person for the purpose of effecting any of the foregoing, (h) the commencement of a proceeding or case, without the application or consent of such Person, in any court seeking (i) such Person's reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator, examiner or the like of such Person or all or any substantial part of its -50- property or (iii) similar relief in respect of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debt and such proceeding or case specified in this clause (h) shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and (except in the case of Section 5.19(a)(ii) of the Indenture or Section 4.19(a)(ii) of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility)) in effect, for a period of sixty (60) or more days or (i) an order for relief against such Person shall be entered in any involuntary case under the Bankruptcy Code. "Board of Directors" means (a) when used with respect to the Company, the Manager of the Company and (b) when used with respect to Mobile Energy, either the board of directors of Mobile Energy or any committee of such board duly authorized to act for it. "Board Resolution" means (a) when used with respect to the Company, a copy of a resolution certified by an Authorized Officer of the Company or the secretary or assistant secretary of the Company as having been adopted by the Manager of the Company and to be in full force and effect on the date of such certification and (b) when used with respect to Mobile Energy, means a copy of a resolution certified by an Authorized Officer or the secretary or assistant secretary of Mobile Energy as having been adopted by the Board of Directors of Mobile Energy and to be in full force and effect on the date of such certification. "Boiler Ash Agreement" means the Boiler Ash Disposal Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Bond Counsel" means Balch & Bingham or other nationally recognized counsel experienced in matters of municipal law and the tax-exempt status of obligations under the Code. "Business Day" means any day other than a Saturday or Sunday or other day on which banks in New York, New York or Atlanta, Georgia are authorized or required to be closed. "Capital Budget" means the capital plan and budget developed by the Company with respect to the capital improvements to the Energy Complex specified in the Master Operating Agreement and certain other planned capital expenditures thereto. "Capital Budget Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Casualty Proceeds" means all insurance proceeds (including title insurance proceeds) and other amounts actually received on account of an Event of Loss, including any net interest thereon or gain in respect thereof, other than (a) proceeds of third-party -51- liability insurance (to the extent paid directly from an insurer or insurers to a third-party) and (b) proceeds of business interruption insurance and other payments received for interruption of operations. "Casualty Proceeds" do not include Additional Available Proceeds with respect to such Event of Loss. "Closing Date" means the date on which the First Mortgage Bonds and the Tax-Exempt Bonds are originally issued. "Coal Supplier" means E.J. Hodder & Associates, Inc., a Tennessee corporation. "Coal Supply Agreement" means the Coal Supply Agreement dated as of May 1, 1995 between the Coal Supplier and the Company. "Code" means, as applicable, the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder or the Internal Revenue Code of 1954 and the rules and regulations promulgated thereunder. "Collateral" means, collectively, all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) by the Company or the IDB (as the case may be), in each case pursuant to the granting and assigning clauses of the applicable Financing Documents. "Collateral Agent" means Bankers Trust (Delaware), a Delaware banking corporation, or any other Person appointed as a substitute or replacement Collateral Agent under the Intercreditor Agreement. "Collateral Agent Claims" means all obligations of the Senior Secured Parties and the Mobile Energy Parties, now or hereafter existing, to pay fees, costs and expenses to the Collateral Agent pursuant to Section 7.3(f) and Article VIII of the Intercreditor Agreement. "Combined Exposure" means, at any time, the sum of (a) the aggregate principal amount of all Senior Securities Outstanding and (b) the aggregate principal amount of all outstanding Working Capital Facility Loans made, and the unutilized Working Capital Facility Commitment, under the Working Capital Facility. "Common Services Agreement" means the Common Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Company" means Mobile Energy Services Company, L.L.C., an Alabama limited liability company. -52- "Company Request" and "Company Order" mean, respectively, a written request or order signed in the name of the Company by an Authorized Officer of the Company and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Company Step-In Rights" has the meaning specified for "MESC Step-In Rights" in the Master Operating Agreement. "Completion Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Consents to Assignment" means, collectively, (a) the Consents to Assignment, the Lease Estoppel and the Supplementary Lease Estoppel of Scott with respect to the Project Contracts to which it is a party, (b) the Consent to Assignment of the Pulp Mill Owner with respect to the Project Contracts to which it is a party, (c) the Consent to Assignment of the Tissue Mill Owner with respect to the Project Contracts to which it is a party, (d) the Consent to Assignment of the Paper Mill Owner with respect to the Project Contracts to which it is a party, (e) the Consent to Assignment of Southern Electric with respect to the Project Contracts to which it is a party, (f) the Consent to Assignment of SCS with respect to the SCS Agreement, (g) any Consent to Assignment of the Coal Supplier with respect to the Coal Supply Agreement, (h) the Consent to Assignment of TRT with respect to the Nondisturbance Agreement (which may be effected pursuant to the Recognition Agreement to which TRT is a party), (i) the Consent to Assignment of the IDB with respect to the Project Contracts to which it is a party (which may be effected pursuant to the Recognition Agreements) and (j) the Consent to Assignment of Ahlstrom Recovery, Inc. with respect to Purchase Order Number MG-2601. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of August 1, 1995 among the Mobile Energy Parties and the Tax-Exempt Indenture Trustee. "Contract" means (a) any agreement (whether executory or non- executory and whether a Person entitled to rights thereunder is so entitled directly or as a third-party beneficiary), including an indenture, lease or license, (b) any deed or other instrument of conveyance, (c) any certificate of incorporation, articles of organization or charter and (d) any by-law. "Corporate Trust Office" means the principal office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) at which at any particular time the corporate trust business thereof shall be administered, which as of the Closing Date is (a) in the case of the Collateral Agent, Bankers Trust (Delaware), c/o Bankers Trust Company, Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group, (b) in the case of the Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309 and (c) in the -53- case of the Tax-Exempt Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309, or such other office as may be designated by the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to the Mobile Energy Parties and, in the case of the Collateral Agent, to the other Intercreditor Parties. "Credit Standard Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the unsecured long-term Debt of the provider of such Reserve Account Letter of Credit shall not be rated "A" or higher by S&P, "A" or higher by Fitch and "A2" or higher by Moody's and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the Collateral Agent or the Indenture Trustee shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has not been satisfied or (ii) Southern shall have failed, or the Company shall have failed to cause Southern, to provide to the Collateral Agent or the Indenture Trustee, on or prior to the date that is forty-five (45) days after the end of each fiscal quarter of Southern, an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied. "Current Fiscal Quarter" has the meaning specified in the definition of Maintenance Reserve Account Required Deposit. "Debt" means, in respect of any Person, (a) indebtedness for borrowed money or the deferred purchase price of property or services (excluding obligations under agreements for the purchase price of goods and services in the normal course of business which are not more than ninety (90) days past due), (b) obligations as lessee under leases that shall have been or should be, in accordance with GAAP, recorded as capital leases, (c) obligations (whether matured or contingent) with respect to any letters of credit issued for the account of such Person, (d) obligations under direct or indirect guaranties or other similar contingent liabilities in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (a), (b) or (c) above and (e) all Debt of another Person secured by a lien on any property owned by the first Person (whether or not such Debt has been assumed by such first Person). "Debt Service Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to draw upon such Reserve Account Letter of Credit pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause third of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security -54- Account is the Distribution Account, clause second of Section 3.8(b) of the Intercreditor Agreement, (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause second of Section 4.5 of the Indenture and (iv) if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, clause second of Section 4.6 of the Tax-Exempt Indenture and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent or the Indenture Trustee (as the case may be) to call upon such Southern Guaranty pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause fourth of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security Account is the Distribution Account, clause third of Section 3.8(b) of the Intercreditor Agreement and (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause third of Section 4.5 of the Indenture. "Debt Service Reserve Account" means any Account so designated (if any) established and created under any Series Supplemental Indenture to the Indenture for the benefit of Holders of Indenture Securities established thereunder. "Debt Service Reserve Account Required Balance" means, in respect of any Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Indenture establishing such Debt Service Reserve Account. "Default Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the provider of such Reserve Account Letter of Credit shall default in its payment obligations thereunder or (ii) the provider of such Reserve Account Letter of Credit shall become insolvent and (b) with respect to any Southern Guaranty, (i) Southern shall fail to perform any of the "Guaranteed Obligations" thereunder as and when due or (ii) Southern shall become insolvent. "Designated Southern Subsidiaries" means, for purposes of the satisfaction of the Southern Credit Standard, all of the Eligible Southern Subsidiaries other than, as designated by the Company to be excluded for such purposes, any one or all (including any combination) of the Eligible Southern Subsidiaries, provided that the aggregate net worth of such Eligible Southern Subsidiaries so excluded is equal to or less than ten percent (10%) of the aggregate net worth of all of the Eligible Southern Subsidiaries. For such purposes, "net worth" means (a) par value of common stock plus (b) paid-in capital plus (c) premium on preferred stock plus (d) retained earnings minus (e) accrued and unpaid dividends on, or other amounts due and payable in respect of, capital stock, in each case, of each of such Eligible Southern Subsidiaries. "Determination of Taxability" means a final determination by the Internal Revenue Service or a court of competent jurisdiction in a proceeding in which the Company has been afforded an -55- opportunity to participate, or, at the election of the Company in its sole discretion, a determination by the Company based on an opinion of Bond Counsel, that as a result of any event the interest payable on any Tax-Exempt Indenture Security (in respect of which, at the time of original issuance, the Tax-Exempt Indenture Trustee received an opinion of Bond Counsel to the effect that interest payable on such Tax-Exempt Indenture Security was not includable for Federal income tax purposes in the gross income of any owner of such Tax-Exempt Indenture Security (other than an owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code)) is includable for Federal income tax purposes in the gross income of any owner of such Tax-Exempt Indenture Security (other than any owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code). No such determination by the Internal Revenue Service shall be considered final unless the Company has been given written notice and, if it so desires, has been given the opportunity to contest the same, either directly or in the name of any owner of a Tax-Exempt Indenture Security and until the conclusion of any appellate review, if sought. Interest on Tax-Exempt Indenture Securities shall not be deemed includable for Federal income tax purposes merely by reason of such interest being treated as a tax preference item for purposes of a Federal alternative minimum tax, loss of or reduction in a related deduction or other indirect adverse tax consequences. "Distribution Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Distribution Date" means any Business Day following an Interest Payment Date and preceding the Monthly Transfer Date immediately succeeding such Interest Payment Date, as selected by the Company. "Easement Deeds" means, collectively, (a) the Easement Deed, dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Company certain easements, (b) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Pulp Mill Owner certain easements, (c) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Company certain easements, (d) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Tissue Mill Owner certain easements, (e) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Company certain easements and (f) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Paper Mill Owner certain easements. -56- "Easements" means, collectively, all easements, licenses, franchises, rights-of-way and spur track agreements to which the Company is now or hereafter a party or beneficiary affecting construction on, or the use or operation of, or constituting a part of, the Site (including the Easement Deeds). "Eligible Southern Subsidiaries" means, at any time, each of Alabama Power Company, an Alabama corporation, Georgia Power Company, a Georgia corporation, Gulf Power Company, a Maine corporation, Mississippi Power Company, a Mississippi corporation, and Savannah Electric and Power Company, a Georgia corporation, provided that a majority of the voting securities of such Person is owned, directly or indirectly, by Southern at such time. "Eminent Domain Proceeds" means all amounts and proceeds actually received in respect of any Event of Eminent Domain, including any net interest thereon or gain in respect thereof. "Eminent Domain Proceeds" do not include Additional Available Proceeds with respect to such Event of Eminent Domain. "Energy Complex" has the meaning specified in the Master Operating Agreement. "Energy Services Agreements" means, collectively, the Pulp Mill Energy Services Agreement, the Tissue Mill Energy Services Agreement and the Paper Mill Energy Services Agreement. "Environmental Bonds" means, collectively, (a) (i) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1973, (ii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1976 and (iii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1980, in the case of clauses (i), (ii) and (iii) above, issued under and secured by a Trust Indenture dated as of April 1, 1973, as supplemented by a First Supplemental Indenture thereto dated as of September 1, 1976 and a Second Supplemental Indenture thereto dated as of October 1, 1980 between the IDB and AmSouth Bank of Alabama, as trustee, and (b) the IDB's Industrial Revenue Bonds (Scott Paper Company Project), Series B of 1976 issued under and secured by a Trust Indenture dated as of September 1, 1976 between the IDB and AmSouth Bank of Alabama, as trustee . "Environmental Indemnity Agreements" means, collectively, (a) the Pulp Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner, (b) the Paper Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Paper Mill Owner, (c) the Tissue Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile -57- Energy) and the Tissue Mill Owner and (d) the Scott Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy). "Environmental Requirement" means any Governmental Approvals in effect from time to time relating to the protection of the environment or otherwise addressing environmental issues or environmental requirements of or by any Governmental Authority, or otherwise relating to noise or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, emission, discharge, release or handling of Hazardous Material, including the Comprehensive Environmental Response Compensation, and Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. ss. 1101 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. ss. 2761), the Occupational Health and Safety Act (29 U.S.C. ss. 641 et seq.), the Pollution Prevention Act (42 U.S.C. ss. 1201 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), Preservation Development, Etc. of Coastal Areas (Ala. Code ss. 9-7-1 et seq.), the Alabama Environmental Management Act (Ala. Code ss. 22-22A-1 et seq.), the Alabama Water Pollution Control Act (Ala. Code ss. 22-22A-1 et seq.), the Alabama Safe Drinking Water Act (Ala. Code ss. 22-23-30 et seq.), Water Well Standards (Ala. Code ss. 22-24-1 et seq.), Water Wastewater Systems and Treatment Plants (Ala. Code ss. 22-25-1 et seq.), Sewage Collection, Treatment, and Disposal Facilities (Ala. Code ss. 22-26-1 et seq.), Solid Wastes Disposal Act (Ala. Code ss. 22-27-1 et seq.), the Alabama Air Pollution Control Act of 1971 (Ala. Code ss. 22-28-1 et seq.), the Hazardous Wastes Management and Minimization Act (Ala. Code ss. 22-30-1 et seq.), the Alabama Hazardous Substance Cleanup Fund (Ala. Code ss. 22-30A-1 et seq.), the Water Pollution Control Authority (Ala. Code ss. 22-34-1 et seq.), the Alabama Underground and Aboveground and Storage Tank Trust Fund Act (Ala. Code ss. 22-35-1 et seq.), the Alabama Underground Storage Tank and Wellhead Protection Act of 1988 (Ala. Code ss. 22-36-1 et seq.) and the Alabama Lead Ban Act of 1988 (Ala. Code ss. 22-37-1 et seq.) and, in each case, any regulations promulgated thereunder. "ERISA" means the Employee Retirement Income Security Act of 1974. "ESA Blockage Event" means, with respect to any Mill Owner or its respective Energy Services Agreement or its Mill, that: (a) such Energy Services Agreement or the Master Operating Agreement has been declared unenforceable by a Governmental Authority having jurisdiction, unless the Company has delivered to the applicable Senior Secured Parties and the -58- Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (i) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by the Company and such Mill Owner, (ii) such declaration of enforceability has been overruled, reversed or rescinded by such Governmental Authority or by another Governmental Authority having final jurisdiction or greater jurisdiction than such first Governmental Authority or (iii) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (b) such Mill Owner has either (i) terminated, or delivered written notice pursuant to the Master Operating Agreement of its intention to terminate (which notice has not been rescinded), its rights and obligations under such Energy Services Agreement or the Master Operating Agreement in connection with a Mill Closure with respect to such Mill or (ii) denied that it has any obligations and substantially ceased performance under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (A) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by the Company and such Mill Owner or, provided that another Person is reasonably capable of performing such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement (as the case may be), by the Company and such other Person or (B) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (c) a default has occurred and is continuing in respect of such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement, unless, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been terminated as a result of such default, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (d) based upon the knowledge of either of the Mobile Energy Parties, it is reasonably likely that, on or prior to the next Distribution Date, either (i) there will be a Mill -59- Closure with respect to such Mill or (ii) such Mill Owner will deliver written notice pursuant to the Master Operating Agreement of such Mill Owner's intention to terminate its rights and obligations under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been terminated as a result of such Mill Closure, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); or (e) a Bankruptcy Event has occurred and is continuing in respect of such Mill Owner, unless (i) the obligations of such Mill Owner under such Energy Services Agreement and the Master Operating Agreement have been expressly assumed with the approval of a court of competent jurisdiction or (ii) if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been rejected or otherwise terminated, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirement with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be). "Event of Default" means, so long as there are any Financing Commitments or any Financing Liabilities outstanding, an "Event of Default" under the Indenture, an "Event of Default" under the Tax- Exempt Indenture or an "Event of Default" under the Working Capital Facility. "Event of Default Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more Persons in substitution for or replacement of any such Project Contract, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that such alternative Contract (a) contains substantially equivalent terms and conditions or, if such terms and conditions are no longer available on a commercially reasonable basis, the terms and conditions then available on a commercially reasonable basis, (b) would, after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, maintain a minimum annual Senior Debt Service Coverage Ratio for each Fiscal Year through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) projected to be equal to or greater than the lesser of (i) the minimum annual Senior Debt Service Coverage Ratio projected to have been in effect for such Fiscal Year had -60- performance under such Project Contract continued and (ii) 1.2 to 1.0 and (c) is reasonably capable of being performed by the parties thereto. Notwithstanding the foregoing, such alternative Contract need not satisfy the conditions described in clauses (a) and (b) above, provided that (A) the Company delivers to the applicable Senior Secured Parties an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements (other than the conditions set forth in subclauses (C) and (D) of clause (b)(ii) of the definition of Restricted Payment Alternative Agreement Requirements with respect to such alternative Contract) and (B) after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.2 to 1.0. "Event of Eminent Domain" means any compulsory transfer or taking, or transfer under threat of compulsory transfer or taking, of a material part of the Energy Complex by any Governmental Authority or any Person acting with the authority thereof for more than six (6) months, unless such transfer or taking is the subject of a Good Faith Contest. "Event of Loss" means any physical loss or destruction of, or destruction to, the Energy Complex, or any other event that causes all or a material part of the Energy Complex to be rendered unfit for normal use for any reason whatsoever, including through failure of title. "Excess Loss Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies in an amount equal to the excess, if any, of all of the Loss Proceeds with respect to such Event of Loss or Event of Eminent Domain (as the case may be) over the total cost of the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Exchange Act" means the Securities Exchange Act of 1934. "Financing Commitment" means any commitment pursuant to the Financing Documents to provide credit to the Company. "Financing Documents" means all Contracts evidencing or securing the Financing Liabilities. "Financing Liabilities" means all indebtedness, liabilities and obligations of the Mobile Energy Parties (including principal, interest, fees, reimbursement obligations, penalties, indemnities and legal expenses, whether due to acceleration or otherwise) owing to the Senior Secured Parties (of whatsoever nature and however evidenced) under or pursuant to (a) the Indenture (including the -61- Guaranty), (b) the Senior Securities, (c) the IDB Lease Agreement, (d) the Tax-Exempt Indenture, (e) the Working Capital Facility and any evidence of indebtedness entered into thereunder and (f) the other Security Documents, in the case of clause (a) through (f) above, whether direct or indirect, primary or secondary, fixed or contingent or now or hereafter arising out of or relating to any such Contract. "Financing Statements" means Uniform Commercial Code financing statements filed in connection with the other Security Documents. "First Mortgage Bonds" means the Indenture Securities issued on the Closing Date under the first Series Supplemental Indenture to the Indenture. "Fiscal Quarter" means the period of time beginning at 12:01 a.m. on the first day of each calendar quarter and ending at midnight on the last day of such calendar quarter. "Fiscal Year" means the period of time beginning at 12:01 a.m. on January 1 of each year and ending at midnight on December 31 of such year. "Fitch" means Fitch Investors Service, L.P., a New York limited partnership. "Fuel Inventory" means fuel inventory of the Energy Complex, in whatever form, including oil, gas, coal, black liquor, biomass and sludge. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "GDPIPD" means the Gross Domestic Product Implicit Price Deflator as published in the United States Department of Commerce, Bureau of Analysis publication entitled "Survey of Current Business." If the Gross Domestic Product Implicit Price Deflator ceases to exist or is no longer available, the Company, with the approval of the Independent Engineer, shall designate a substitute index that is reasonably similar to the Gross Domestic Product Implicit Price Deflator. "GDPIPD Factor" means, with respect to each Fiscal Year, the GDPIPD most recently published during or prior to such Fiscal Year divided by the GDPIPD published with respect to December 1994; provided, however, that such GDPIPD Factor shall not be less than one (1). "Good Faith Contest" means the contest of an item if (a) such item is diligently contested in good faith by appropriate proceedings and adequate reserves or bonding are established in accordance with GAAP with respect to such item and (b) the failure to pay or comply with such item during the period of such contest would not result in a Material Adverse Effect. -62- "Governmental Approvals" means those authorizations, consents, approvals, waivers, exemptions, variances, registrations, certifications, permissions, permits and licenses with any Governmental Authority required for the ownership and operation of the Energy Complex and the performance of a Person's obligations under the Project Documents. "Governmental Authority" means any Federal, state, city, county, municipal, foreign, international, regional or other governmental or regulatory authority, agency, department, board, body, instrumentality, commission, arbiter or court. "Guaranteed Obligations" means all indebtedness, liabilities, obligations, covenants and duties of, and all terms and conditions to be observed by, the Company (including in its capacity as a "debtor in possession" under the Bankruptcy Code) due or owing to, or in favor or for the benefit of, the Senior Secured Parties under the Security Documents or the Working Capital Facility (as the case may be), in each case (a) whether due or owing to, or in favor or for the benefit of, the Senior Secured Parties or any other Person that becomes the Indenture Trustee, the Tax-Exempt Indenture Trustee or the Working Capital Facility Provider (as the case may be) by reason of any succession or assignment at any time thereafter and (b) whether or not an allowable claim against the Company under the Bankruptcy Code, or otherwise enforceable against the Company, and including, in any event, interest accruing after the filing by or against the Company of a petition under the Bankruptcy Code; provided, however, that the satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company. "Guaranty" means the unconditional guaranty by Mobile Energy of the Guaranteed Obligations included in Article XIV of the Indenture, Article VIII of the IDB Lease Agreement and Article VIII of the Working Capital Facility (as the case may be). "Hazardous Materials" means hazardous wastes, hazardous substances, hazardous constituents, air contaminants or toxic substances, whether solids, liquids or gases, including substances defined or otherwise regulated as "hazardous materials," "regulated substances," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "carcinogens," "hazardous air pollutants," "criteria pollutants," "reproductive toxins," "radioactive materials," "toxic chemicals," or other similar designations in, or otherwise subject to regulation under, any Environmental Requirement, including petroleum hydrocarbons, asbestos-containing materials, urea formaldehyde foam insulation, polychlorinated biphenyls and radionuclides. "Holder" means a Person in whose name an Indenture Security or a Tax-Exempt Indenture Security (as the case may be) is registered -63- in the register providing for the registration, including upon transfer or exchange, thereof pursuant to the Indenture or the Tax- Exempt Indenture (as the case may be). "IDB" means The Industrial Development Board of the City of Mobile, Alabama. "IDB Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses, indemnification payments or other amounts to the IDB under the Financing Documents, other than (a) rent payments under the IDB Lease Agreement and (b) payments in respect of principal of and premium, if any, and interest on the 1994 Bonds. "IDB Lease Agreement" means the Amended and Restated Lease and Agreement dated as of August 1, 1995 among the IDB and the Mobile Energy Parties. "IDB Request" and "IDB Order" mean, respectively, a written request or order signed in the name of the IDB by an Authorized Officer of the IDB and delivered to the Tax-Exempt Indenture Trustee. "Income Tax Deficiency" means (a) with respect to the second Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the sum of (A) the combined Federal and State of Alabama quarterly estimated income tax payments that would have been required to be paid by all Members during such Fiscal Year prior to such Distribution Date and (B) one-half of the amounts estimated to be required to be paid for County and City of Mobile, Alabama income taxes in respect of such Fiscal Year, if any, all calculated, solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (1) be a member of a consolidated, affiliated, combined, unitary or other tax group, (2) be a party to any tax sharing arrangements with any other Person and (3) have income, loss or credits (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the first Distribution Date during such Fiscal Year in excess of the amount of distributions, if any, that would have been calculated by clause (b) below with respect to such Distribution Date and (b) with respect to the first Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the estimate, as of such Distribution Date, of the combined Federal, State of Alabama, and County and City of Mobile, Alabama income taxes that relate to the immediately preceding Fiscal Year of all Members, all calculated solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (A) be a member of a consolidated, affiliated, combined, unitary or other tax group, (B) be a party to any tax sharing -64- arrangements with any other Person and (C) have income, loss or credits (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the second Distribution Date of such prior Fiscal Year. "Indenture" means the Trust Indenture dated as of August 1, 1995 among the Mobile Energy Parties and the Indenture Trustee. "Indenture Accounts" means, with respect to the Indenture Securities of any series, the Indenture Securities Account and each Debt Service Reserve Account (if any) established for the benefit of Holders of the Indenture Securities of such series. "Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Indenture Securities" means all Debt issued pursuant to the Indenture. "Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Indenture Trustee by the Company pursuant to the granting and assigning clauses of the Indenture and (b) the Shared Collateral. "Indenture Securities Interest Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Principal Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Redemption Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Independent Engineer" means Stone & Webster Engineering Corporation or another nationally recognized consulting or engineering firm appointed Independent Engineer pursuant to the terms of the Intercreditor Agreement. -65- "Independent Engineer Agreement" means the Independent Engineer Agreement dated as of August 1, 1995 between the Company and the Independent Engineer or any other similar Contract among such Persons. "Independent Engineer Confirmation" means a certificate signed by an authorized representative of the Independent Engineer confirming the reasonableness of statements and projections contained in certain Officer's Certificates delivered to the applicable Senior Secured Parties or the Collateral Agent under the Financing Documents, which confirmation may not be unreasonably withheld, conditioned or delayed. "Independent Insurance Advisor" means Sedgwick James or another nationally recognized insurance advisory firm appointed as insurance advisor under the Indenture and the Tax-Exempt Indenture by the Collateral Agent. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among the Senior Secured Parties, the Collateral Agent, the IDB and the Mobile Energy Parties. "Intercreditor Agreement Accounts" means, collectively, the Completion Account, the Revenue Account, the Mill Owner Reimbursement Account, the Working Capital Facility Account, the Operating Account, the Maintenance Reserve Account, the Loss Proceeds Account, the Subordinated Debt Account, the Subordinated Fee Account and the Distribution Account. "Intercreditor Parties" means, collectively, the Senior Secured Parties, the IDB, the Mobile Energy Parties, any Subordinated Debt Provider and any other Person party to the Intercreditor Agreement (other than the Collateral Agent). "Interest Payment Date" means each January 1 and July 1 of each year, commencing January 1, 1996. "Investment Grade" means a rating in one of the four highest categories (without regard to subcategories within such rating categories) by a Rating Agency. "Law" means any constitution, treaty, statute, code, ordinance, regulation, order, decree, writ or judicial or arbitral decision. "Lease" means the Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July, 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Lease Documents" means, collectively, the IDB Lease Agreement, the Tax-Exempt Indenture (including any Series Supplemental Indenture) and (to the extent relating to, or -66- securing, the Tax-Exempt Indenture Securities) the other Financing Documents. "Lease Indemnity" means the Letter Agreement dated August 1, 1995 by the Mobile Energy Parties in favor of Scott, providing for the indemnification of Scott with respect to matters arising under the Utilities Land Sublease dated as of December 1, 1983, as amended, between Scott and the IDB. "Leased Land" means the land underlying the components of the Tax-Exempt Project marked on Exhibit A to the IDB Lease Agreement. "Lenders" has the meaning specified in the Working Capital Facility. "Lien" means any lien, claim, security interest, mortgage, trust arrangement, judgment, pledge, option, charge, easement, encumbrance, title retention, conditional sales agreement, encroachment, right-of-way, building or use restriction, preferential right or any other security agreement, arrangement or similar right in favor of any Person, whether voluntarily incurred or arising by operation of law, and includes any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "Loss Proceeds" means, as applicable, Casualty Proceeds or Eminent Domain Proceeds. "Loss Proceeds Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Excess Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Expenditures" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, other than (a) fuel costs and expenses, (b) labor and employee expenses, including fringe benefits and labor relations expense, (c) payments for insurance premiums and like insurance related expenses required or otherwise maintained under any Project Document, (d) costs and expenses of consumable items such as process or cleaning chemicals and lubricants, (e) equipment rental, small tools and vehicle maintenance expenses, (f) costs and expenses associated with legal, accounting and other office and administrative functions, (g) permitting fees, (h) costs and expenses of safety supplies, office supplies and other office expenses, (i) property taxes and payments made in lieu of taxes, (j) computer maintenance expenses, (k) any amounts payable for services rendered under the Common Services Agreement, (l) ash disposal costs, (m) liquidated damages payable to the Mill Owners under the Master Operating Agreement, (n) amounts payable to the -67- Mill Owners in connection with the exercise of Mill Owner Step-In Rights, (o) any amounts required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of the Tax-Exempt Indenture Securities (to the extent not already provided for in the Tax-Exempt Indenture) and (p) payments to the IDB (including IDB Claims and payments required to be made by the Company with respect to the 1994 Bonds), in the case of clauses (a) through (p) above, to the extent the foregoing costs or expenses are not customarily treated as capital expenditures. "Maintenance Plan" means the maintenance plan and budget for the Energy Complex, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Maintenance Plan Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Reserve Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Reserve Account Balance" means, with respect to the Current Fiscal Quarter, the sum of (a) the monies on deposit in the Maintenance Reserve Account, (b) amounts available to be drawn or called upon under any Reserve Account Security deposited in the Maintenance Plan Funding Subaccount and (c) the monies on deposit in, or otherwise credited to (by means of a guaranty, capital infusion agreement or otherwise), the Mill Owner Maintenance Reserve Account, in the case of clauses (a), (b) and (c) above, at the beginning of the Current Fiscal Quarter. "Maintenance Reserve Account Required Deposit" means, with respect to any Fiscal Quarter during any Fiscal Year (the "Current Fiscal Quarter"), one or more deposits into the Maintenance Reserve Account on Monthly Transfer Dates occurring during the Current Fiscal Quarter in an aggregate amount equal to the excess of the sum of paragraphs (a), (b) and (c) below over the Maintenance Reserve Account Balance with respect to the Current Fiscal Quarter: (a) the amount of Maintenance Reserve Account Required Deposits with respect to each Fiscal Quarter preceding the Current Fiscal Quarter that were required to be deposited into the Maintenance Reserve Account during each such Fiscal Quarter but were not, and have not been since, so deposited; (b) the aggregate amount of any withdrawals from the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account during each Fiscal Quarter preceding the Current Fiscal Quarter that were in excess of the aggregate projected Maintenance Expenditures for each such Fiscal -68- Quarter (as specified in the Maintenance Plan) but were not, and have not been since, redeposited in the Maintenance Reserve Account; and (c) the greatest of: (i) if the Current Fiscal Quarter is the first Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding sixteen (16) Fiscal Quarters (in each case as specified in the Maintenance Plan) by sixteen (16); (ii) if the Current Fiscal Quarter is the first or second Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fifteen (15) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fifteen (15); (iii) if the Current Fiscal Quarter is the first, second or third Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fourteen (14) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fourteen (14); and (iv) if the Current Fiscal Quarter is the first, second, third or fourth Fiscal Quarter of such Fiscal Year, the greatest of the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for any period consisting of the Current Fiscal Quarter and any number of consecutive Fiscal Quarters from one (1) to thirteen (13) immediately succeeding the Current Fiscal Quarter (in each case as specified in the Maintenance Plan) by such number of consecutive Fiscal Quarters. "Manager" means Mobile Energy and any Person appointed as an additional, substitute or replacement manager of the Company pursuant to the terms of the Articles of Organization. "Master Operating Agreement" means the Amended and Restated Master Operating Agreement dated as of July 13, 1995 among the Company (as assignee of Mobile Energy), Scott, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Material Adverse Effect" means (a) a change in the financial condition of either of the Mobile Energy Parties or the Energy Complex that would reasonably be expected to materially and adversely affect the ability of either of the Mobile Energy Parties to pay principal of and interest on the Senior Debt as and when -69- required or (b) any event or occurrence of whatever nature that would materially and adversely affect (i) the ability of either of the Mobile Energy Parties to perform its obligations under the Project Documents or (ii) the Lien of the Security Documents. "Member" means any Person owning a membership interest in the Company. "Mill Closure" means (a) a public announcement by a Mill Owner that it will close its respective Mill for a period of at least one (1) year or that it will reduce production of pulp, paper or tissue (as applicable) at such Mill (permanently or for a period of at least two (2) years) to less than ten percent (10%) of 1994 production levels or (b) the occurrence of a two (2) year period during which, for any reason other than the occurrence of a Force Majeure Event (as defined in the Master Operating Agreement), such Mill Owner's production of pulp, paper or tissue (as applicable) at such Mill is less than ten percent (10%) of 1994 production levels. "Mill Owner Maintenance Reserve Account" means the account so designated established and created pursuant to the Master Operating Agreement for the sole benefit of the Mill Owners. "Mill Owner Maintenance Reserve Account Agreement" means the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among Southern, the Company and the Mill Owners. "Mill Owner Reimbursement Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Mill Owner Step-In Rights" has the meaning specified in the Master Operating Agreement. "Mill Owners" means, collectively, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Mills" means, collectively, the Pulp Mill, the Tissue Mill and the Paper Mill. "Mixed-Use Bonds" means, collectively, the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series A and the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series B, in each case issued under and secured by a Trust Indenture dated as of December 1, 1984, as supplemented by a First Supplemental Indenture thereto dated as of June 1, 1985, between the IDB and AmSouth Bank of Alabama, as trustee. "Mobile Energy" means Mobile Energy Services Holdings, Inc., an Alabama corporation. "Mobile Energy Parties" means, collectively, the Company and Mobile Energy. -70- "Mobile Energy Request" or "Mobile Energy Order" means, respectively, a written request or order signed in the name of Mobile Energy by an Authorized Officer of Mobile Energy and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Mobile Facility" means the integrated pulp, paper and tissue manufacturing facility located on a 730-acre site along the Mobile River and the Chickasaw Creek in Mobile, Alabama, comprised of the Mills and the Energy Complex. "Monthly Transfer Date" means the last Business Day of each month of each Fiscal Year, commencing with the first such day occurring after the Closing Date. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation. "Mortgage" means the Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 among the Company, the IDB and the Mortgagee. "Mortgagee" means Bankers Trust (Delaware), or any other Person appointed as a substitute or replacement Mortgagee under the Mortgage. "1983 Bonds" means the IDB's Exempt Facilities Revenue Bonds (Scott Paper Company Project), 1983 Series B, issued under and secured by a Trust Indenture dated as of December 1, 1983 between the IDB and BankAmerica Trust Company of New York, as trustee. "1984 Bonds" means the IDB's Variable Rate Demand Solid Waste Revenue Refunding Bonds (Scott Paper Company Project) Series 1984 A, B, C, D and E issued under and secured by the 1984 Indenture. "1984 Indenture" means the Trust Indenture dated as of December 1, 1984, as supplemented by the First Supplemental Indenture thereto dated as of January 1, 1985 and the Second Supplemental Indenture thereto dated as of August 1, 1995, between the IDB and Chemical Bank, as trustee. "1984 Lease" means the Lease and Agreement dated December 1, 1984, as amended by Amendment No. 1 thereto dated as of November 8, 1994 and Amendment No. 2 thereto dated as of December 9, 1994, between the IDB and the Company (as assignee of Mobile Energy (as assignee of Scott)). "1994 Bond Payment Date" means each June 1 and December 1 of each year, commencing December 1, 1995. "1994 Bond Trustee" means Bankers Trust (Delaware), in its capacity as trustee under the 1994 Indenture. -71- "1994 Bonds" means the IDB's Industrial Development Revenue Bonds (Scott Paper Recovery Boiler Project) 1994 Series A. For all purposes of the Financing Documents, (a) payments in respect of the principal of and premium, if any, and interest on the 1994 Bonds shall be treated as neither Operation and Maintenance Costs nor Senior Debt Service Requirements (or any other debt service) and (b) receipts (or deemed receipts) in respect of the 1994 Bonds shall not be treated as Revenues. "1994 Indenture" means the Trust Indenture dated as of December 1, 1994 between the IDB and the 1994 Bond Trustee. "1995 Bonds" has the meaning specified in Section 2.17(a) of the Tax-Exempt Indenture, which means the Tax-Exempt Bonds. "Non-Affiliate Subordinated Debt" means any unsecured loan or loans from any Person that is not an Affiliate of the Company pursuant to a Subordinated Loan Agreement, the amounts necessary for repayment of which have been included in the Annual Budget approved by the Collateral Agent and the Independent Engineer. "Nondisturbance Agreement" means the Estoppel and Nondisturbance Agreement dated as of December 12, 1994 between TRT and the Company (as assignee of Mobile Energy). "Officer's Certificate" means a certificate that has been signed by an Authorized Officer of either of the Mobile Energy Parties or of Southern (as the case may be). "O&M Agreement" means the Facility Operations and Maintenance Agreement dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Operator. "Operating Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Operating Agreement" means the Operating Agreement of the Company dated as of July 13, 1995, as amended by the First Amendment thereto dated as of July 13, 1995, among the Members. "Operation and Maintenance Costs" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, including and together with (a) Subordinated Fees, (b) Maintenance Expenditures and (c) any such costs and expenses specified in clauses (a) through (p) of the definition of Maintenance Expenditures (other than (i) rent payments under the IDB Lease Agreement and (ii) payments of principal of and premium, if any, and interest on the 1994 Bonds). "Operator" means Southern Electric, in its capacity as operator under the O&M Agreement. -72- "Opinion of Counsel" means a written opinion of counsel for any Person either expressly referred to in any Financing Document to which the Collateral Agent or any of the Senior Secured Parties is a party or otherwise satisfactory to the Collateral Agent or such Senior Secured Party (which may include counsel for either of the Mobile Energy Parties, whether or not such counsel is an employee of either or both of them). "Optional Modifications" means all modifications to the Energy Complex that are not Required Modifications. "Optional Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Outstanding" means, when used with respect to any of the Senior Securities (however referenced in any Financing Document), as of the date of determination, all such Senior Securities theretofore authenticated and delivered under the Indenture or the Tax-Exempt Indenture (as the case may be), except: (a) such Senior Securities theretofore canceled by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or delivered to either such Trustee for cancellation; (b) such Senior Securities or portions thereof deemed to have been paid within the meaning of, in the case of the Indenture, Section 12.1 thereof and, in the case of the Tax- Exempt Indenture, Section 12.1 thereof (as the case may be); and (c) such Senior Securities that have been exchanged for other Senior Securities or Senior Securities in lieu of which other Senior Securities have been authenticated and delivered pursuant to the Indenture or the Tax-Exempt Indenture (as the case may be) unless held by a Holder in whose hands such Senior Securities constitute valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Senior Securities (however referenced in any Financing Document) Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or the Tax-Exempt Indenture (as the case may be) or whether or not a quorum is present at a meeting of Holders of such Senior Securities, such Senior Securities owned by either of the Mobile Energy Parties (or any Affiliate thereof) shall be disregarded and deemed not to be Outstanding, except that, in determining whether or not the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to presence of a quorum, only such Senior Securities that a Responsible Officer of the Indenture Trustee or the Tax-Exempt -73- Indenture Trustee (as the case may be) knows to be so owned shall be so disregarded. Any such Senior Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) such pledgee's right so to act with respect to such Senior Securities and that such pledgee is not a Mobile Energy Party (or any Affiliate thereof). "Paper Mill" means the paper mill located at the Mobile Facility, which as of the Closing Date is owned by S.D. Warren. "Paper Mill Energy Services Agreement" means the Paper Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated July 13, 1995, between the Paper Mill Owner and the Company (as assignee of Mobile Energy). "Paper Mill Owner" means S.D. Warren, in its capacity as owner of the Paper Mill. "Paying Agent" means any Person acting as Paying Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Percentage Share" means an amount (expressed as a percentage) equal to: (a) with respect to the Working Capital Facility, (i) the Working Capital Facility Commitment in effect immediately prior to any deposit into the Working Capital Facility Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(i) of the Intercreditor Agreement divided by (ii) the Combined Exposure immediately prior to such deposit; (b) with respect to the Indenture, (i) the principal amount of the Indenture Securities Outstanding immediately prior to any transfer to the Indenture Trustee for deposit into the Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(ii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer; and (c) with respect to the Tax-Exempt Indenture, (i) the principal amount of the Tax-Exempt Indenture Securities Outstanding immediately prior to any transfer to the Tax- Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain -74- pursuant to Section 6.2(b)(iii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer. "Permitted Indebtedness" means (a) in the case of the Company: (i) the First Mortgage Bonds; (ii) Debt incurred under a Working Capital Facility having a Working Capital Facility Commitment not to exceed $15,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time, provided (and the Working Capital Facility shall contain provisions to such effect) that (A) no more than $5,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time) of such Debt may be scheduled to mature during any calendar month, (B) any Working Capital Facility Loan advanced thereunder shall mature no later than ninety-three (93) days from the date such Working Capital Facility Loan was first advanced, (C) the Company shall be required to repay all amounts advanced thereunder so that no amounts are outstanding once during each Fiscal Year (other than the Fiscal Year ending December 31, 1995) for a period of five (5) consecutive days and (D) the Working Capital Facility Provider thereunder shall become a party to the Intercreditor Agreement; (iii) the Tax-Exempt Bonds; (iv) reimbursement obligations in respect of letters of credit (if any) and other financial obligations arising under the Project Contracts and obligations arising under the Lease Indemnity; (v) purchase money obligations incurred to finance discrete items of equipment not comprising an integral part of the Energy Complex that extend only to the equipment being financed and that do not in the aggregate have annual debt service or lease obligations exceeding $2,000,000 (multiplied by the GDPIPD Factor in effect at the time such obligations were incurred); (vi) trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (vii) obligations in respect of surety bonds or similar instruments in an aggregate amount not exceeding $10,000,000 (multiplied by the GDPIPD Factor in effect at the time such obligations were incurred) at any one time outstanding; (viii) Affiliate Subordinated Debt; (ix) Replacement Debt permitted to be issued pursuant to the terms of the Financing Documents; (x) Debt permitted to be issued pursuant to the terms of the Financing Documents for Required Modifications and Optional Modifications; (xi) Non-Affiliate Subordinated Debt (including any Non-Affiliate Subordinated Debt permitted by clause (x) above) in an aggregate principal amount not to exceed $75,000,000 (multiplied by the GDPIPD Factor in effect at the time such Debt was incurred) permitted to be issued pursuant to the terms of the Financing Documents; (xii) Refunding Debt permitted to be issued pursuant to the terms of the Financing Documents; and (xiii) the Company's obligations in respect of the 1994 Bonds, the Mixed-Use Bonds, the Environmental Bonds and the Refunding Letter of Credit; and (b) in the case of Mobile Energy, the Guaranty. -75- "Permitted Investments" means investments in securities that are: (a) direct obligations of the United States of America or of any agency thereof; (b) obligations fully guaranteed by the United States of America or any agency thereof; (c) time deposits (which may be represented by certificates of deposit) issued by commercial banks organized under the laws of the United States of America or of any political subdivision thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union having a combined capital and surplus of at least $500,000,000 and having long-term unsecured Debt having a rating at least equal to (i) the highest rating assigned to the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) by at least two of the Rating Agencies or (ii) "B" by Thompson Bankwatch, Inc. (in either case provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such bank); (d) open market commercial paper of any corporation incorporated or doing business under the laws of the United States of America or of any political subdivision thereof then rated at least A-1/P-1 (or an equivalent thereof) by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such corporation); (e) obligations issued or guaranteed by, and any other obligations the interest on which is excluded from income for Federal income tax purposes issued by, any state of the United States of America or the District of Columbia or the Commonwealth of Puerto Rico or any political subdivision, agency, authority or instrumentality thereof, which issuer or guarantor has (i) a short-term Debt rating which is (on the date of acquisition thereof) A- 1/P-1 (or an equivalent thereof) or better and (ii) a long-term Debt rating that is (on the date of acquisition thereof) "A" or better, in each case by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such issuer or guarantor); (f) guaranteed investment contracts of any financial institution organized under the laws of the United States of America or any state thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union, which financial institution has assets of at least $5 billion in the aggregate and has a long term Debt rating that is (on the date of acquisition thereof) "A" or better by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such institution); (g) investment contracts of any financial institution either (i) (A) fully secured by direct obligations of the United States, (B) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States or (C) securities or receipts evidencing ownership interests in obligations or specified portions thereof described in clause (A) or (B) above, in each case guaranteed as a full faith and credit obligation of the United States, having a market value at least equal to 102% of the amount deposited thereunder and possession of which obligation is held under arrangements satisfactory to the Collateral Agent, the -76- Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or (ii) with long-term Debt ratings of "A" or higher and short-term ratings in one of the highest two major categories by any of the Rating Agencies; (h) a contract or investment agreement with a provider or guarantor (i) which provider or guarantor is rated at least "A" or equivalent by each of the Rating Agencies (provided that if a guarantor is party to the rating, the guaranty is unconditional and is confirmed in writing prior to any assignment by the provider to another subsidiary of such guarantor), (ii) providing that monies invested shall be payable to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall be payable to the Collateral Agent) without condition (other than notice) and without breakage fee or other penalty, upon not more than two (2) Business Days' notice for application when and as required or permitted under the Indenture, the Intercreditor Agreement or the Tax-Exempt Indenture (as applicable), (iii) stating that such contract or agreement is unconditional, expressly disclaiming any right of setoff and providing for immediate termination in the event of insolvency of the provider and termination upon demand of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall provide for termination upon demand of the Collateral Agent) (which demand shall only be made at the direction of the Company) after any payment or other covenant default by the provider and (iv) the terms and provisions of which are in form and substance satisfactory to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be); and (i) investments in money market funds registered under the Investment Company Act of 1940 then rated in the highest category by S&P and Moody's. "Permitted Liens" means: (a) Liens specifically created, required or permitted by the Indenture, the Tax-Exempt Indenture or the IDB Lease Agreement; (b) the Liens created, or purported to be created, on the Collateral pursuant to the Security Documents; (c) Liens for taxes that are either not yet due, are due but payable without penalty or are the subject of a Good Faith Contest; (d) any exceptions to title that are set forth on Schedule B--Section 2 of the title insurance policy delivered to the Collateral Agent on the Closing Date (to the extent that such exceptions have not been released or subordinated prior to the Closing Date); (e) such minor defects, easements, rights of way, restrictions, irregularities, encumbrances and clouds on title and statutory liens that do not materially impair the property affected thereby and that do not individually or in the aggregate materially impair the value of the security interests granted under the Financing Documents; (f) the easements and other rights in favor of third-parties contained in the Project Contracts as of the Closing Date; (g) deposits or pledges to secure statutory obligations or appeals, release of attachments, stays of execution or injunction, performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or for purposes of like general nature in the ordinary -77- course of business; (h) Liens in connection with worker's compensation, unemployment insurance or other social security or pension obligations; (i) legal or equitable encumbrances deemed to exist by reason of the existence of any litigation or other legal proceeding if the same are the subject of a Good Faith Contest (excluding any attachment prior to judgment, judgment lien or attachment in aid of execution on a judgment); (j) mechanic's, workmen's, materialmen's, construction or other like Liens arising in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations that are not yet due or that are the subject of a Good Faith Contest; (k) Liens securing purchase money obligations that constitute Permitted Indebtedness; (l) Liens in favor of the Mill Owners on the Mill Owner Maintenance Reserve Account, including monies on deposit therein or otherwise credited thereto (in accordance with the Mill Owner Maintenance Reserve Account Agreement) not exceeding $2,000,000, to the extent arising under the Master Operating Agreement or the Mill Owner Maintenance Reserve Account Agreement; and (m) Liens on cash collateral not exceeding $1,500,000 in favor of the issuer of the Refunding Letter of Credit. "Person" means any individual, sole proprietorship, corporation, partnership, limited liability company, joint venture, trust, unincorporated association, institution, Governmental Authority or any other entity. "Place of Payment" means, when used with respect to the Senior Securities of any series, the office or agency maintained pursuant to, in the case of the Indenture, Section 9.14(a) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(a) thereof and, in either case, such other place or places, if any, where the principal of and premium, if any, and interest on the Senior Securities of such series are payable as specified in the Series Supplemental Indenture to the Indenture or the Tax-Exempt Indenture (as the case may be) establishing the Senior Securities of such series. "Predecessor Securities" means, with respect to any particular Senior Security, every previous Senior Security evidencing all or a portion of the same Debt as that evidenced by such particular Senior Security. For purposes of this definition, any Senior Security authenticated and delivered under, in the case of any Indenture Security, Section 2.9 of the Indenture and, in the case of any Tax-Exempt Indenture Security, Section 2.9 of the Tax-Exempt Indenture in lieu of a lost, destroyed or stolen Senior Security shall be deemed to evidence the same Debt as such lost, destroyed or stolen Senior Security. "Prepayment Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Principal Payment Date" means in respect of (a) the Indenture Securities, any January 1 or July 1 on which principal payments are -78- due to Holders thereof and (b) the Tax-Exempt Indenture Securities, any January 1 on which principal payments are due to Holders thereof. "Processing Services" has the meaning specified in the Master Operating Agreement. "Project Contracts" means, collectively, (a) the Energy Services Agreements, (b) the Master Operating Agreement, (c) the Lease, (d) the Supplementary Lease, (e) the O&M Agreement, (f) the Common Services Agreement, (g) the Water Agreement, (h) the Boiler Ash Agreement, (i) the Environmental Indemnity Agreements, (j) the Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of June 16, 1995 and the Second Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy), (k) the Employee Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, among Scott, the Company (as assignee of Mobile Energy) and Southern Electric, (l) the SCS Agreement, (m) the Easement Deeds, (n) the Asset Purchase Agreement dated as of December 12, 1994 between Scott, as seller, and the Company (as assignee of Mobile Energy), as buyer, (o) the Coal Supply Agreement, (p) any other Contract entered into by either of the Mobile Energy Parties for the provision of fuel to the Energy Complex, (q) the IDB Lease Agreement, (r) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (s) the Construction, Financing and Installment Sale Agreement dated as of April 1, 1973 between the IDB and Scott, (t) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (u) the Facilities Lease and Agreement dated as of December 1, 1984 between the IDB and Scott, (v) the Sublease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (w) the Construction, Financing and Installment Sale Agreement dated as of September 1, 1976 between the IDB and Scott, (x) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (y) the Recovery Boiler Facilities Lease and Agreement dated as of December 1, 1994 between the IDB and Scott, (z) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (aa) the Nondisturbance Agreement, (bb) the Recognition Agreements, (cc) the Mill Owner Maintenance Reserve Account Agreement and (dd) the Transfer Agreement. "Project Costs" means costs and expenses (other than financing costs and expenses) paid, incurred or to be incurred by the Company after the Closing Date to complete the capital improvements to the Energy Complex specified in the Master Operating Agreement in accordance with the Capital Budget and certain other planned expenditures relating to the Energy Complex. -79- "Project Documents" means, collectively, the Project Contracts and the Financing Documents. "Project Participant" means each Person that is party to a Project Document. "Prudent Plant Operating Standards" has the meaning specified in the Master Operating Agreement. "Pulp Mill" means the pulp mill (including a process water plant and waste water treatment plant) located at the Mobile Facility, which as of the Closing Date is owned by Scott. "Pulp Mill Energy Services Agreement" means the Pulp Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Pulp Mill Owner" means Scott, in its capacity as owner of the Pulp Mill. "Pulp Mill Step-In Equipment" has the meaning specified in the Master Operating Agreement. "PURPA" means the Public Utility Regulatory Policies Act of 1978. "Qualified Engineer" means an independent engineer listed on Schedule 1 to the Intercreditor Agreement, as such Schedule may be amended from time to time in accordance with Section 11.3 of the Intercreditor Agreement. "Qualifying Facility" means a "Qualifying Cogeneration Facility" as specified in section 3(18)(B) of the Federal Power Act or a qualifying small power production facility within the meaning of section 201 of PURPA. "Rating Agencies" means, collectively, S&P, Fitch and Moody's, together with any other nationally recognized credit agency of similar standing if any such Person is not then currently rating the proposed subject of such rating. "Receivables" means all of the Company's rights to payment for goods sold or leased or services performed by the Company, including (a) rights evidenced by an account, note, contract, security, instrument, chattel paper or other evidence of indebtedness and (b) all "accounts" as defined in Section 9-106 of the Uniform Commercial Code as in effect in the State of New York on the Closing Date. "Recognition Agreements" means, collectively, (a) the Recognition, Cooperation and Consent Agreement relating to the Mixed-Use Bonds dated as of August 1, 1995 among the Company, the IDB, AmSouth Bank of Alabama, TRT and the Collateral Agent and (b) -80- the Recognition, Cooperation and Consent Agreement relating to the Tax-Exempt Bonds dated as of August 1, 1995 among the Company, the IDB, the Tax-Exempt Indenture Trustee and the Collateral Agent. "Redemption Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Redistributed Proceeds" means, with respect to any Excess Loss Proceeds, the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the Working Capital Facility Distribution Amount in respect of such Excess Loss Proceeds. "Refunding Debt" means Debt, the proceeds of which are used to refund outstanding Senior Debt. "Refunding Letter of Credit" means one or more letters of credit issued by a commercial bank in an aggregate amount not to exceed $1,500,000 to provide for the payment of accrued interest on the 1984 Bonds upon the redemption thereof. "Regular Record Date" means, for the Stated Maturity of any Senior Security of a series, or for the Stated Maturity of any installment of principal thereof or payment of interest thereon, the 15th day (whether or not a Business Day) of the month prior to such Stated Maturity, or any other date specified for such purpose in the form of Senior Security of such series attached to the Series Supplemental Indenture to the Indenture or the Tax-Exempt Indenture (as the case may be) relating to the Senior Securities of such series. "Replacement Debt" means Senior Securities, the proceeds of which are used to refinance all or a portion of the outstanding Tax-Exempt Indenture Securities (whether by effecting a gross-up of, or by the issuance of Senior Securities to replace, affected Tax-Exempt Indenture Securities) upon the occurrence of a Determination of Taxability. "Replacement Facility" means a facility with materially different performance capabilities from the Energy Complex that can be built to provide services to some or all of the Mills following the occurrence of an Event of Loss or an Event of Eminent Domain. "Required Deposit" means, at the time of any Required Deposit Event with respect to any Reserve Account Security on deposit in any Reserve Account Security Account, an amount equal to the aggregate Available Amount under such Reserve Account Security at such time; provided, however, that if such Required Deposit Event results from the occurrence of a Debt Service Event, such amount shall be equal to the aggregate amount required to be transferred pursuant to, if such Reserve Account Security Account is (a) the Maintenance Plan Funding Subaccount, Section 3.5(c) of the Intercreditor Agreement, (b) the Distribution Account, Section -81- 3.8(b) of the Intercreditor Agreement, (c) a Debt Service Reserve Account, Section 4.5 of the Indenture and (d) a Tax-Exempt Debt Service Reserve Account, Section 4.6 of the Tax-Exempt Indenture. "Required Deposit Event" means (a) in the case of any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Reserve Account Letter of Credit, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Reserve Account Letter of Credit, unless such Reserve Account Letter of Credit has been replaced with monies or other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to such date, (iii) the occurrence of a Credit Standard Event or Default Event with respect to such Reserve Account Letter of Credit and the continuance thereof for a period of five (5) days, unless such Reserve Account Letter of Credit has been replaced with other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to the expiration of such period or (iv) the date on which a Trigger Event Notice has been delivered and (b) in the case of any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Southern Guaranty, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Southern Guaranty, unless such Southern Guaranty has been replaced with monies or other Reserve Account Security prior to such date, (iii) the occurrence of a Credit Standard Event with respect to such Southern Guaranty and the continuance thereof for a period of fifteen (15) days, unless (A) the Collateral Agent or the Indenture Trustee (as the case may be) shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied after such occurrence and prior to the expiration of such period or (B) such Southern Guaranty has been replaced with monies or other Reserve Account Security prior to the expiration of such period, (iv) the occurrence of a Default Event and the continuance thereof for a period of five (5) days, unless such Southern Guaranty has been replaced with other Reserve Account Security prior to the expiration of such period or (v) the date on which a Trigger Event Notice has been delivered. "Required Interest Deposit" means, in the case of any Monthly Transfer Date with respect to: (a) the Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date, is equal to the amount of interest on the Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a -82- Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date (unless such next succeeding Interest Payment Date is January 1, 2020, in which case together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to December 1, 2019), is equal to the amount of interest on the Tax-Exempt Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Tax- Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax- Exempt Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). "Required Modifications" means those modifications reasonably necessary for the Energy Complex to remain in compliance with all material Governmental Approvals and maintain, at a minimum, the Maximum Capacity (as defined in the Master Operating Agreement) levels as in effect on the Closing Date. -83- "Required Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Required Principal Deposit" means in the case of any Monthly Transfer Date with respect to: (a) the Indenture Securities Principal Subaccount, an amount equal to one-sixth (1/6th) of the amount of principal of the Indenture Securities becoming due on each Principal Payment Date therefor occurring within the six (6) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within six (6) months after the Closing Date or any other date on which any Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date) (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Principal Subaccount, one-twelfth (1/12th) (unless such Monthly Transfer Date occurs on or after January 1, 2019, in which case one- eleventh (1/11th)) of the amount of principal of the Tax- Exempt Indenture Securities becoming due on each Principal Payment Date therefor occurring within the twelve (12) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within twelve (12) months after the Closing Date or any other date on which any Tax-Exempt Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date)(such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Tax-Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); -84- (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax- Exempt Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). "Required Senior Creditors" means Senior Secured Parties holding or otherwise representing 331/3% of the Combined Exposure. "Reserve Account Letter of Credit" means a letter of credit issued by a commercial bank whose long-term unsecured Debt is rated at least "A" by S&P, "A" by Fitch and "A2" by Moody's. "Reserve Account Security" means either, or any combination of, (a) one or more Southern Guaranties or (b) one or more Reserve Account Letters of Credit. "Reserve Account Security Accounts" means, collectively, each Debt Service Reserve Account (if any), each Tax-Exempt Debt Service Reserve Account (if any), the Maintenance Plan Funding Subaccount and the Distribution Account. "Responsible Officer" means, when used with respect to the Collateral Agent, the Indenture Trustee and the Tax-Exempt Indenture Trustee, (a) any officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) within the Corporate Trust Office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be), including any vice president, any assistant vice president, any assistant secretary or any assistant treasurer, (b) any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) performing functions similar to those performed by any of the officers designated in clause (a) above and (c) with respect to a particular corporate trust matter, any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to whom such matter is referred because of such other officer's knowledge of and familiarity with the particular subject. -85- "Restricted Payment Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more other Persons in substitution for or replacement of any such Project Contract that has been declared unenforceable or rejected or otherwise terminated, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that either (a) the Company has delivered to the Collateral Agent a letter from any two of the Rating Agencies (then currently rating the Indenture Securities or the Tax-Exempt Indenture Securities) confirming that, after giving effect to such alternative Contract, the ratings of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) are Investment Grade or (b) the Company (i) has provided to the Collateral Agent the Revenue Sufficiency Certification and (ii) has delivered to the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that (A) the term of such alternative Contract extends through the earlier of (1) the final maturity of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) and (2) the term of such Project Contract, (B) such alternative Contract contains termination provisions no less favorable to the Company than those contained in such Project Contract, (C) such alternative Contract has been in full force and effect for at least thirty-six (36) months, (D) the average of the two annual Senior Debt Service Coverage Ratios for the four immediately preceding semi-annual payment periods was equal to at least 1.25 to 1.0 and, based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.25 to 1.0 and (E) such alternative Contract is reasonably capable of being performed by the parties thereto. "Restricted Payments" means, collectively, (a) payments from the Subordinated Fee Account or any other payment in respect of Subordinated Fees, (b) distributions (from the Distribution Account or otherwise), including a return of capital contributions and dividends, paid to, or at the direction or for the benefit of, any Affiliate of the Company, but excluding distributions of cash from any Account to the extent such cash has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents, (c) the payment of principal of or premium, if any, or interest on any Affiliate Subordinated Debt, (d) the repurchase by the Company of any interest of any Member, or (e) the making of any loans or other advances from the Company to any Affiliate of the Company, but excluding advances of cash to the extent such cash (i) has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents or (ii) constitutes a payment required under the O&M Agreement or the SCS Agreement. "Revenue Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. -86- "Revenue Sufficiency Certification" means an Officer's Certificate of the Company, together with an Independent Engineer Confirmation, to the effect that, based upon projections prepared by the Company in accordance with Section 1.15 of the Indenture or Section 1.12 of the IDB Lease Agreement, or of any comparable provision of the Working Capital Facility, the Project Contracts then in effect (including any alternative Contract entered into, or to be entered into, by the Company with one or more other Persons in substitution or replacement of any other Project Contract as contemplated by the Event of Default Alternative Agreement Requirements or the Restricted Payment Alternative Agreement Requirements) generate sufficient Revenues to enable the Company to pay its debts and other obligations (including Operation and Maintenance Costs) when they become due through the final maturity of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be). "Revenues" means (without duplication), for any period, the revenues received by the Company for use of the services and facilities of the Energy Complex including (a) amounts received by the Company under the Project Contracts, (b) interest and other income earned and credited on monies deposited in the Accounts (to the extent not retained in such Accounts), (c) the proceeds of the sale of any part of the Energy Complex, provided that such sale is not prohibited by the Financing Documents, (d) the proceeds of any business interruption insurance and other payments received for interruption of operations (excluding any proceeds of any liability or physical damage insurance) and (e) all other monies that have been deposited into the Revenue Account as required or permitted by the terms of the Financing Documents. Notwithstanding the foregoing, "Revenues" do not include (i) capital contributions to the Company, (ii) the proceeds of any Debt or Loss Proceeds, (iii) amounts received by the Company in connection with the exercise of Company Step-In Rights (to the extent in excess of the Company's expenses incurred in connection therewith, including the cure or the attempted cure of the related Pulp Mill Triggering Event (as defined in the Master Operating Agreement)), (iv) monies transferred from the Completion Account to the Revenue Account pursuant to Section 3.9(c) of the Intercreditor Agreement, (v) monies transferred from any Debt Service Reserve Account to the Revenue Account pursuant to Section 4.5 of the Indenture, (vi) amounts received by the Company with respect to the 1994 Bonds and (vii) monies deposited into any Reserve Account Security Account in replacement (or satisfaction) of Reserve Account Security on deposit therein (including monies deposited into the Maintenance Plan Funding Subaccount pursuant to the last sentence of Section 3.5(a) of the Intercreditor Agreement). "S&P" means Standard & Poor's Ratings Group, a New York corporation. "Scott" means Scott Paper Company, a Pennsylvania corporation. -87- "SCS" means Southern Company Services, Inc., an Alabama corporation. "SCS Agreement" means the Agreement dated July 14, 1995 between SCS and the Company. "S.D. Warren" means S.D. Warren Company, a Pennsylvania corporation. "SEC" means the Securities and Exchange Commission of the United States of America. "Secretary" means, in the case of a corporation (including Mobile Energy) or limited liability company (including the Company) the secretary or an assistant secretary of such corporation or limited liability company (as the case may be). "Secured Obligations" means, collectively, the Financing Liabilities, the Trustee Claims, the Collateral Agent Claims and the IDB Claims. "Secured Party" means Bankers Trust (Delaware) or any other Person appointed as a substitute or replacement Secured Party under the Security Agreement. "Securities" has the meaning specified (a) in the case of the Indenture, in the first "WHEREAS" clause thereof and (b) in the case of the Tax-Exempt Indenture, in the last "WHEREAS" clause thereof. "Securities Act" means the Securities Act of 1933. "Security Agreement" means the Assignment and Security Agreement dated as of August 1, 1995 among the Company, the IDB and the Secured Party. "Security Documents" means, collectively, (a) the Mortgage, (b) the Security Agreement, (c) the Indenture (including any Series Supplemental Indenture), (d) the Intercreditor Agreement, (e) the Tax-Exempt Indenture (including any Series Supplemental Indenture), (f) the IDB Lease Agreement, (g) the Consents to Assignment and (h) each Financing Statement. "Security Interest" means the Liens created, or purported to be created, on Shared Collateral pursuant to any Security Document. "Security Register" has the meaning specified in Section 2.8 of the Indenture or Section 2.8 of the Tax-Exempt Indenture (as the case may be). "Security Registrar" means any Person acting as Security Registrar under the Indenture or the Tax-Exempt Indenture pursuant to Section 9.14 or Section 9.13 (as the case may be) thereof. -88- "Senior Creditor Certificate" means a certificate of a Senior Secured Party, signed by an Authorized Representative of such Senior Secured Party, (a) setting forth the principal amount of the Financing Liabilities due or owing to, or in favor of or for the benefit of, such Senior Secured Party as of the date of such certificate and the outstanding unutilized Financing Commitments of such Senior Secured Party as of the date of such certificate, (b) setting forth a contact person for such Senior Secured Party, including phone and facsimile numbers for such person, (c) directing the Collateral Agent to take a specified action and (d) stating specifically the action the Collateral Agent is directed to take and the Security Document and the provision thereof pursuant to which the Collateral Agent is being directed to act. "Senior Debt" means, collectively, the Outstanding Senior Securities and the outstanding Working Capital Facility Loans. "Senior Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operation and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Senior Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (iv) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (v) the aggregate amount of overdue payments in respect of clauses (b)(i) through (iv) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Senior Debt Service Coverage Ratio. "Senior Debt Service Requirement" means, for any period, the sum of (a) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (b) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (c) all amounts payable by the Company during such -89- period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (d) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (e) the aggregate amount of overdue payments in respect of the foregoing from previous periods, in each case determined on a cash basis in accordance with GAAP. "Senior Debt Termination Date" means the date on which all Financing Liabilities, other than contingent liabilities and obligations that are unasserted at such date, have been paid and satisfied in full and all Financing Commitments have been terminated. "Senior Secured Parties" means, collectively, (a) the Indenture Trustee (on behalf of the Holders of the Indenture Securities from time to time and, solely in its capacity as trustee on behalf of such Holders, itself), (b) the Tax-Exempt Indenture Trustee (on behalf of the Holders of the Tax-Exempt Indenture Securities from time to time and, solely in its capacity as trustee on behalf of such Holders, itself) and (c) the Working Capital Facility Provider (on behalf of the Lenders from time to time and itself). "Senior Securities" means, collectively, the Indenture Securities and the Tax-Exempt Indenture Securities. "Series Supplemental Indenture" means an indenture supplemental to the Indenture or the Tax-Exempt Indenture entered into by the Mobile Energy Parties or the IDB (as the case may be) and the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) for the purpose of establishing, in accordance with such indenture, the title, form and terms of the Senior Securities of any series. "Shared Collateral" means all Collateral other than (a) the Collateral referenced in clause (a) of the definition of Indenture Securities Collateral and (b) the Collateral referenced in clause (a) of the definition of Tax-Exempt Indenture Securities Collateral. "Sinking Fund" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Redemption Dates" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Requirements" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). -90- "Site" means the real property on which the Energy Complex is situated, as more fully described in the Mortgage. "Southern" means The Southern Company, a Delaware corporation. "Southern Credit Standard" means, at any time, (a) Southern's outstanding senior long-term Debt is then rated at least, and not rated less than, "A" by either S&P or Moody's (unless such senior long-term Debt is not then rated by either S&P or Moody's, in which case each Designated Southern Subsidiary has outstanding senior long-term Debt that is then rated at least, and not rated less than, BBB by S&P or Baa2 by Moody's) and (b) the sum of (i) cash and cash equivalents (including marketable securities) of Southern and the Designated Southern Subsidiaries, (ii) amounts available from committed credit facilities of Southern and the Designated Southern Subsidiaries and (iii) amounts available from commercial paper authorized to be issued by Southern and rated not less than A-1/P-1 by S&P or Moody's (in each case as of the end of Southern's most recently completed fiscal quarter and provided that such cash and cash equivalents and other amounts are available, without restriction, for distribution to the Collateral Agent or the Indenture Trustee, upon fifteen (15) days' notice) is equal to at least the aggregate amount of Southern Guaranties then outstanding multiplied by four. "Southern Electric" means Southern Electric International, Inc., a Delaware corporation. "Southern Guaranty" means one or more unconditional, absolute and irrevocable guaranties from Southern to be delivered to (a) the Collateral Agent for deposit into the Maintenance Plan Funding Subaccount or the Distribution Account pursuant to and in accordance with Section 3.15(a) of, and in substantially the form attached as Exhibit C to, the Intercreditor Agreement or (b) the Indenture Trustee for deposit into each Debt Service Reserve Account (if any) pursuant to and in accordance with Section 4.6(a) of, and in substantially the form attached as Exhibit A to, the Indenture, provided that, in the case of clause (a) and (b) above, the Southern Credit Standard is satisfied at the time of such delivery and deposit. "Southern Master Tax Sharing Agreement" means the Income Tax Allocation Agreement dated as of December 29, 1981 among Southern and its corporate subsidiaries. "Special Record Date" means, with respect to the payment of any defaulted principal or interest, a date fixed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) pursuant to, in the case of the Indenture Trustee, Section 2.10 of the Indenture and, in the case of the Tax-Exempt Indenture Trustee, Section 2.10 of the Tax-Exempt Indenture. "Stated Maturity" means, when used with respect to any Senior Security or any installment of principal thereof or payment of -91- interest thereon, the date specified in such Senior Security as the fixed date on which such Senior Security or such installment of principal or payment of interest is due and payable. "Subordinated Debt" means, collectively, Affiliate Subordinated Debt and Non-Affiliate Subordinated Debt. "Subordinated Debt Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Debt Provider" means any Person providing Subordinated Debt pursuant to a Subordinated Loan Agreement. "Subordinated Fee" means a fee in exchange for the provisions of goods or services to either of the Mobile Energy Parties, the payment of which is fully subordinated to the Secured Obligations as to payment and exercise of remedies and that is payable only to the extent it would otherwise be distributable if on deposit in the Distribution Account. "Subordinated Fee Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Loan Agreement" means a binding agreement with a Subordinated Debt Provider providing unsecured debt financing for the benefit of the Energy Complex and on terms and conditions that shall satisfy the requirements of the Financing Documents. "Supplementary Lease" means the Supplementary Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Tax-Exempt Bonds" means the Tax-Exempt Indenture Securities issued on the Closing Date under the Tax-Exempt Indenture. "Tax-Exempt Debt Service Reserve Account" means the Account so designated established and created under Section 4.4(a) of the Tax- Exempt Indenture and any Account so designated and created under any Series Supplemental Indenture to the Tax-Exempt Indenture for the benefit of Holders of the Tax-Exempt Indenture Securities established thereunder. "Tax-Exempt Debt Service Reserve Account Required Balance" means (a) in respect of the Tax-Exempt Debt Service Reserve Account established and created under Section 4.4(a) of the Tax-Exempt Indenture, the amount designated in Section 4.4(b) thereof and (b) in respect of any other Tax-Exempt Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Tax-Exempt Indenture establishing such Tax-Exempt Debt Service Reserve Account. -92- "Tax-Exempt Indenture" means the Amended and Restated Trust Indenture dated as of August 1, 1995 between the IDB and the Tax- Exempt Indenture Trustee. "Tax-Exempt Indenture Accounts" means, with respect to the Tax-Exempt Indenture Securities of any series, the Tax-Exempt Indenture Securities Account and each Tax-Exempt Debt Service Reserve Account (if any) established for the benefit of Holders of the Tax-Exempt Indenture Securities of such series. "Tax-Exempt Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Tax-Exempt Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Tax-Exempt Indenture Securities" means all Outstanding Debt issued pursuant to the Tax-Exempt Indenture. "Tax-Exempt Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Tax-Exempt Indenture Trustee by the IDB pursuant to the granting and assigning clauses of the Tax-Exempt Indenture and (b) the Shared Collateral. "Tax-Exempt Indenture Securities Interest Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Principal Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Redemption Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Tax-Exempt Project" means those portions of the Energy Complex financed with the proceeds of the 1983 Bonds, as described generally in Exhibit A to the IDB Lease Agreement. -93- "Termination Event" means, with respect to any Reserve Account Security, such Reserve Account Security shall have terminated or expired (other than any termination thereof pursuant to the last sentence of Section 3.8(c) of the Intercreditor Agreement). "Third Party Engineer" means the independent engineering firm chosen from the list of engineers maintained as Schedule 1 to the Intercreditor Agreement and appointed Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Third Party Engineer Dispute Resolution" means the dispute resolution process involving a Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Tissue Mill" means the tissue mill located at the Mobile Facility, which as of the Closing Date is owned by Scott. "Tissue Mill Energy Services Agreement" means the Tissue Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Tissue Mill Owner and the Company (as assignee of Mobile Energy). "Tissue Mill Owner" means Scott, in its capacity as owner of the Tissue Mill. "Total Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operations and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account or the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Total Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayments of principal), (iv) all amounts payable by the Company as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents, (v) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the outstanding Subordinated Debt, (vi) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any Subordinated Debt Provider and (vii) the aggregate -94- amount of overdue payments in respect of clauses (b)(i) through (vi) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Total Debt Service Coverage Ratio. "Transfer Agreement" means the Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement dated July 14, 1995 between Mobile Energy and the Company. "Trigger Event" means (a) an Event of Default under the Indenture and an acceleration of Indenture Securities thereunder, (b) an Event of Default under the Tax-Exempt Indenture and an acceleration of Tax-Exempt Indenture Securities thereunder, (c) an Event of Default under the Working Capital Facility and an acceleration of Working Capital Facility Loans thereunder or (d) a Bankruptcy Event in respect of either of the Mobile Energy Parties and the expiration of the shortest applicable grace period with respect thereto. "Trigger Event Period" means that a Trigger Event shall have occurred and be continuing, provided that, except in the case of any such Trigger Event that shall have resulted from a Bankruptcy Event in respect of either of the Mobile Energy Parties, the written request of the Required Senior Creditors specified in Section 5.1(a) of the Intercreditor Agreement shall have been delivered to the Collateral Agent and not been rescinded. "TRT" means Three Rivers Timber Company, a Washington corporation. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which the Indenture was executed, except as provided in Section 11.6 thereof; provided, however, that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended. "Trustee Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses or other amounts to (a) the Indenture Trustee under the Indenture or (b) the Tax-Exempt Indenture Trustee under the Tax-Exempt Indenture. "Uniform Commercial Code" means the Uniform Commercial Code of the jurisdiction the law of which governs the Contract in which such term is used. "U.S. Government Obligations" means non-callable direct obligations of or obligations as to which the payment of principal of and interest is unconditionally guaranteed by the United States of America. -95- "Water Agreement" means the Water Procurement and Effluent Service Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Paper Mill Owner and the Tissue Mill Owner. "Wind-Up Event" means, at any time upon and after a Trigger Event, the application of monies on deposit in any of the Intercreditor Agreement Accounts, or of proceeds from any sale, disposition or other realization of any Shared Collateral (other than the Intercreditor Agreement Accounts), in either case to the payment of amounts owing in respect of any Senior Debt and as a result of the exercise of remedies by the Collateral Agent under Article V of the Intercreditor Agreement. "Working Capital Escalation Factor" means, with respect to any Fiscal Year, a factor (calculated in June of such Fiscal Year) equal to the amount obtained by (a) dividing (i) the GDPIPD most recently published during such Fiscal Year by (ii) the GDPIPD published during the prior Fiscal Year on the date that most closely corresponds to, and is on or prior to, the date of such GDPIPD most recently published (provided that if the amount obtained is less than or equal to 1.015, then such amount shall be deemed to equal 1.015), (b) then subtracting 0.015, and (c) then multiplying by the Working Capital Escalation Factor with respect to the immediately preceding Fiscal Year. "Working Capital Facility" means the Revolving Credit Agreement dated as of August 1, 1995 between the Company and the Working Capital Facility Provider or any other Contract between the Company and a Working Capital Facility Provider pursuant to which funds for the working capital requirements of the Company are provided. "Working Capital Facility Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Working Capital Facility Commitment" means the aggregate of the commitments of the Lenders under the Working Capital Facility. "Working Capital Facility Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement and provided that the Working Capital Facility Commitment is subject to reduction in connection with such Event of Loss or Event of Eminent Domain pursuant to the terms of the Working Capital Facility, an amount equal to the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the unutilized Working Capital Facility Commitment in effect immediately prior to such reduction, unless the Company would not be able to borrow Working Capital Facility Loans (because the conditions set forth in Article III of the Working Capital Facility are not available or not satisfied), -96- in which case the lesser of (a) the Working Capital Facility's Percentage Share of such Excess Loss Proceeds and (b) the outstanding Working Capital Loans at such time. "Working Capital Facility O&M Loan" means a Working Capital Facility Loan, to the extent the proceeds thereof are applied to Operation and Maintenance Costs other than (a) rebates to the United States government pursuant to Section 148 of the Code, (b) Maintenance Expenditures and (c) payments of IDB Claims. "Working Capital Facility Provider" means Banque Paribas, a French banking corporation, and each other Person providing funds to the Company pursuant to a Working Capital Facility. "Working Capital Facility Loan" means a Loan (as defined in the Working Capital Facility) advanced by the Working Capital Facility Provider pursuant to the Working Capital Facility. -97- EXHIBIT "A" Parcel A: Lots 7 and 9 of Scott Paper Company Subdivision as shown on the plat thereof as recorded in Map Book 64, Page 39, in the records appearing in the Office of the Judge of Probate of Mobile County, Alabama. Exhibit A-1 EXHIBIT "A" Property Description of Leased Premises ALL that certain plot, piece or parcel of land, situate, lying and being in the City of Mobile, County of Mobile, and State of Alabama, bounded and described as follows: Parcel I Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the Office of the Judge of Probate of Mobile County, Alabama, said point being 3570.10 feet North and 431.54 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270056.327 and East 326422.733; Thence N-10-53'-56"-W for 356.22 ft.; Thence S-89-01'-08"-E for 105.36 ft.; Thence S-68-5 2'-49"-E for 194.97 ft.; Thence S-15-17'-38"-E for 241.11 ft.; Thence S-80-56'-54"-W for 287.04 ft. to the Point of Beginning. Said Parcel (the "East Fuel Tank Parcel") lying and being in Lot 11 of the Scott Paper Company Subdivision and containing 1.968 acres, more or less. LESS AND EXCEPT: Beginning at a point 38.85 feet South and 7.65 feet West of the North East corner of the Parcel described above, said point being at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270295.212 and East 326634.957; Thence S-42-00'-44"-W for 42.00 ft.; Thence N-47-59'-16"-W for 50.00 ft.; Thence N-42-00'-44"-E for 42.00 ft.; Thence S-47-59'-16"-E for 50 ft. to the Point of Beginning. Said Parcel (the "Excluded Parcel") lying entirely within the East Fuel Tank Parcel described above and containing 2100.00 square feet, more or less. Parcel II Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the judge of Probate of Mobile County, Alabama: Said point being 2027.703 feet North and 2186.144 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, West Zone, NAD 1927, North 268513.927, East 328177.335: Thence N-41(degree)-44'-09"-E for 195.20 feet; Thence S-26(degree)-32'-42"-E for 119.38 feet; Thence S-34(degree)-20'-56"-E for 102.00 feet; Thence S-41(degree)-44'-09"-W for 144.25 feet; Thence Northwesterly, around a curve to the left having a radius of 438.67 feet and a Delta angle of 27(degree)-48'-23", the Chord of which bears N-43(degree)-25'-40"-W for 210.66 feet, for an arc distance of 212.74 feet to the Point of Beginning. Said Parcel lying and being entirely within the boundaries of Lot 11 of the aforesaid Exhibit A-2 Scott Paper Company Subdivision, and containing 0.759 acres, more or less. Exhibit A-3 EXHIBIT "A" Parcel C: NO. 8 RECOVERY BOILER BUILDING Beginning at the Northeast corner of Lot 9 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39 in the Office of the Judge of Probate of Mobile County, Alabama, said point being at Alabama State Plane Coordinate, North 269059.626, East 327544.503: thence South 17 degrees 10 minutes 05 seconds East along the East line of said Lot 9 for 91.82 feet; thence South 79 degrees 05 minutes 11 seconds West, leaving the East line of said Lot 9, for 61.16 feet; thence South 10 degrees 55 minutes 44 seconds East for 27.93 feet; thence South 79 degrees 04 minutes 16 seconds West for 239.72 feet; thence North 10 degrees 55 minutes 44 seconds West for 145.10 feet to a point on the North line of aforesaid Lot 9; thence South 74 degrees 19 minutes 51 seconds East along the North line of said Lot 9 for 56.98 feet; thence North 79 degrees 10 minutes 01 seconds East along the North line of said Lot 9 for 70.09 feet; thence North 10 degrees 50 minutes 10 seconds West along the North line of said Lot 9 for 6.00 feet; thence North 46 degrees 30 minutes 09 seconds East along the North line of said Lot 9 for 6.90 feet; thence South 68 degrees 10 minutes 10 seconds East along the North line of said Lot 9 for 6.90 feet; thence South 10 degrees 50 minutes 10 seconds East along the North line of said Lot 9 for 6.00 feet; thence North 79 degrees 10 minutes 01 seconds East for 158.24 feet to the point of beginning. Said parcel lying and being in Lot 9 of the Scott Paper Company Subdivision and containing 34507.69 square feet, more or less. WEST WATER TANK FARM AREA Beginning at a point on the East right of way of Main Street as shown on the record plat of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39 in the Office of the Judge of Probate of Mobile County, Alabama, said point being 25.72 feet, South 10 degrees 52 minutes 25 seconds East of the intersection of the North right of way of West Energy Drive with the East right of way of Main Street, as shown on the recorded plat of said Scott Paper Company Subdivision and being at Alabama State Plane Coordinate, North 268901.518, East 327151.667; thence North 79 degrees 07 minutes 35 seconds East, leaving the East right of way of said Main Street, for 98.10 feet; thence South 10 degrees 52 minutes 00 seconds East for 195.30 feet to a point on the Southwest line of Lot 9 of aforesaid Scott Paper Company Subdivision; thence South 79 degrees 07 minutes 56 seconds West along the Southwest line of said Lot 9 for 45.85 feet; thence South 11 degrees 08 minutes 40 seconds East along the Southwest line of said Lot 9 for Exhibit A-4 1.70 feet; thence Northeasterly along the Southwest line of said Lot 9 and around a curve to the right having a radius of 16.29 feet and a central angle of 314 degrees 59 minutes 51 seconds for an arc distance of 89.55 feet; thence North 79 degrees 07 minutes 56 seconds East along the Southwest line of said Lot 9 for 34.74 feet; thence North 10 degrees 52 minutes 06 seconds West along said Southwest line for 38.77 feet; thence South 79 degrees 07 minutes 59 seconds West along the Southwest line of said Lot 9 for 12.76 feet; thence North 71 degrees 22 minutes 15 seconds West along the Southwest line of said Lot 9 for 85.22 feet to a point on the East right of way of aforesaid Main Street; thence North 10 degrees 52 minutes 25 seconds West along the East right of way of said Main Street for 103.79 feet to the point of beginning. Said parcel lying and being in Lot 9 of the Scott Paper Company Subdivision and containing 14492.34 square feet, more or less. Exhibit A-5 EXHIBIT A Description of Leased Land Those certain premises located in the County of Mobile, State of Alabama bounded and described as follows: RECOVERY AREA NO. 7 Beginning at a Point at Alabama State Plane Coordinate N 268944.583, E327580.044, said point being 2458.36 ft. North and 1588.85 ft. East of the Site of the Great Magnolia; Thence S-17(degree)-10'-07"-E for 26.11 ft.; Thence S-26(degree)-37'-14"-E for 164.93 ft.; Thence S-29(degree)-44'-52"-E for 142.73 ft.; Thence S-44(degree)-22'-46"-E for 28.07 ft.; Thence S-25(degree)-30'-05"-W for 50.78 ft.; Thence S-79(degree)-06'-46"-W for 410.18 ft.; Thence N-10(degree)-49'-45"-W for 384.40 ft.; Thence N-79(degree)-10'-15"-E for 282.10 ft.; Thence N-10(degree)-49'-30"-W for 18.51 ft.; Thence N-79(degree)-10'-38"-E for 29.76 ft.; Thence S-10(degree)-49'-34"-E for 18.51 ft.; Thence N-79(degree)-10'-08"-E for 18.85 ft. to the Point of Beginning. SLUDGE BUILDING ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268777.532, E 327712.983, said point being 2291.31 ft. North and 1721.79 ft. East of the Site of the Great Magnolia; Thence N-30(degree)-36'-15"-W for 22.16 ft.; Thence N-59(degree)-23'-39"-E for 27.51 ft.; Thence S-30(degree)-36'-18"-E for 22.16 ft.; Thence S-59(degree)-23'-49"-W for 27.51 ft. to the Point of Beginning. SLUDGE TOWER Beginning at a Point at Alabama State Plane Coordinate N 268984.742, E 327588.763, said point being 2498.52 ft. North and 1597.57 ft. East of the Site of the Great Magnolia; Thence N-78(degree)-58'-04"-E for 15.66 ft.; Thence N-11(degree)-01'-56"-W for 12.11 ft.; Thence N-78(degree)-58'-04"-E for 17.76 ft.; Thence S-11(degree)-01'-56"-E for 32.08 ft.; Thence S-78(degree)-58'-04"-W for 33.41 ft.; Thence N-11(degree)-01'-58"-W for 19.97 ft. to the Point of Beginning. BIOMASS TOWER ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268989.042, E 327343.762, said point being 2502.82 ft. North and 1352.57 ft. East of the Site of the Great Magnolia; Thence S-78(degree)-55'-12"-W for 24.05 ft.; Thence N-11(degree)-04'-48"-W for 31.70 Exhibit A-6 ft.; Thence N-78(degree)-55'-12"-E for 24.05 ft.; Thence S-11(degree)-04'-48"-E for 31.70 ft. to the Point of Beginning. COAL TOWER ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268846.988, E 326816.353, said point being 2360.76 ft. North and 825.167 ft. East of the Site of the Great Magnolia; Thence S-75(degree)-10'-05"-W for 33.09 ft.; Thence N-14(degree)-49'-56"-W for 26.97 ft.; Thence N-75(degree)-10'-05"-E for 33.09 ft.; Thence S-14(degree)-49'-56"-E for 26.97 ft. to the Point of Beginning. COAL UNLOADING BUILDING ALSO: Beginning at a Point at Alabama State Plane Coordinate N 268573.700, E 326422.793, said point being 2087.48 ft. North and 431.60 ft. East of the Site of the Great Magnolia; Thence N-32(degree)-45'-47"-W for 50.48 ft.; Thence N-57(degree)-14'-13"-E for 20.34 ft.; Thence S-32(degree)-45'-47"-E for 50.48 ft.; Thence S-57(degree)-14'-13"-W for 20.34 ft. to the Point of Beginning. AREA CONVEYORS ALSO: 4 strips of land being 10 feet in width and lying 5 feet each side of the following described centerlines. TO-WIT: Beginning at a Point at Alabama State Plane Coordinate N 268792.160, E 327704.257, said point being 2305.94 ft. North and 1713.07 ft. East of the Site of the Great Magnolia; Thence S-63(degree)-24'-43"-W for 4.45 ft.; Thence N-26(degree)-36'-02"-W for 200.15 ft. to the Point of ending of the Centerline herein described. Beginning at a Point at Alabama State Plane Coordinate N 268990.737, E 327615.688, said point being 2504.51 ft. North and 1624.50 ft. East of the Site of the Great Magnolia; Thence N-88(degree)-52'-24"-W for 273.56 ft. to the Point of Ending of the Centerline herein described. Beginning at a Point at Alabama State Plane Coordinate N 268995.750, E 327317.964, said point being 2509.53 ft. North and 1326.77 ft. East of the Site of the Great Magnolia; Thence S-75(degree)-08'-47"-W for 522.98 ft. to the Point of Ending of the Centerline herein described. Exhibit A-7 Beginning at a Point at Alabama State Plane Coordinate N 268842.848, E 326783.217, said point being 2356.62 ft. North and 792.03 ft. East of the Site of the Great Magnolia; Thence S-57(degree)-47'-29"-W for 428.42 ft. to the Point of Ending of the Centerline herein described. Being a portion of the premises conveyed by Augustine Meaher, Jr., et al., to Scott Paper Company by deed dated July 25, 1994 record in the office of the Judge of Probate of Mobile County Alabama in Real Property Book 4183, Page 1204. Exhibit A-8 CHIP STORAGE AND BIOMASS AREA ALSO: Beginning at a Point at Alabama State Plane Coordinate N 269052.227, E 327505.839, said point being 2566.00 ft. North and 1514.65 ft. East of the Site of the Great Magnolia; Thence S-79(degree)-10'-00"-W for 195.25 ft.; Thence S-11(degree)-04'-48"-E for 31.70 ft.; Thence S-74(degree)-56'-08"-W for 104.22 ft.; Thence S-60(degree)-54'-39"-W for 52.00 ft.; Thence S-79(degree)-03'-27"-W for 27.77 ft.; Thence N-28(degree)-25'-54"-W for 112.22 ft.; Thence N-61(degree)-34'-28"-E for 7.77 ft.; Thence N-28(degree)-25'-53"-W for 513.29 ft.; Thence S-61(degree)-17'-22"-W for 11.08 ft.; Thence N-28(degree)-42'-36"-W for 20.23 ft.; Thence N-60(degree)-59'-48"-E for 230.48 ft.; Thence N-47(degree)-00'-32"-E for 66.51 ft.; Thence S-30(degree)-11'-18"-E for 16.35 ft.; Thence N-60(degree)-36'-59"-E for 26.14 ft.; Thence S-29(degree)-04'-06"-E for 266.19 ft.; Thence N-60(degree)-55'-58"-E for 31.18 ft.; Thence S-29(degree)-04'-14"-E for 90.07 ft.; Thence S-60(degree)-55'-56"-W for 31.19 ft.; Thence S-29(degree)-04'-06"-E for 235.44 ft.; Thence N-61(degree)-12'-24"-E for 50.07 ft.; Thence S-28(degree)-47'-34"-E for 118.07 ft. to the Point of Beginning. Exhibit A-9 Exhibit A-2 IDB PROPERTIES THE FOLLOWING ESTATES OR INTEREST IN REAL PROPERTY: 1. The leasehold estate granted pursuant to that certain Utilities Land Sublease by and between Scott Paper Company and the Industrial Development Board of the City of Mobile, dated December 1, 1983, and recorded in Real Property Book 2557, Page 176, Office of the Judge of Probate, Mobile County, Alabama Records, amended December 1, 1983, and subsequently amended by amendment No. 2 to Utilities Land Sublease, dated November 8, 1994, and recorded in Real Property Book 4221, Page 41, aforesaid records, subject to the rights granted to the Scott Paper Company and its successors and assigns pursuant to the certain Lease and Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company dated December 1, 1984 and recorded in Real Property Book 2702, page 434, aforesaid records and amended by Amendment No. 1, dated November 8, 1984 and recorded in Real Property Book 4221, Page 31 aforesaid records. 2. Assets owned by the Industrial Development Board of the City of Mobile, described in and subject to that certain Lease and Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company, dated December 1, 1984, and recorded in Real Property Book 2702, Page 434 and amended by Amendment No. 1, dated November 8, 1984, and recorded in Real Property Book 4221, page 31 aforesaid records. 3. Assets owned by the Industrial Development Board of the City of Mobile, subject to and described in Paragraph 2 of Exhibit A of that certain Facilities Lease and Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company dated December 1, 1984, and recorded in Real Property Book 2753, Page 124, as amended by First Supplemental Facilities Lease Agreement dated June 1, 1985 and recorded in Real Property Book 2770, Page 290, and further amended by Second Supplemental Facilities Lease and Agreement, dated November 8, 1994, and recorded in Real Property Book 4221, Page 17, aforesaid records. 4. Assets owned by the Industrial Development Board of the City of Mobile, subject to that certain Construction, Financing and Installment Sale Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company, dated November 1, 1976 and recorded in Real Property Book 1644, Page 153, aforesaid records, and amended by Supplemental Amendment dated June 1, 1977 and recorded in Real Property Book 1719, Page 38, aforesaid records. 5. Assets owned by the Industrial Development Board of the City of Mobile, subject to that certain Construction, Financing and Page 1 of 3 Installment Sale Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company, dated April 1, 1973, as amended by First Supplemental Construction, Financing and Installment Sale Agreement, dated as of September 1, 1976, recorded in Real Property Book 1625, Page 496, aforesaid records, and a Second Supplemental Financing and Installment Sale Agreement, dated as of October 1, 1980, recorded in Real Property Book 2159, Page 199, aforesaid records. 6. Assets owned by the Industrial Development Board of the City of Mobile, described in and subject to that certain Recovery Boiler Facilities Lease and Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company, dated December 1, 1994, and recorded in Real Property Book 4221, Page 968, aforesaid records. 7. The leasehold interest pursuant to that certain Land Lease by and between Scott Paper Company and the Industrial Development Board of the City of Mobile, dated December 1, 1994, and recorded in Real Property Book 4221, Page 955, aforesaid records, subject to the rights of Scott Paper Company and its successors and assigns under that certain Recovery Boiler Facilities Lease and Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company dated December 1, 1994, and recorded in Real Property Book 4221, page 968, aforesaid records. 8. The leasehold interest pursuant to that certain Woodyard Land Sublease No. 2, dated December 1, 1984, and recorded in Real Property Book 2753, Page 157, aforesaid records, subject to the rights of Scott Paper Company and its successors and assigns under that certain Facilities Lease and Agreement by and between the Industrial Development Board of the City of Mobile and Scott Paper Company dated December 1, 1984, and recorded in Real Property Book 2753, Page 124, as amended by First Supplemental Facilities Lease Agreement dated June 1, 1985 and recorded in Real Property Book 2770, Page 290, and further amended by Second Supplemental Facilities Lease and Agreement, dated November 8, 1994, and recorded in Real Property Book 4221, page 17, aforesaid records. PROVIDED, HOWEVER, this Mortgage and the conveyance herein of the rights of the IDB are expressly made subject to all matters affecting the same of record in the Office of the Judge of Probate, Mobile County, Alabama, including, without limitations the following (a) all rights of the various leases, subleases and assignments owned by the Company and described in this Mortgage, and (b) the following Trust Indentures: (i) TRUST INDENTURE dated April 1, 1973 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY Page 2 of 3 OF MOBILE, ALABAMA and THE FIRST NATIONAL BANK OF MOBILE, as Trustee. (ii) TRUST INDENTURE dated November 1, 1976 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and THE FIRST NATIONAL BANK OF MOBILE, as Trustee, recorded in Book 1644, page 0194 in the office of the Probate Judge of Mobile County, Alabama. Page 3 of 3 (iii) TRUST INDENTURE dated December 1, 1983 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and BANKAMERICA TRUST COMPANY OF NEW YORK, as Trustee, recorded in Book 2557, page 079, aforesaid Records. (iv) TRUST INDENTURE dated December 1, 1984 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and CHEMICAL BANK, as Trustee, recorded in Book 2702, page 469, aforesaid Records. (v) TRUST INDENTURE dated December 1, 1984 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and THE FIRST NATIONAL BANK OF MOBILE, as Trustee, recorded in Book 2753, page 172, aforesaid Records. (vi) TRUST INDENTURE dated June 1, 1985 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE , ALABAMA and THE FIRST NATIONAL BANK OF MOBILE, as Trustee, recorded in Book 2770, page 297, aforesaid Records. (vii) TRUST INDENTURE dated December 1, 1994 between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and AMSOUTH BANK OF ALABAMA, as Trustee, recorded in Book 4221, page 1002, aforesaid Records. Page 4 of 3 Exhibit B CONVEYANCE LEASES ALL OF THE FOLLOWING DOCUMENTS HAVE BEEN CONVEYED BY MOBILE ENERGY SERVICES HOLDINGS, INC. (FORMERLY KNOWN AS MOBILE ENERGY SERVICES COMPANY, INC.) TO MOBILE ENERGY SERVICES COMPANY, L.L.C. BY VIRTUE OF THAT CERTAIN OMNIBUS DEED, BILL OF SALE, GENERAL ASSIGNMENT AND CONVEYANCE AGREEMENT DATED AS OF JULY 14, 1995: (a) That certain Construction, Financing and Installment Sale Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and SCOTT PAPER COMPANY, dated as of April 1, 1973, as amended by a First Supplemental Construction, Financing and Installment Sale Agreement, dated as of September 1, 1976, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 1625, Page 496, and a Second Supplemental Financing and Installment Sale Agreement, dated as of October 1, 1980, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 2159, Page 199, as partially assigned to MOBILE ENERGY SERVICES COMPANY, INC. by that certain Lease and Assignment Agreement, dated as of December 12, 1994. (b) That certain Construction, Financing and Installment Sale Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and SCOTT PAPER COMPANY, dated as of September 1, 1976, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 1625 at Page 541, as partially assigned to MOBILE ENERGY SERVICES COMPANY, INC. by that certain Lease and Assignment Agreement, dated as of December 12, 1994. (c) That certain Facilities Lease and Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and SCOTT PAPER COMPANY, dated as of December 1, 1984, as amended by that certain First Supplemental Facilities Lease and Agreement, dated as of June 1, 1985, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 2770, Page 2770, at Page 240, and that certain Second Supplemental Facilities Lease and Agreement, dated as of November 8, 1994, as assigned by that certain Sublease and Assignment Agreement, dated as of December 12, 1994. (d) That certain Lease and Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and SCOTT PAPER COMPANY, dated as of December 1, 1984, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 2702 at Page 436, as amended by that certain Amendment No. 1 to Lease and Agreement, dated as of November 8, 1994, recorded in Real Property Book 2702, Page 31, aforesaid records, and by Amendment No. 2 to Lease and Page 1 of 2 Agreement, dated as of December 9, 1994, recorded in Real Property Book 4221, Page 41, aforesaid records, as assigned by that certain Lease Assignment and Assumption Agreement between SCOTT PAPER COMPANY and MOBILE ENERGY SERVICES COMPANY, INC., dated as of December 12, 1994 (concurrently herewith, this lease is being amended and restated in connection with the refunding of the IDB's Variable Rate Demand Solid Waste Revenue Refunding Bonds (Scott Paper Company Project) Series 1984 A, B, C, D & E). (e) That certain Recovery Boiler Facilities Lease and Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA and SCOTT PAPER COMPANY, dated as of December 1, 1994, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 4221 at Page 968 (which was entered into as a part of a transaction to issue Industrial Development Revenue Bonds pursuant to an Inducement Resolution dated December 19, 1991), as assigned to MOBILE ENERGY SERVICES COMPANY, INC. by that certain Lease Assignment and Assumption Agreement, dated as of December 12, 1994. (f) That certain Lease Agreement between SCOTT PAPER COMPANY and MOBILE ENERGY SERVICES COMPANY, INC., dated as of December 12, 1994, a Memorandum of Lease of which has been recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 4222 at Page 1240. (g) That certain Supplementary Lease Agreement between SCOTT PAPER COMPANY and MOBILE ENERGY SERVICES COMPANY, INC., dated as of December 12, 1994, a Memorandum of Lease of which has been recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 4222 at Page 1248, as amended by that certain letter agreement, dated as of December 15, 1994. Page 2 of 2 Exhibit C EASEMENT PREMISES Scott Paper Company Subdivision (the "Subdivision") as depicted on that certain recorded plat of such subdivision recorded in Map Book 64, page 39, Office of the Judge of Probate of Mobile County, Alabama. LESS AND EXCEPT Lots 7 and 9 of the Subdivision and those portions of Lot 11 of the subdivision leased from Scott Paper Company to Mobile Energy Services Holdings, Inc. (formerly known as "Mobile Energy Services Company, Inc.") pursuant to that certain Supplementary Lease Agreement, dated as of December 12, 1994, a memorandum of which has been recorded in Real Property Book 4222, Page 1248, Office of the Judge of Probate, Mobile County, Alabama, as assigned to Mobile Energy Services Company, L.L.C. pursuant to that certain Omnibus Deed, Bill of Sale, General Assignment and Conveyance, dated as of July 14, 1994. Together With: Any and all rights of the Company to any land described in the following easements: a) That certain Crossing Easement from Alabama State Docks Department to Scott Paper Company, dated October 20, 1994 and recorded in Real Property Book 4215, Page 232; and b) that certain Grade Crossing Easement from Alabama State Docks Department to Scott Paper Company, dated October 20, 1994 and recorded in Real Property Book 4215, Page 237; and c) that certain Agreement Easement and Rights of Ways granted Hollingsworth & Whitney Company by the State Docks Commission, dated April 14, 1938 and recorded in Deed Book 279, Page 109; all of the Office of the Judge of Probate of Mobile County, Alabama. Page 1 of 1 Exhibit D EASEMENTS 1. That certain Easement Deed between S.D. WARREN COMPANY and MOBILE ENERGY SERVICES COMPANY, INC., dated as of December 12, 1994, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 4222 at Page 1525, as now or hereafter amended, as assigned to Mortgagee by that certain Omnibus Deed, Bill of Sale, General Assignment and Conveyance, dated as of July 14, 1995, and to be recorded in the Office of the Judge of Probate, Mobile County, Alabama. 2. That certain Easement Deed between SCOTT PAPER COMPANY and MOBILE ENERGY SERVICES COMPANY, INC., dated as of December 12, 1994, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 4222 at Page 1334, as now or hereafter amended, as assigned to Mortgagee by that certain Omnibus Deed, Bill of Sale, General Assignment and Conveyance, dated as of July 14, 1995, and to be recorded in the Office of the Judge of Probate, Mobile County, Alabama. 3. That certain Easement Deed between SCOTT PAPER COMPANY and MOBILE ENERGY SERVICES COMPANY, INC., dated as of December 12, 1994, recorded in the Office of the Judge of Probate, Mobile County, Alabama in Real Property Book 4222 at Page 1616, as now or hereafter amended, as assigned to Mortgagee by that certain Omnibus Deed, Bill of Sale, General Assignment and Conveyance, dated as of July 14, 1995, and to be recorded in the Office of the Judge of Probate, Mobile County, Alabama. 4. That certain Easement Deed between SCOTT PAPER COMPANY and MOBILE ENERGY SERVICES COMPANY, L.L.C. dated August __, 1995, to be recorded in the Office of the Judge of Probate, Mobile County, Alabama records. 5. That certain Crossing Easement from Alabama State Docks Department to Scott Paper Company, dated October 20, 1994 and recorded in Real Property Book 4215, Page 232, Office of the Judge of Probate, Mobile County, Alabama. 6. That certain Grade Crossing Easement from Alabama State Docks Department to Scott Paper Company, dated October 20, 1994 and recorded in Real Property Book 4215, Page 237, Office of the Judge of Probate, Mobile County, Alabama. 7. That certain Agreement Easement and Rights of Ways granted Hollingsworth & Whitney Company by the State Docks Commission, dated April 14, 1938 and recorded in Deed Book 279, Page 109, Office of the Judge of Probate, Mobile County, Alabama. Page 1 of 1 EX-4.8 9 Exhibit 4.8 This instrument prepared by and when recorded, please return to: Troutman Sanders 600 Peachtree Street Suite 5200 CROSS REFERENCE: Atlanta, Georgia 30308-2216 RP 4285, Attn: Elizabeth Chandler, Esq. PAGE 1121, Mobile County, Alabama records FIRST AMENDMENT TO LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES, RENTS, ISSUES AND PROFITS AND SECURITY AGREEMENT AND FIXTURE FILING This FIRST AMENDMENT TO LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES, RENTS, ISSUES AND PROFITS AND SECURITY AGREEMENT AND FIXTURE FILING is entered into and executed by and among MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company ("MESC"), THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA ("IDB"; MESC and IDB are collectively referred to herein as "Mortgagor"), and BANKERS TRUST (DELAWARE), not individually, but solely in its capacity as "Collateral Agent" under the Intercreditor Agreement ("Mortgagee"). W I T N E S S E T H: WHEREAS, Scott Paper Company ("Lessor") and Mobile Energy Services Company, Inc., an Alabama corporation ("MESC") entered into that certain Supplementary Lease Agreement, dated as of December 12, 1994 (the "Original Lease"), the subject of which was to lease certain improved real property which is more particularly described on Exhibit "B" attached to the Original Lease (the "Original Leased Premises"); and WHEREAS, the Original Lease was amended by that certain First Amendment to Supplementary Lease Agreement ("First Lease Amendment"), dated as of July 13, 1995, and that certain Second Amendment to Supplementary Lease Agreement ("Second Lease Amendment"), dated as of August 1, 1995 (the Original Lease, as amended by the First Amendment and the Second Lease Amendment shall be referred to herein as the "Lease"); and WHEREAS, MESC is the successor-in-interest to Mobile Energy Services Holdings, Inc., an Alabama corporation, which is formerly known as "Mobile Energy Services Company, Inc.;" and WHEREAS, Mortgagor and Mortgagee entered into that certain Leasehold Mortgage, Assignment of Rents, Rents, Issues and Profits and Security Agreement and Fixture Filing (the "Mortgage"), dated as of August 1, 1995 and filed for record in RP 4285, Page 1121, in the Office of the Judge of Probate, Mobile County, Alabama, with respect to certain real property located in Mobile County, Alabama, including, without limitation, the Original Leased Premises; and WHEREAS, concurrently herewith, Lessor and MESC are entering into that certain Third Amendment to Supplementary Lease Agreement to change, among other matters, the description of the Original Leased Premises (the "Relocated Premises"), upon the terms and conditions therein contained; and WHEREAS, Mortgagor and Mortgagee wish to modify the Mortgage to include that certain portion of the Relocated Premises which was not contained in the Original Leased Premises and for other purposes more particularly described herein. NOW, THEREFORE, for and in consideration of the premises described above and of the mutual benefits to be received by the parties each from the other, Mortgagor and Mortgagee do hereby execute this First Amendment and do hereby covenant, certify and agree with each other as follows: 1. The recitals set forth above are incorporated into the agreement between them for all purposes, and the parties hereby agree that said recitals are true and correct in all material respects. Except as otherwise specified herein, capitalized terms used herein but not defined herein shall have the meanings specified in the Mortgage. 2. In addition to the Collateral subject to the Mortgage, MESC has bargained and sold, and hereby irrevocably grants, bargains, sells, remises, releases, conveys, warrants, assigns, transfers mortgages, pledges, delivers, grants a security interest, sets over and confirms unto Mortgagee for the benefit and used of the Senior Secured Parties forever, with warranties of title as set forth in Section 4 of the Mortgage, subject to the terms and conditions set forth in the Mortgage, all rights, title and interest of MESC in and to that certain property (the "Additional Collateral") more particularly described on Exhibit "A" attached hereto and by this reference incorporated herein so that from and after the date hereof, the Collateral, as such term is defined in the Mortgage shall include the Additional Collateral. 3. Following the grant described in Paragraph 2 above, Parcel II described in Exhibit "A", page 2 of 8 of the Mortgage, shall be deleted and that certain parcel of land described on Exhibit "B" attached hereto and by this reference incorporated herein shall be replaced in lieu thereof. 4. Except as expressly modified hereby, all other terms and provisions of the Mortgage shall remain the same, and shall remain in full force and effect, and the parties hereto do hereby ratify and affirm each and every term thereof. Mortgagor hereby reaffirms its obligation and liability under the Mortgage, acknowledges that it has no defenses to said obligation and liability, and further agrees to abide by all terms and provisions of the Mortgage, as amended herein. The terms of this First Amendment shall in no event occasion a release of any of the Collateral. The parties hereto agree that this First Amendment shall not constitute a novation of the Mortgage, or of any security, title or interest created thereby, or of any of the obligations thereunder. To the extent that any of the terms of the Mortgage conflict with or are inconsistent with the terms of this First Amendment, then the terms of this First Amendment shall control. That except as specifically modified by the First Amendment, the Mortgage, shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned have duly caused this First Amendment to be duly executed this the 8th day of December, 1995. "MORTGAGEE" BANKERS TRUST (DELAWARE), as Collateral Agent By: /s/ Name: James H. Stallkamp Title: President "MORTGAGOR" MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company By: /s/ Name: S. Marce Fuller Title: Vice President THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA By: /s/ Name: Robert S. Wilbanks Title: Secretary STATE OF Delaware COUNTY OF Newcastle I, the undersigned Notary Public in and for said County in said State, hereby certify that James H. Stallcamp whose name as President of Bankers Trust (Delaware), is signed to the foregoing First Amendment and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and seal this the 7th day of December, 1995. /s/ Notary Public [AFFIX NOTARY SEAL] STATE OF Georgia COUNTY OF Fulton I, the undersigned Notary Public in and for said County in said State, hereby certify that S. Marce Fuller whose name as Vice President of Mobile Energy Services Co., L.L.C., is signed to the foregoing First Amendment and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and seal this the 21st day of December, 1995. /s/ Notary Public [AFFIX NOTARY SEAL] STATE OF Alabama COUNTY OF Mobile I, the undersigned Notary Public in and for said County in said State, hereby certify that Robert Wilbank whose name as Secretary of the Board, is signed to the foregoing First Amendment and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and seal this the 17th day of December, 1995. /s/ Notary Public [AFFIX NOTARY SEAL] EXHIBIT "A" Beginning at a point in Lot 11 of Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the Judge of Probate of Mobile County, Alabama, said point being 2029.873 feet North and 2185.566 feet East of the Site of the Great Magnolia and at Alabama State Plane Coordinate, West Zone, N 268516.099, E 328173.913; Thence N-41(degree)-44'-09" E for 197.45 ft.; Thence S-26(degree)-32'-42"-E for 4.30 ft.; Thence S-41(degree)-44'-09"-W for 195.20 ft. to a point on a curve to the left having a radius of 438.37 ft., the chord of which bears N-57(degree)-35'-46"-W for 4.05 ft. for an arc distance of 4.05 ft. to the Point of Beginning. Said parcel lying and being in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64 page 39 in the office of the Judge of Probate of Mobile, County, Alabama, and containing 785.121 square feet, more or less. EXHIBIT "B" Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the Judge of Probate of Mobile County, Alabama; Said point being 2029.873 feet North and 2185.566 feet East of the Site of the Great Magnolia, and at Alabama State Plan Coordinate, West Zone, NAD 1927, North 268516.099, East 328173.913; Thence N-41(degree)-44'- 09"-E for 197.45 feet; Thence S-26(degree)-32'-42"-E for 123.69 feet; Thence S-34(degree)-20'-56"-E for 96.39 feet; Thence 41(degree)-44'-09"-W for 143.79 feet; Thence Northwesterly, around a curve to the left having a radius of 438.37 feet and a Delta angle of 27(degree)-35'-10", the Chord of which bears N-44(degree)-04'-04"-W for 209.02 feet, for an arc distance of 211.06 feet to the Point of Beginning. Said Parcel lying and being entirely within the boundaries of Lot 11 of the aforesaid Scott Paper Company Subdivision, and containing 0.759 acres, more or less. EX-4.9 10 Exhibit 4.9 - ------------------------------------------------------------------------------- ASSIGNMENT AND SECURITY AGREEMENT between MOBILE ENERGY SERVICES COMPANY, L.L.C. and THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA, as Debtors, and BANKERS TRUST (DELAWARE), as the Secured Party Dated as of August 1, 1995 - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page 1. Definitions and other Provisions of Interpretation......................1 2. Creation of Security Interest...........................................1 3. Representations, Warranties and Covenants...............................5 4. Default.................................................................7 5. Rights and Remedies During Trigger Event Period.........................7 6. Assignment of Governmental Approvals....................................8 7. Security Interest Absolute..............................................8 8. Attorney-in-Fact........................................................9 9. Secured Party and Senior Secured Parties May Perform...................10 10. The Company Remains Liable............................................10 11. Indemnification; Subrogation; Waiver of Offset........................10 12. Reasonable Care.......................................................11 13. Waivers of Rights Inhibiting Enforcement..............................11 14. No Duty on Secured Party's Part.......................................11 15. Notices...............................................................12 16. Other Remedies........................................................12 17. Waiver................................................................12 18. Time of Essence.......................................................12 19. Successors and Assigns................................................12 20. Headings..............................................................12 21. Governing Law.........................................................12 22. Amendments, Changes and Modifications.................................13 23. Assignment............................................................13 24. Severability..........................................................13 25. Secured Party Not Liable..............................................13 26. No Recourse...........................................................13 27. Counterparts..........................................................13 28. Continuing Assignment, Pledge and Security Interest...................13 29. Security Only.........................................................14 30. Payments Set Aside....................................................14 31. Further Assurances....................................................14 32. Shared Drafting.......................................................14 34. Conflict with Intercreditor Agreement.................................15 35. Effect of Termination of Intercreditor Agreement......................15 APPENDIX A - Defined Terms -i- This ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement"), dated as of August 1, 1995, among MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company ("Company"), THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA, a public corporation organized and existing under the laws of the State of Alabama (the "IDB" and, severally and not jointly with the Company, "Debtors"), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent under the Intercreditor Agreement referred to below (the "Secured Party"). W I T N E S S E T H : WHEREAS, in consideration of (a) the execution and delivery by the Secured Party and the Senior Secured Parties (as defined below) of the Financing Documents (as defined below) to which they are parties, (b) the Senior Secured Parties making available to the Company the Financing Commitments (as defined below) and advancing monies thereunder and (c) the Senior Secured Party providing certain services under this Agreement, the Mortgage (as defined below), the Intercreditor Agreement and any other Financing Documents to which the Secured Party is a party, the Senior Secured Parties require each Debtor to grant the security interest contemplated by this Agreement to the Secured Party to secure the Secured Obligations (as defined below); and WHEREAS, this Agreement is intended as security for the Secured Obligations. NOW, THEREFORE, in consideration of the premises set forth above and the mutual covenants contained herein, in order to induce each Senior Secured Party to issue or make available the Secured Obligations pursuant to the terms and provisions of the Financing Documents to which each such Senior Secured Party is a party and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and FOR THE PURPOSE OF SECURING the payment and performance of the Secured Obligations, which Secured Obligations may increase, decrease and increase again, from time to time, the parties hereto hereby agree as follows: 1. Definitions and other Provisions of Interpretation. For all purposes of this Agreement, except as otherwise expressly provided in this Agreement or unless the context otherwise requires, all terms used herein shall have the meanings set forth in Appendix A to the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among the First Union National Bank of Georgia, as the Indenture Trustee referred to therein, First Union National Bank of Georgia, as the Tax-Exempt Indenture Trustee referred to therein, Banque Paribas, as the Working Capital Facility Provider referred to therein, the IDB, the Company, Mobile Energy Services Holdings, Inc. and the Secured Party. 2. Creation of Security Interest. (a) As security for the full payment, observance and performance when due (whether at stated maturity, by acceleration or otherwise) of any and all of the Secured Obligations now existing or hereafter arising, each Debtor hereby mortgages, pledges and collaterally assigns to the Secured Party (for the ratable benefit of the Senior Secured Parties), and grants to and in favor of the Secured Party (for the ratable benefit of the Senior Secured Parties) a continuing lien upon, and a continuing security interest in, all estate, right, title and interest (whatever it may be) of such Debtor in, to and under the following (whether now foreseeable, whether or not the same is subject to Article 8 or 9 of the Uniform Commercial Code or constitutes Collateral by reason of one or more of the following paragraphs and wherever the same may be located) (collectively, the "Collateral"): (i) all Project Contracts and any other Contract, commitment or understanding heretofore or hereafter executed by (or on behalf of) such Debtor in connection with the Energy Complex, the Site or any of the Project Documents (the "Assigned Agreements"), including (A) all rights of such Debtor to receive monies due and to become due, and all monies actually received by such Debtor, under or pursuant to the Assigned Agreements, (B) all rights of such Debtor to receive proceeds of any performance or payment bond, insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (C) all claims of such Debtor for damages arising out of or for breach of or default under the Assigned Agreements and (D) all rights of such Debtor to take any action to terminate, amend, supplement, modify or waive performance of the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder; provided, however, that, except during a Trigger Event Period, such Debtor may exercise all of the foregoing rights in any lawful manner not inconsistent with this Agreement, the Mortgage or any of the other Security Documents; (ii) all automobiles, trucks, boats and other rolling stock or moveable personal property ("Rolling Stock"), including Rolling Stock for which the title thereto is evidenced by a certificate of title issued by the United States or a state that permits or requires a lien thereon to be evidenced upon such certificate, in which the Company now or at any time in the future may have an interest or in which the IDB now or at any time in future may have an interest in connection with the Energy Complex or the Site. In connection therewith, such Debtor shall notify the Secured Party before acquiring any such Rolling Stock, and provide the Secured Party with (A) all lien entry forms and similar documents, duly completed, executed and acknowledged, (B) the certificates of title to such Rolling Stock and (C) such other information or documents, in each case, to the extent required or reasonably desirable in order to enable the Secured Party -2- to perfect the lien granted hereunder on such Rolling Stock. Upon execution of such lien entry forms and other documents by the Secured Party, such Debtor shall, at the sole cost and expense of the Company, cause such lien entry forms and other documents to be presented to the appropriate authorities in order to perfect the lien granted hereunder on such Rolling Stock for the benefit of the Secured Party; (iii) to the extent permitted by Law, all Governmental Approvals relating to the Energy Complex; provided, however, that any of such Governmental Approvals that by their terms or by operation of Law would become void, voidable, terminable or revocable or would constitute a breach or default thereunder if pledged or assigned hereunder or if a security interest therein were granted hereunder are expressly excepted and excluded from the lien and terms of this Agreement to the extent necessary to avoid such voidness, voidability, terminability or revocability; (iv) all Equipment (as such term is defined in the Uniform Commercial Code as in effect on the date hereof); (v) all accounts (as defined in the Uniform Commercial Code), together with any right to payment for goods sold or leased or for services rendered in connection with such accounts, whether or not such right to payment has been earned by performance, and all agreements, rights, interests, inventory (including fuel supplies including oil, gas, coal, weak black liquor, biomass and sludge) goods, chattel paper, documents, instruments, general intangibles, fixtures, trade fixtures, consumer goods, money and other assets owned by such Debtor on the date hereof or hereafter arising or acquired, including the 1994 Bonds, the Improvements (as such term is defined in the Mortgage), and designs, plans and specifications relating to the Site and the facilities owned by such Debtor on the date hereof or hereafter acquired, if applicable, all offsets or allowances under the Clean Air Act Amendments of 1990 and any implementing state Laws in respect thereof and any right, title or interest of such Debtor under any indemnity, warranty or guaranty in respect of the Site and the Energy Complex or of any of the foregoing and any rents, revenues, incomes and profits in respect of the Site and the Energy Complex; provided, however, that no Debt Service Reserve Account, Tax-Exempt Debt Service Reserve Account or Mill Owner Maintenance Reserve Account, nor (except in the case of the Mill Owner Maintenance Reserve Account, the Company's right to receive amounts therein to the extent such amounts are in excess of $2 million) any monies contained therein or hereafter transferred thereto or deposited therein (nor any right to receive monies thereunder), shall be included in the Collateral and no lien or security interest therein shall be deemed to be created hereby; -3- (vi) all proceeds of and any unearned premiums on any insurance policies covering the Collateral, including the right to receive the proceeds of any insurance, judgments or settlements made in lieu thereof for damage to the Collateral; (vii) (A) the Intercreditor Agreement Accounts, all sums of money, from any source whatsoever, now or hereafter transferred to and comprising the Intercreditor Agreement Accounts or delivered to the Secured Party for deposit therein, including all credit balances therein, any and all cash and investments at any time on deposit in the Intercreditor Agreement Accounts and any and all interest and dividends or other income derived from such monies and investments, and (B) all statements, certificates, passbooks and instruments representing the Intercreditor Agreement Accounts and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Intercreditor Agreement Accounts; and (viii) to the extent not included in the foregoing, all proceeds, products and accessions of and to any and all of the foregoing, including "proceeds" (within the meaning of the Uniform Commercial Code) and whatever is received upon any collection, exchange, sale or other disposition of any of the Collateral, and any property into which any of the Collateral is converted, whether cash or noncash proceeds, and any and all other amounts paid or payable under or in connection with any of the Collateral. Notwithstanding the foregoing, the Security Interest granted hereby in favor of the Secured Party shall be released without condition as to monies deposited into any Indenture Account or Tax-Exempt Indenture Account or into the Mill Owner Maintenance Reserve Account upon, in each case, the deposit of such monies therein, and the Collateral shall not include, and no Security Interest is granted hereby in, any right, title or interest of either Debtor in any Indenture Account or Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account, all sums of money, from any source whatsoever, now or hereafter transferred to or deposited into any Indenture Account or Tax-Exempt Indenture Account (or delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee for deposit therein) or, except to the extent monies on deposit therein exceed $2,000,000, the Company's right to receive such excess from the Mill Owner Maintenance Reserve Account, including, in each case, all credit balances therein, any and all cash and investments at any time on deposit in any Indenture Account or any Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account, and any and all interest, dividends and other income derived from such monies and investments on deposit therein and all certificates, passbooks and instruments representing any Indenture Account or Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any Indenture Account -4- or Tax-Exempt Indenture Account or the Mill Owner Maintenance Reserve Account. In addition, notwithstanding the foregoing, the Security Interest granted hereby shall be, and shall at all times continue to be, subject and subordinate in all respects to the lien and security interest of the Tax-Exempt Indenture Trustee granted by the IDB pursuant to or in connection with the Tax-Exempt Indenture Securities, the 1983 Bonds, the 1984 Bonds, the 1994 Bonds, the Mixed-Use Bonds and the Environmental Bonds, including, in each case, any renewal, modification, extension, substitution, replacement or consolidation thereof. Such subordination shall not be affected by any further advance, repayment and readvance or prepayment under or in respect of any instrument secured by the Tax-Exempt Indenture. It is the intention of the parties that the foregoing description of the Collateral shall be sufficient, together with the description of the Collateral set forth in the Mortgage, to enable the Secured Party to take possession of, or foreclose upon, all of the right, title and interest of each Debtor in and to the Shared Collateral, including the Site and the Energy Complex and any and all real property and personal property, tangible and intangible, used or useable in connection therewith, and to enable the Secured Party or its designee to, in accordance with the terms hereof and of the Mortgage, operate, sell or otherwise dispose of the entire interest of such Debtor in and to the Shared Collateral, including the Site and the Energy Complex or any part thereof, during a Trigger Event Period; provided, however, that all of the Collateral is hereby assigned to the Secured Party solely as security, and the Secured Party shall have no duty, liability or obligation whatsoever to such Debtor with respect to any of the Collateral, unless the Secured Party so elects in writing consistent with its rights under this Agreement. (b) This Agreement secures, in accordance with the provisions hereof, the Secured Obligations. 3. Representations, Warranties and Covenants. The Company hereby represents, warrants and covenants as follows: (a) The Security Interest granted and created pursuant to this Agreement is a legal and valid security interest in the Collateral now owned by the Company or hereafter acquired. (b) The Security Interest granted and created pursuant to this Agreement (i) with respect to such of the Collateral in which a security interest may be perfected by the filing of a Financing Statement under the Uniform Commercial Code will, upon the filing of the necessary Financing Statements in all appropriate jurisdictions, create a perfected first priority security interest in such Collateral now owned by the Company or hereafter acquired, prior and superior to all other Liens (other than Permitted Liens), and (ii) with respect to all of -5- the other Collateral to which the Uniform Commercial Code is applicable will, upon the Secured Party's taking possession of such Collateral, create a perfected first priority security interest in such Collateral now owned by the Company or hereafter acquired, prior and superior to all other Liens (other than Permitted Liens). (c) The Company is the legal and beneficial owner of the Collateral now owned by it, and will be the legal and beneficial owner of the interest in the Collateral hereafter acquired by it, free and clear of all Liens (other than Permitted Liens). (d) No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority, any regulatory body or any other Person is required of the Company with respect to the execution, delivery and performance of, or the grant of the Security Interest pursuant to, this Agreement (other than the filing of the Financing Statements referred to in Section 3(b) and such authorizations, approvals and other actions that have been obtained and are in full force and effect). (e) The Company shall notify the Secured Party promptly in writing of any claim against the Collateral adverse in any material respect to the interest of the Secured Party hereunder. (f) The Company agrees that from time to time upon the request of the Secured Party, the Company will, at its sole cost and expense, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or advisable, or that the Secured Party may request, in order to perfect, maintain, preserve and protect the Security Interest granted or purported to be granted hereby in the Collateral, maintain, preserve and protect the Collateral, or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to the Collateral. Without limiting the generality of the foregoing, the Company will (i) if any Collateral shall be evidenced by a promissory note or other instrument, deliver and pledge to the Secured Party hereunder such note or instrument duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Secured Party, and (ii) execute and file such financing or continuation statements, or amendments thereto and assignments thereof, and such other instruments, endorsements or notices, as may be necessary, or as the Secured Party may request, in order to perfect, maintain, preserve and protect the Security Interest granted or purported to be granted hereby. Each Debtor hereby authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto and assignments thereof, relating to all or -6- any part of the Collateral without the signature of such Debtor where permitted by Law. (g) The Company shall keep and maintain, at its sole cost and expense, satisfactory and complete records of the Collateral. The Company shall furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral (including such file search reports from such Uniform Commercial Code and other filing and recording offices and such opinions of counsel relating to the Collateral and the attachment and perfection of the Security Interest) as the Secured Party may request. The Company's chief executive office and principal place of business is 900 Ashwood Parkway, Suite 300, Atlanta, Georgia 30338; the Company shall promptly notify the Secured Party of any change of the foregoing. (h) The Company shall not create, incur or permit to exist, and shall defend the Collateral against and take such other action as is necessary to remove, any Lien or claim on or to the Collateral, other than Permitted Liens, and will defend the right, title and interest of the Secured Party in and to any of the Collateral against the claims and demands of all Persons whomsoever. Except with respect to Permitted Liens, neither Debtor shall file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Collateral in which the Secured Party is not named as the sole secured party (other than any such instrument on file as of the date hereof (and any continuation thereof) naming the Company as secured party. (i) The Company shall notify the Secured Party promptly if any tangible, material items of Collateral, or any material items that are to become Collateral, are to be stored for any length of time (other than temporary storage incident to transportation to the Site) in any location other than the Site. The notice shall specify, in such detail as is required by the Secured Party, (i) the items that are to be stored, (ii) the location at which such items are to be stored and the name and address of the owner and operator of the storage facility, (iii) the length of time that such items are to be stored at such location and (iv) the name of the Person who is the owner of such items. To the extent necessary, the Company shall execute additional security agreements, financing statements and other related documents, covering the items that are to be stored, so as to perfect a first priority security interest therein in favor of the Secured Party. If for any reason a first priority security interest cannot be perfected in the items stored or to be stored, the Company shall promptly transport such items to the Site. Upon instructions from the Secured Party, the Company shall obtain such additional insurance on the Collateral stored at any -7- location other than the Site as the Secured Party, based on the advice of the Independent Insurance Advisor, reasonably deems necessary, consistent with the requirements of the Financing Documents, to protect the Secured Party's interests. (j) In the event that the Company shall receive directly from any party to the Assigned Agreements any payments thereunder, the Company shall receive such payments in constructive trust for the benefit of the Secured Party, shall segregate such payments from other funds of the Company and shall forthwith transmit and deliver such payments to the Secured Party in the same form as so received (with any necessary endorsements), in each case in accordance with the Intercreditor Agreement. 4. Default. The occurrence and continuation of a Trigger Event shall be deemed a "Security Agreement Event of Default" under this Agreement. 5. Rights and Remedies During Trigger Event Period. (a) During a Trigger Event Period, the Secured Party may, in accordance with its obligations under the Intercreditor Agreement, do one or more of the following: (i) notwithstanding anything in the Financing Documents to the contrary, take all cash held by the Secured Party (including any resulting from the liquidation of investments) as Collateral, including all cash proceeds received or receivable by the Secured Party in respect of the Collateral, and use such cash for such purposes in accordance with its obligations under the Intercreditor Agreement, and in the interest of the Energy Complex and/or apply the same in whole or in part, in satisfaction of all or any part of the Secured Obligations (whether or not due and payable) in the manner specified in Section 5(b); (ii) upon notice to the Company, which notice need not be in writing (but which notice shall promptly be confirmed in writing), make such payments and do such acts in accordance with its obligations under the Intercreditor Agreement, to protect, maintain, preserve, perfect or continue the perfection of the Security Interest in the Collateral and to maintain, preserve and protect the Collateral, including paying, purchasing, contesting or compromising any Lien that is, or purports to be, prior to or superior to the Security Interest granted hereunder, and commencing, appearing or otherwise participating in or controlling any action or proceeding purporting to affect the Security Interest in or ownership of the Collateral; (iii) foreclose this Agreement as herein provided or in any manner permitted by Law and exercise any and all of the rights and remedies conferred upon the Secured Party by the Security Documents either concurrently or in such order as the -8- Secured Party may determine without affecting the rights or remedies to which the Secured Party may be entitled under the Security Documents; (iv) require the Company to, and the Company hereby agrees that it will, at its expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place to be designated by the Secured Party that is reasonably convenient to both parties; (v) without notice or demand or legal process, enter upon any premises of the Company and take possession of the Collateral; (vi) without notice, except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Secured Party's offices or elsewhere, at such time or times, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Secured Party may deem commercially reasonable. The Company agrees that, to the extent notice of sale shall be required by Law, at least ten (10) days' notice to the Company of the time and the place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. At any sale of the Collateral, if permitted by Law, the Secured Party or any Senior Secured Party may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) for the purchase of the Collateral or any portion thereof for the account of the Secured Party or such Senior Secured Party. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Debtor authorizes the Secured Party, at any time and from time to time, to execute, in connection with a sale of the Collateral pursuant to the provisions of this Agreement, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (vii) exercise with respect to the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party after default under the Uniform Commercial Code. (b) The proceeds of any sale or realization of the Collateral shall be applied in accordance with Section 6.1 of the Intercreditor Agreement. -9- (c) The Secured Party may consult, at the Company's expense, with counsel (who may or may not be counsel to the Company), and the opinion of such counsel shall be full and complete authorization and protection, and the Secured Party shall be entitled to conclusively rely on the opinion of such counsel, in respect of any action taken or not taken or suffered by the Secured Party under this Agreement. 6. Assignment of Governmental Approvals. During a Trigger Event Period, the Company agrees to use its best efforts to have renewed or extended in the name of the Secured Party (or other Person operating the Energy Complex) or otherwise to obtain for the Secured Party (or such other Person) the benefits of all of the Company's Governmental Approvals to the extent that such Governmental Approvals and other rights shall not be assignable or transferable. 7. Security Interest Absolute. All rights of the Secured Party hereunder, the Security Interest and all obligations of the Company hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any of the Project Documents, any of the Collateral (including the Assigned Agreements) or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any of the Project Documents or any of the Collateral (including the Assigned Agreements); (c) any exchange, release or non-perfection of any Collateral or any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Secured Obligations; or (d) to the fullest extent permitted by Law, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or any third party pledgor. 8. Attorney-in-Fact. Each Debtor, until payment in full of the Secured Obligations, irrevocably constitutes and appoints the Secured Party, and any other Person that the Secured Party may designate, to act, upon the occurrence and during a Trigger Event Period, as such Debtor's attorney-in-fact (which appointment as attorney-in-fact shall be coupled with an interest and be irrevocable), with full authority in the place and stead of such Debtor and in the name of such Debtor or otherwise, from time to time in the Secured Party's discretion and subject to Section 7.3 of the Intercreditor Agreement, to take any action and to execute any and all documents and instruments that the Secured Party may -10- deem necessary or advisable to accomplish the purposes of this Agreement, including: (a) to receive, endorse and collect all instruments made payable to such Debtor representing any dividends, interest payments or other distributions constituting Collateral or any part thereof and to give full discharge for the same and to file any claim or to take any other action or proceeding in any court of Law or equity or otherwise deemed appropriate by the Secured Party for the purpose of collecting any and all of such dividends, payments or other distributions; (b) to pay or discharge taxes and Liens levied or placed on the Collateral; and (c) (i) to direct any party liable for any payment under or with respect to any of the Collateral to make payment of any and all monies due or to become due thereunder or with respect thereto directly to the Secured Party or as the Secured Party shall direct, (ii) to ask or demand for, to collect and to receive payment of and receipt for any and all monies, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (iii) to commence and prosecute any suits, actions or proceedings at Law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral, (iv) to defend any suit, action or proceeding brought against such Debtor with respect to any Collateral, (v) to settle, compromise or adjust any suit, action or proceeding described in clauses (iii) and (iv) above and, in connection therewith, to give such discharges or releases as the Secured Party may deem appropriate and (vi) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes and to do, at the Secured Party's option and at such Debtor's sole cost and expense, at any time, or from time to time, all acts and things that the Secured Party deems necessary to protect, maintain, preserve or realize upon the Collateral and the Security Interest granted herein and to effect the intent of this Agreement, all as fully and effectively as such Debtor might do. Each Debtor hereby ratifies all that the Secured Party shall do or cause to be done as such Debtor's attorney-in-fact consistent with the foregoing. Each Debtor also authorizes the Secured Party, during a Trigger Event Period, to communicate in its own name with any party to any Project Document at any time, with regard to any matter relating to such Project Document. 9. Secured Party and Senior Secured Parties May Perform. The Secured Party or any Senior Secured Party (upon notice to the Secured Party and each other Senior Secured Party), without -11- releasing the Company from any obligation, covenant or condition hereof, itself may (but shall not be obligated to), during any Trigger Event Period, make any payment or perform, or cause the performance of, any such obligation, covenant, condition or agreement or any other action in such manner and to such extent as the Secured Party may deem necessary to protect, perfect, maintain, preserve or continue the perfection of the Security Interest in the Collateral or to protect, maintain or preserve the Collateral. Any costs or expenses incurred by the Secured Party or any Senior Secured Party in connection with the foregoing, including reasonable attorneys' fees and expenses, shall constitute a part of the Secured Obligations, shall bear interest at a rate per annum equal to the then highest yield on any of the Outstanding Senior Debt plus two percent (2%) and shall be payable upon demand by the Secured Party or such Senior Secured Party, as the case may be. 10. The Company Remains Liable. Anything herein to the contrary notwithstanding, the Company shall remain liable under the Assigned Agreements and any other Contracts included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed. The exercise by the Secured Party of any of the rights or remedies hereunder shall not release the Company from any of its duties or obligations under the Assigned Agreements or any other Contracts included in the Collateral, except to the extent the Company is expressly released therefrom by the Secured Party in writing. The Secured Party shall not have any obligation or liability under the Assigned Agreements or any other Contracts included in the Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of the Company thereunder or to take any action to collect or enforce any claim for payment assigned hereunder, except to the extent the Secured Party expressly assumes such obligations or duties in writing consistent with its rights under this Agreement. 11. Indemnification; Subrogation; Waiver of Offset. (a) The Company shall indemnify the Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement or the Collateral or any part thereof (including enforcement of this Agreement, but excluding any such claims, losses or liabilities resulting from the Secured Party's gross negligence or willful misconduct). (b) The Company waives any and all right to claim or recover against the Secured Party, and its directors, officers, employees, agents and representatives, for loss of or damage to the Company, the Collateral, the Company's property or the property of others under the Company's control from any cause to the extent insured against or required to be insured against by the provisions of the Financing Documents, except for such loss or damage to the extent due to gross negligence or willful misconduct of the Secured Party or its directors, officers, employees or representatives. -12- 12. Reasonable Care. The Secured Party shall exercise the same degree of care hereunder as it exercises or would exercise in connection with similar transactions for its own account. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Secured Party accords or would accord collateral held by the Secured Party in similar transactions for its own account. Without limiting the generality of the foregoing and except as otherwise provided by applicable Law, the Secured Party shall not be required to marshall any collateral, including the Collateral subject to the Security Interest created hereby, or to resort to any item of Collateral in any particular order; and all of the Secured Party's rights hereunder and in respect of such Collateral shall be cumulative and in addition to all other rights, however existing or arising. To the extent that it lawfully may, each Debtor hereby agrees that it will not invoke any Law relating to the marshaling of collateral that might cause delay in or impede the enforcement of the Secured Party's rights under this Agreement, the Mortgage or under any other instrument evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or guaranteed. 13. Waivers of Rights Inhibiting Enforcement. Each Debtor waives (a) any claim that, as to any part of the Collateral, a public sale, if such Debtor elects so to proceed, is, in and of itself, not a commercially reasonable method of sale for such Collateral, (b) the right to assert in any action or proceeding between it and the Secured Party any offsets or counterclaims that it may have, (c) except as otherwise provided in any of the Security Documents, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURED PARTY'S TAKING POSSESSION OR DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT EACH DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF THE SECURED PARTY'S RIGHTS HEREUNDER, (d) all rights of redemption, appraisement, valuation, stay and extension or moratorium, (e) to the extent permitted by Law, the benefits of all Laws referred to in Section 12 and (f) all other rights the exercise of which would, directly or indirectly, prevent, delay or inhibit the enforcement of any of the rights or remedies under the Security Documents or the absolute sale of the Collateral, now or hereafter in force under any applicable Law, and each Debtor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such Laws and rights. 14. No Duty on Secured Party's Part. The powers conferred on the Secured Party hereunder are solely to protect the -13- Secured Party's interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Secured Party shall be accountable only for amounts that it receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Company for any act or failure to act hereunder, except for its own gross negligence or willful misconduct. 15. Notices. All notices, demands, requests and other communications required or permitted hereunder shall be in writing and shall be given and deemed to have been given in accordance with Section 12.4 of the Intercreditor Agreement. 16. Other Remedies. The remedies herein provided are cumulative and not exclusive of any remedies provided by Law. The Secured Party shall have all of the rights and remedies granted under the Security Documents and available at Law or in equity, and these same rights and remedies may be pursued separately, successively or concurrently against the Company or any collateral under the Security Documents, at the sole discretion of the Secured Party. The application of the Collateral to satisfy the Secured Obligations pursuant to the terms hereof shall not operate to release the Company from its Secured Obligations until payment in full of any deficiency has been made in cash. 17. Waiver. By exercising or failing to exercise any of its rights, options or elections hereunder (without also expressly waiving the same in writing), the Secured Party shall not be deemed to have waived any breach or default on the part of the Company or to have released the Company from any of its obligations secured hereby. No failure on the part of the Secured Party to exercise, and no delay in exercising (without also expressly waiving the same in writing), any right, power or privilege shall preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. 18. Time of Essence. TIME IS OF THE ESSENCE WITH RESPECT TO EACH AND EVERY COVENANT, AGREEMENT AND OBLIGATION UNDER THIS AGREEMENT. 19. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the parties hereto shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. 20. Headings. The captions, headings and table of contents used in this Agreement are for convenience only and shall not affect the construction hereof. 21. Governing Law. THE RIGHTS AND DUTIES OF EACH DEBTOR AND THE SECURED PARTY SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS -14- THEREOF (OTHER THAN SUCH SECTION 5-1401), EXCEPT THAT SUCH LAW SHALL NOT APPLY WITH RESPECT TO ANY COLLATERAL WHERE, AND TO THE EXTENT THAT, IT IS NECESSARY TO APPLY THE LAWS OF ANOTHER JURISDICTION TO PERFECT LIENS RELATING TO DEBT ISSUED UNDER THE FINANCING DOCUMENTS. 22. Amendments, Changes and Modifications. This Agreement may not be effectively amended or terminated except as permitted by the Intercreditor Agreement. 23. Assignment. The Secured Party may assign this Agreement to any successor Secured Party under and in accordance with the Intercreditor Agreement. 24. Severability. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization, without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. 25. Secured Party Not Liable. Neither this Agreement nor any action on the part of the Secured Party (other than an express written assumption) shall constitute an assumption by the Secured Party of any of the obligations of the Company related to any of the Collateral, and the Company shall continue to be liable for all such obligations whether incurred before or after a Security Agreement Event of Default. 26. No Recourse. Satisfaction of the obligations of the Company under this Agreement shall be had solely from the assets of the Mobile Energy Parties. No recourse shall be had to (a) any assets or properties of the Members (other than Mobile Energy as provided in the Guaranty) or of the stockholders of Mobile Energy, other than their respective interests in the Collateral, (b) any Member (other than Mobile Energy as provided in the Guaranty) or (c) any Affiliate, incorporator, stockholder, partner, member, officer, director or employee of any Member (other than the Mobile Energy Parties and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern) or of the Company (other than Mobile Energy and, in respect of any Southern Guaranty on deposit in any Reserve Account Security Account, Southern). Notwithstanding anything in this Section 26 to the contrary, (i) nothing contained in this Agreement shall limit or otherwise prejudice in any way the right of the Secured Party and the Senior Secured Parties to proceed against any Person whomsoever (A) with respect to the enforcement of such Person's obligations under any Project Document (including the Guaranty and any Southern Guaranty to which such Person is a party) or limit or otherwise prejudice in any way the right of the Secured Party, the Senior Secured Parties or the Holders of any Senior Securities to proceed against such Person with respect to the enforcement of such obligations or (B) to the extent necessary to realize the benefit -15- of the Collateral granted under the Security Documents and (ii) any limitations of liability herein shall not apply if and to the extent that any Person commits fraud or willful misrepresentations, including those contained in Officer's Certificates issued from time to time. 27. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 28. Continuing Assignment, Pledge and Security Interest. This Agreement shall create a continuing assignment, pledge and security interest in the Collateral and shall remain in full force and effect for the benefit of the Secured Party until the satisfaction in full of the Secured Obligations. Except as set fourth in Section 30, upon the payment in full of the Secured Obligations and all other amounts owing to the Secured Party under the Financing Documents, the Security Interest granted hereby shall terminate and all rights to the Collateral shall revert to each Debtor. In connection with such termination, the Secured Party shall execute such instruments of release prepared by each Debtor as such Debtor shall reasonably request at the Company's sole cost and expense. 29. Security Only. This Agreement is granted for security purposes only. Accordingly, except as otherwise permitted by any of the Security Documents, the Secured Party shall not enforce its rights with respect to the Collateral other than during a Trigger Event Period. 30. Payments Set Aside. To the extent that either Debtor or any other Person on behalf of such Debtor makes a payment or payments to the Secured Party, or the Secured Party enforces its security interests or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy Law, state or Federal Law, common Law or equitable cause, then, to the extent of such recovery, the Secured Obligations, or any part thereof originally intended to be satisfied, and this Agreement and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 31. Further Assurances. The Company shall, at its sole cost and without expense to the Secured Party, do, execute, acknowledge and deliver all and every further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances as the Secured Party shall, from time to time, reasonably require for better assuring, conveying, assigning, transferring and confirming unto the Secured Party the property hereby conveyed, mortgaged or assigned or intended now or hereafter -16- so to be, or that the Company may be or hereafter become bound to convey, mortgage or assign to the Secured Party, or for carrying out the intention or facilitating the performance of the terms of this Agreement, or for filing, registering or recording this Agreement. 32. Shared Drafting. If there shall be any ambiguity in the terms of this Agreement, the doctrine of construction that holds that the language of the document shall be construed against its drafter shall not apply as all parties have shared in the drafting of this Agreement. 33. Limitation of Liability of Secured Party. Notwithstanding anything to the contrary contained herein or in any of the other Financing Documents, this Agreement has been executed by Bankers Trust (Delaware) not in its individual capacity but solely as the Secured Party in its capacity as Collateral Agent under the Intercreditor Agreement and, except in the case of its gross negligence or willful misconduct, Bankers Trust (Delaware) in its individual capacity shall have no liability for the representations, warranties, covenants, agreements or other obligations of the Secured Party hereunder or in any certificates, notices or agreements delivered pursuant hereto. For all purposes of this Agreement, in the performance of its duties or obligations hereunder, the Secured Party shall be subject to, and entitled to the benefits of, the terms and provisions of Article VII of the Intercreditor Agreement. 34. Conflict with Intercreditor Agreement. Notwithstanding anything to the contrary contained herein or in any of the other Financing Documents, all rights, duties, obligations and indemnities of the Secured Party hereunder (including the standard of care pursuant to which it acts) shall be governed by the provisions of the Intercreditor Agreement, including the exercise of any and all remedies hereunder. In the event of a conflict between this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. 35. Effect of Termination of Intercreditor Agreement. Notwithstanding anything to the contrary contained herein, if the Intercreditor Agreement shall be terminated while this Agreement remains in effect, each reference in this Agreement to a Trigger Event shall be deemed to be a reference to an Event of Default and no Senior Creditor Certificates under the Intercreditor Agreement shall be required to be received by the Secured Party prior to its exercise of remedies hereunder and the term "Trigger Event Period" shall be deemed to mean the period commencing upon the occurrence of any Event of Default and continuing for so long as such Event of Default continues. -17- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company By: /s/ Name: Christopher J. Kysar Title: Vice President THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MOBILE, ALABAMA By: /s/ Name: Clarence Boll, Jr. Title: Vice President BANKERS TRUST (DELAWARE), a New York banking corporation, as Collateral Agent under the Intercreditor Agreement By: /s/ Name: James H. Stallkamp Title: President STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Christopher J. Kysar whose name as Vice President of Mobile Energy Services Company, L.L.C., an Alabama limited liability company, is signed to the foregoing Assignment and Security Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said limited liability company. Given under my hand and seal this the 24th day of August, 1995. /s/ (seal) Notary Public STATE OF ALABAMA ) ) ss.: COUNTY OF MOBILE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Clarence Boll, Jr. whose name as Vice President of The Industrial Development Board of the City of Mobile, Alabama, a public corporation organized under the laws of the State of Alabama, is signed to the foregoing Assignment and Security Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. Given under my hand and seal this the 17th day of August, 1995. /s/ (seal) Notary Public STATE OF DELAWARE ) ) ss.: COUNTY OF NEW CASTLE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that James H. Stallkamp whose name as President of Bankers Trust (Delaware), a Delaware banking corporation, is signed to the foregoing Assignment and Security Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said banking corporation. Given under my hand and seal this the 21 day of August, 1995. /s/ (seal) Notary Public Appendix A DEFINED TERMS For purposes of any Financing Document (as defined herein), terms used in such Financing Document (including terms used herein) that are not otherwise defined therein shall have the following meanings, subject to any provisions contained in such Financing Document that affect the construction or interpretation of such terms. Except as otherwise expressly provided in any such Financing Document, if and to the extent that such Financing Document shall be amended, restated, supplemented or otherwise modified from time to time pursuant to the terms and provisions thereof, this Appendix A shall be, or be deemed to have been, amended, restated, supplemented or otherwise modified concurrently with the execution and delivery of such amendment, restatement, supplement or other modification in order to conform the terms herein and therein, mutatis mutandis, to the terms set forth in or required by such amendment, restatement, supplement or other modification. Except as otherwise expressly provided in any such Financing Document: (a) the terms used in such Financing Document have the meanings assigned to them in this Appendix A and include the plural as well as the singular; provided, however, that, in the case of the Indenture, all such terms that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (b) (i) all accounting terms not otherwise defined in such Financing Document have the meanings assigned to them, (ii) all financial statements and all certificates and reports as to financial matters required to be delivered to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), under such Financing Document shall be prepared and (iii) all calculations made for the purpose of determining compliance with such Financing Document shall (except as otherwise expressly provided herein) be made, in the case of clauses (i), (ii) and (iii) above, in accordance with, or by application of, GAAP applied on a basis consistent (except inconsistencies that are disclosed in writing to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be), and are in accordance with GAAP as certified by a firm of independent certified public accountants of recognized national standing) with that used in the preparation of the then most recent corresponding financial statements furnished under such Financing Document to the Collateral Agent or any Senior Secured Party, or any other Person (as the case may be); -21- (c) all references in such Financing Document to any designated "Article," "Section," "Appendix," "Schedule," "Exhibit" and other subdivision are to the designated Article, Section, Appendix, Schedule, Exhibit and other subdivision, respectively, of such Financing Document; (d) all references in such Financing Document to (i) the words "herein," "hereof" and "hereunder" and other words of similar import refer to such Financing Document as a whole and not to any particular Article, Section or other subdivision and (ii) the term "this Agreement" or "this Indenture" means such Financing Document as a whole, including Appendices, Schedules and Exhibits thereto; (e) all references in such Financing Document to any Project Document or other Contract defined or referred to therein shall include such Contract (and, in the case of the Senior Securities or any other instrument, any other instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified, or as such Contract may have been replaced (including (i) in the case of an Energy Services Agreement or the Master Operating Agreement, any replacement Contract therefor then satisfying the Restricted Payment Alternative Agreement Requirements with respect thereto and (ii) in the case of any Project Contract, any replacement Contract therefor then satisfying the Event of Default Alternative Agreement Requirements with respect thereto), from time to time; (f) all references in such Financing Document to any Person (including any of its capacities) shall include the permitted successors and assigns of such Person (including in such capacity) in accordance with the terms of such Financing Document and the other Project Documents and, in the case of any Governmental Authority, any Person succeeding to its functions and capacities; (g) all references in such Financing Document to any Law shall include such Law or any successor Law as amended, supplemented or otherwise modified and in effect from time to time, and any other Law in substance substituted therefor; (h) any item or list of items set forth following the word "including," "include" or "includes" in such Financing Document is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included," such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such item or items similar to such items; -22- (i) all references in such Financing Document to the Collateral Agent, the Indenture Trustee, the Tax-Exempt Indenture Trustee, the IDB or the Working Capital Facility Provider shall be deemed to refer to each such Person however designated in the Financing Documents so that (i) references to rights or duties of the Collateral Agent under such Financing Document shall be deemed to include the rights or duties of such Person as the "Secured Party" under the Security Agreement and as the "Mortgagee" under the Mortgage, (ii) references to rights or duties of the Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement, (iii) references to rights or duties of the Tax-Exempt Indenture Trustee under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement and (iv) references to rights or duties of the Working Capital Facility Provider under such Financing Document shall be deemed to include the rights or duties of such Person as a "Senior Secured Party" under the Intercreditor Agreement; provided, however, that, if such Financing Document is (A) the Security Agreement, references to rights or duties of the "Secured Party" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent, (B) the Mortgage, references to rights or duties of the "Mortgagee" thereunder shall be deemed to include the rights or duties of such Person as the Collateral Agent and (C) the Working Capital Facility, references to rights or duties of the "Agent" thereunder or a Lender shall be deemed to include the rights or duties of such Person as the Working Capital Facility Provider; (j) all terms defined in such Financing Document shall have the meanings therein ascribed to them when used in any certificate, opinion or other document delivered pursuant thereto and, in the case of the Indenture and the Tax-Exempt Indenture, in the Senior Securities; (k) all references in such Financing Document to the knowledge of any Person that is a corporation, limited liability company or partnership, or any other Person that is not an individual, with respect to any subject or event (including the occurrence or non-occurrence of any circumstance, the failure to perform or observe, or the satisfaction of, any covenant or agreement or the pending or threatened nature of any action) shall be deemed to mean that an Authorized Officer of such Person (or, if such Person is the Company, the Plant Manager thereof) has actual knowledge or awareness of such subject or event or when notice of such subject or event shall have been given, or deemed to have been given, to such Person in accordance with the provisions of such Financing Document; and -23- (l) all references in such Financing Document to the Project Contracts shall be deemed to exclude any Project Contract (and the Consent to Assignment (if any) with respect thereto) (i) after the date on which such Project Contract (A) may have been terminated in accordance with Section 5.10 of the Indenture or Section 4.10 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), (B) shall have reached its stated termination date (if any) or (C) (other than in the case of the Energy Services Agreements and the Master Operating Agreement in connection with a Mill Closure) shall have been fully and finally performed by all parties thereto and (ii) after the date of any disposition of the Company's rights and obligations under such Project Contract in accordance with Section 5.8 of the Indenture or Section 4.8 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility), except, in the case of clauses (i) and (ii) above, if and to the extent that any provisions of such Project Contract so excluded provide that the rights and obligations of any Person that is a party to such Contract shall survive the termination thereof. "Accounts" means, collectively, the Intercreditor Agreement Accounts, the Indenture Accounts and the Tax-Exempt Indenture Accounts. "Act" has the meaning specified (a) in the case of any Holder of Indenture Securities, in Section 1.4 of the Indenture and (b) in the case of any Holder of Tax-Exempt Indenture Securities, in Section 1.4 of the Tax-Exempt Indenture. "Additional Available Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies neither constituting Revenues nor otherwise required (except pursuant to the provisions of Section 3.10 of the Intercreditor Agreement) to be deposited into any Account that are deposited into the Loss Proceeds Account as other amounts available to the Company and necessary for the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of securities or partnership or other ownership interests or by contract or otherwise. Notwithstanding the foregoing, Southern, Mobile Energy, Southern Electric, the Operator and each Person owning, directly or indirectly, five percent (5%) or more of the membership interests in the Company shall be deemed to be an Affiliate of the Company. -24- "Affiliate Subordinated Debt" means any unsecured, subordinated loan or loans to the Company from any of its Affiliates pursuant to a Subordinated Loan Agreement, fully subordinated as to payment and exercise of remedies and payable only from monies otherwise distributable by the Company from the Distribution Account in accordance with the Intercreditor Agreement. "Aggregate Demand" has the meaning specified in the Master Operating Agreement. "Alabama Act" means Ala. Code ss. 11-54-80 to ss. 11-54-101. "Annual Budget" means the operating plan and budget for the Energy Complex developed by the Company for operation of the Energy Complex for any Fiscal Year, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Approved Institutional Investor" has the meaning specified (a) in the case of the Tax-Exempt Bonds, in the Limited Offering Memorandum dated August 17, 1995 relating to the initial offering thereof and (b) in the case of any other Tax-Exempt Indenture Securities, in any other offering memorandum relating to the initial offering of such Tax-Exempt Indenture Securities. "Articles of Organization" means the Articles of Organization of the Company dated July 13, 1995. "Authenticating Agent" means any Person acting as Authenticating Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Authorized Agent" means any Paying Agent, Authenticating Agent or Security Registrar or other agent appointed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or the Company or the IDB (as the case may be) in accordance with the Indenture or the Tax-Exempt Indenture (as the case may be) to perform any function that such indenture authorizes such agent to perform. "Authorized Officer" means (a) in the case of a corporation (including Mobile Energy) or limited liability company (including the Company), the chief executive officer, the president, the chief financial officer, a vice president, the treasurer or an assistant treasurer of such corporation or limited liability company and (b) in the case of any general or limited partnership, any Person authorized by the managing general partner (or such other Person that is responsible for the management of such partnership) to take the applicable action on behalf of such partnership or any officer (with a title specified in clause (a) above) of such partnership's -25- managing general partner (or such other Person that is responsible for the management of such managing general partner). "Authorized Representative" means, in respect of any Person, the individual or individuals authorized to act on behalf of such Person by the board of directors, manager, management committee, board of control or any other governing body of such Person as designated from time to time in a certificate of such Person, which shall include or attach thereto specimen signatures, delivered to the Collateral Agent upon which the Collateral Agent may conclusively rely. "Authorized Trust Officer" means any officer of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or any other individual who shall be duly authorized by appropriate corporate action on the part of either such trustee to authenticate Senior Securities. "Automatic Acceleration Default" has the meaning specified (a) in the case of the Indenture, in Section 8.2(a) thereof and (b) in the case of the Tax-Exempt Indenture, in Section 8.2(a) thereof. "Available Amount" means, at any time, (a) in the case of any Reserve Account Letter of Credit, the undrawn stated amount of such Reserve Account Letter of Credit at such time and (b) in the case of any Southern Guaranty, an amount equal to the "Available Amount" set forth therein (as such amount may be increased or decreased in accordance with such Southern Guaranty). "Bankruptcy Code" means the Federal Bankruptcy Code of 1978. "Bankruptcy Event" means, in respect of any Person, (a) such Person's general inability, or its admission of its inability, to pay its debts as such debts become due, (b) the application by such Person for or its consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (c) the commencement by such Person of a voluntary case under the Bankruptcy Code, (d) the making by such Person of a general assignment for the benefit of its creditors, (e) the filing of a petition by such Person seeking to take advantage as a debtor of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, winding-up or readjustment of debts, (f) the failure by such Person to controvert in a timely and appropriate manner, or its acquiescence in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, (g) the taking of any corporate or other action by such Person for the purpose of effecting any of the foregoing, (h) the commencement of a proceeding or case, without the application or consent of such Person, in any court seeking (i) such Person's reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator, examiner or the like of such Person or all or any substantial part of its -26- property or (iii) similar relief in respect of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debt and such proceeding or case specified in this clause (h) shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and (except in the case of Section 5.19(a)(ii) of the Indenture or Section 4.19(a)(ii) of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility)) in effect, for a period of sixty (60) or more days or (i) an order for relief against such Person shall be entered in any involuntary case under the Bankruptcy Code. "Board of Directors" means (a) when used with respect to the Company, the Manager of the Company and (b) when used with respect to Mobile Energy, either the board of directors of Mobile Energy or any committee of such board duly authorized to act for it. "Board Resolution" means (a) when used with respect to the Company, a copy of a resolution certified by an Authorized Officer of the Company or the secretary or assistant secretary of the Company as having been adopted by the Manager of the Company and to be in full force and effect on the date of such certification and (b) when used with respect to Mobile Energy, means a copy of a resolution certified by an Authorized Officer or the secretary or assistant secretary of Mobile Energy as having been adopted by the Board of Directors of Mobile Energy and to be in full force and effect on the date of such certification. "Boiler Ash Agreement" means the Boiler Ash Disposal Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Bond Counsel" means Balch & Bingham or other nationally recognized counsel experienced in matters of municipal law and the tax-exempt status of obligations under the Code. "Business Day" means any day other than a Saturday or Sunday or other day on which banks in New York, New York or Atlanta, Georgia are authorized or required to be closed. "Capital Budget" means the capital plan and budget developed by the Company with respect to the capital improvements to the Energy Complex specified in the Master Operating Agreement and certain other planned capital expenditures thereto. "Capital Budget Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Casualty Proceeds" means all insurance proceeds (including title insurance proceeds) and other amounts actually received on account of an Event of Loss, including any net interest thereon or gain in respect thereof, other than (a) proceeds of third-party -27- liability insurance (to the extent paid directly from an insurer or insurers to a third-party) and (b) proceeds of business interruption insurance and other payments received for interruption of operations. "Casualty Proceeds" do not include Additional Available Proceeds with respect to such Event of Loss. "Closing Date" means the date on which the First Mortgage Bonds and the Tax-Exempt Bonds are originally issued. "Coal Supplier" means E.J. Hodder & Associates, Inc., a Tennessee corporation. "Coal Supply Agreement" means the Coal Supply Agreement dated as of May 1, 1995 between the Coal Supplier and the Company. "Code" means, as applicable, the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder or the Internal Revenue Code of 1954 and the rules and regulations promulgated thereunder. "Collateral" means, collectively, all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) by the Company or the IDB (as the case may be), in each case pursuant to the granting and assigning clauses of the applicable Financing Documents. "Collateral Agent" means Bankers Trust (Delaware), a Delaware banking corporation, or any other Person appointed as a substitute or replacement Collateral Agent under the Intercreditor Agreement. "Collateral Agent Claims" means all obligations of the Senior Secured Parties and the Mobile Energy Parties, now or hereafter existing, to pay fees, costs and expenses to the Collateral Agent pursuant to Section 7.3(f) and Article VIII of the Intercreditor Agreement. "Combined Exposure" means, at any time, the sum of (a) the aggregate principal amount of all Senior Securities Outstanding and (b) the aggregate principal amount of all outstanding Working Capital Facility Loans made, and the unutilized Working Capital Facility Commitment, under the Working Capital Facility. "Common Services Agreement" means the Common Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Company" means Mobile Energy Services Company, L.L.C., an Alabama limited liability company. -28- "Company Request" and "Company Order" mean, respectively, a written request or order signed in the name of the Company by an Authorized Officer of the Company and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Company Step-In Rights" has the meaning specified for "MESC Step-In Rights" in the Master Operating Agreement. "Completion Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Consents to Assignment" means, collectively, (a) the Consents to Assignment, the Lease Estoppel and the Supplementary Lease Estoppel of Scott with respect to the Project Contracts to which it is a party, (b) the Consent to Assignment of the Pulp Mill Owner with respect to the Project Contracts to which it is a party, (c) the Consent to Assignment of the Tissue Mill Owner with respect to the Project Contracts to which it is a party, (d) the Consent to Assignment of the Paper Mill Owner with respect to the Project Contracts to which it is a party, (e) the Consent to Assignment of Southern Electric with respect to the Project Contracts to which it is a party, (f) the Consent to Assignment of SCS with respect to the SCS Agreement, (g) any Consent to Assignment of the Coal Supplier with respect to the Coal Supply Agreement, (h) the Consent to Assignment of TRT with respect to the Nondisturbance Agreement (which may be effected pursuant to the Recognition Agreement to which TRT is a party), (i) the Consent to Assignment of the IDB with respect to the Project Contracts to which it is a party (which may be effected pursuant to the Recognition Agreements) and (j) the Consent to Assignment of Ahlstrom Recovery, Inc. with respect to Purchase Order Number MG-2601. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of August 1, 1995 among the Mobile Energy Parties and the Tax-Exempt Indenture Trustee. "Contract" means (a) any agreement (whether executory or non- executory and whether a Person entitled to rights thereunder is so entitled directly or as a third-party beneficiary), including an indenture, lease or license, (b) any deed or other instrument of conveyance, (c) any certificate of incorporation, articles of organization or charter and (d) any by-law. "Corporate Trust Office" means the principal office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) at which at any particular time the corporate trust business thereof shall be administered, which as of the Closing Date is (a) in the case of the Collateral Agent, Bankers Trust (Delaware), c/o Bankers Trust Company, Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group, (b) in the case of the Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309 and (c) in the -29- case of the Tax-Exempt Indenture Trustee, First Union National Bank of Georgia, Corporate Trust Department, M/C GA9094, 999 Peachtree Street, N.E., Atlanta, Georgia 30309, or such other office as may be designated by the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to the Mobile Energy Parties and, in the case of the Collateral Agent, to the other Intercreditor Parties. "Credit Standard Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the unsecured long-term Debt of the provider of such Reserve Account Letter of Credit shall not be rated "A" or higher by S&P, "A" or higher by Fitch and "A2" or higher by Moody's and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the Collateral Agent or the Indenture Trustee shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has not been satisfied or (ii) Southern shall have failed, or the Company shall have failed to cause Southern, to provide to the Collateral Agent or the Indenture Trustee, on or prior to the date that is forty-five (45) days after the end of each fiscal quarter of Southern, an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied. "Current Fiscal Quarter" has the meaning specified in the definition of Maintenance Reserve Account Required Deposit. "Debt" means, in respect of any Person, (a) indebtedness for borrowed money or the deferred purchase price of property or services (excluding obligations under agreements for the purchase price of goods and services in the normal course of business which are not more than ninety (90) days past due), (b) obligations as lessee under leases that shall have been or should be, in accordance with GAAP, recorded as capital leases, (c) obligations (whether matured or contingent) with respect to any letters of credit issued for the account of such Person, (d) obligations under direct or indirect guaranties or other similar contingent liabilities in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (a), (b) or (c) above and (e) all Debt of another Person secured by a lien on any property owned by the first Person (whether or not such Debt has been assumed by such first Person). "Debt Service Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to draw upon such Reserve Account Letter of Credit pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause third of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security -30- Account is the Distribution Account, clause second of Section 3.8(b) of the Intercreditor Agreement, (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause second of Section 4.5 of the Indenture and (iv) if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, clause second of Section 4.6 of the Tax-Exempt Indenture and (b) with respect to any Southern Guaranty on deposit in any Reserve Account Security Account, the authorization of the Collateral Agent or the Indenture Trustee (as the case may be) to call upon such Southern Guaranty pursuant to (i) if such Reserve Account Security Account is the Maintenance Plan Funding Subaccount, clause fourth of Section 3.5(c) of the Intercreditor Agreement, (ii) if such Reserve Account Security Account is the Distribution Account, clause third of Section 3.8(b) of the Intercreditor Agreement and (iii) if such Reserve Account Security Account is a Debt Service Reserve Account, clause third of Section 4.5 of the Indenture. "Debt Service Reserve Account" means any Account so designated (if any) established and created under any Series Supplemental Indenture to the Indenture for the benefit of Holders of Indenture Securities established thereunder. "Debt Service Reserve Account Required Balance" means, in respect of any Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Indenture establishing such Debt Service Reserve Account. "Default Event" means (a) with respect to any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the provider of such Reserve Account Letter of Credit shall default in its payment obligations thereunder or (ii) the provider of such Reserve Account Letter of Credit shall become insolvent and (b) with respect to any Southern Guaranty, (i) Southern shall fail to perform any of the "Guaranteed Obligations" thereunder as and when due or (ii) Southern shall become insolvent. "Designated Southern Subsidiaries" means, for purposes of the satisfaction of the Southern Credit Standard, all of the Eligible Southern Subsidiaries other than, as designated by the Company to be excluded for such purposes, any one or all (including any combination) of the Eligible Southern Subsidiaries, provided that the aggregate net worth of such Eligible Southern Subsidiaries so excluded is equal to or less than ten percent (10%) of the aggregate net worth of all of the Eligible Southern Subsidiaries. For such purposes, "net worth" means (a) par value of common stock plus (b) paid-in capital plus (c) premium on preferred stock plus (d) retained earnings minus (e) accrued and unpaid dividends on, or other amounts due and payable in respect of, capital stock, in each case, of each of such Eligible Southern Subsidiaries. "Determination of Taxability" means a final determination by the Internal Revenue Service or a court of competent jurisdiction in a proceeding in which the Company has been afforded an -31- opportunity to participate, or, at the election of the Company in its sole discretion, a determination by the Company based on an opinion of Bond Counsel, that as a result of any event the interest payable on any Tax-Exempt Indenture Security (in respect of which, at the time of original issuance, the Tax-Exempt Indenture Trustee received an opinion of Bond Counsel to the effect that interest payable on such Tax-Exempt Indenture Security was not includable for Federal income tax purposes in the gross income of any owner of such Tax-Exempt Indenture Security (other than an owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code)) is includable for Federal income tax purposes in the gross income of any owner of such Tax-Exempt Indenture Security (other than any owner who is a "substantial user" of the Energy Complex or a "related person" within the meaning of Section 147(a) of the Code). No such determination by the Internal Revenue Service shall be considered final unless the Company has been given written notice and, if it so desires, has been given the opportunity to contest the same, either directly or in the name of any owner of a Tax-Exempt Indenture Security and until the conclusion of any appellate review, if sought. Interest on Tax-Exempt Indenture Securities shall not be deemed includable for Federal income tax purposes merely by reason of such interest being treated as a tax preference item for purposes of a Federal alternative minimum tax, loss of or reduction in a related deduction or other indirect adverse tax consequences. "Distribution Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Distribution Date" means any Business Day following an Interest Payment Date and preceding the Monthly Transfer Date immediately succeeding such Interest Payment Date, as selected by the Company. "Easement Deeds" means, collectively, (a) the Easement Deed, dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Company certain easements, (b) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner granting the Pulp Mill Owner certain easements, (c) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Company certain easements, (d) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Tissue Mill Owner granting the Tissue Mill Owner certain easements, (e) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Company certain easements and (f) the Easement Deed dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Paper Mill Owner granting the Paper Mill Owner certain easements. -32- "Easements" means, collectively, all easements, licenses, franchises, rights-of-way and spur track agreements to which the Company is now or hereafter a party or beneficiary affecting construction on, or the use or operation of, or constituting a part of, the Site (including the Easement Deeds). "Eligible Southern Subsidiaries" means, at any time, each of Alabama Power Company, an Alabama corporation, Georgia Power Company, a Georgia corporation, Gulf Power Company, a Maine corporation, Mississippi Power Company, a Mississippi corporation, and Savannah Electric and Power Company, a Georgia corporation, provided that a majority of the voting securities of such Person is owned, directly or indirectly, by Southern at such time. "Eminent Domain Proceeds" means all amounts and proceeds actually received in respect of any Event of Eminent Domain, including any net interest thereon or gain in respect thereof. "Eminent Domain Proceeds" do not include Additional Available Proceeds with respect to such Event of Eminent Domain. "Energy Complex" has the meaning specified in the Master Operating Agreement. "Energy Services Agreements" means, collectively, the Pulp Mill Energy Services Agreement, the Tissue Mill Energy Services Agreement and the Paper Mill Energy Services Agreement. "Environmental Bonds" means, collectively, (a) (i) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1973, (ii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1976 and (iii) the IDB's Environmental Improvement Revenue Bonds (Scott Paper Company Project), Series A of 1980, in the case of clauses (i), (ii) and (iii) above, issued under and secured by a Trust Indenture dated as of April 1, 1973, as supplemented by a First Supplemental Indenture thereto dated as of September 1, 1976 and a Second Supplemental Indenture thereto dated as of October 1, 1980 between the IDB and AmSouth Bank of Alabama, as trustee, and (b) the IDB's Industrial Revenue Bonds (Scott Paper Company Project), Series B of 1976 issued under and secured by a Trust Indenture dated as of September 1, 1976 between the IDB and AmSouth Bank of Alabama, as trustee . "Environmental Indemnity Agreements" means, collectively, (a) the Pulp Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Pulp Mill Owner, (b) the Paper Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile Energy) and the Paper Mill Owner, (c) the Tissue Mill Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Company (as assignee of Mobile -33- Energy) and the Tissue Mill Owner and (d) the Scott Environmental Indemnity Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy). "Environmental Requirement" means any Governmental Approvals in effect from time to time relating to the protection of the environment or otherwise addressing environmental issues or environmental requirements of or by any Governmental Authority, or otherwise relating to noise or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, emission, discharge, release or handling of Hazardous Material, including the Comprehensive Environmental Response Compensation, and Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. ss. 1101 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. ss. 2761), the Occupational Health and Safety Act (29 U.S.C. ss. 641 et seq.), the Pollution Prevention Act (42 U.S.C. ss. 1201 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), Preservation Development, Etc. of Coastal Areas (Ala. Code ss. 9-7-1 et seq.), the Alabama Environmental Management Act (Ala. Code ss. 22-22A-1 et seq.), the Alabama Water Pollution Control Act (Ala. Code ss. 22-22A-1 et seq.), the Alabama Safe Drinking Water Act (Ala. Code ss. 22-23-30 et seq.), Water Well Standards (Ala. Code ss. 22-24-1 et seq.), Water Wastewater Systems and Treatment Plants (Ala. Code ss. 22-25-1 et seq.), Sewage Collection, Treatment, and Disposal Facilities (Ala. Code ss. 22-26-1 et seq.), Solid Wastes Disposal Act (Ala. Code ss. 22-27-1 et seq.), the Alabama Air Pollution Control Act of 1971 (Ala. Code ss. 22-28-1 et seq.), the Hazardous Wastes Management and Minimization Act (Ala. Code ss. 22-30-1 et seq.), the Alabama Hazardous Substance Cleanup Fund (Ala. Code ss. 22-30A-1 et seq.), the Water Pollution Control Authority (Ala. Code ss. 22-34-1 et seq.), the Alabama Underground and Aboveground and Storage Tank Trust Fund Act (Ala. Code ss. 22-35-1 et seq.), the Alabama Underground Storage Tank and Wellhead Protection Act of 1988 (Ala. Code ss. 22-36-1 et seq.) and the Alabama Lead Ban Act of 1988 (Ala. Code ss. 22-37-1 et seq.) and, in each case, any regulations promulgated thereunder. "ERISA" means the Employee Retirement Income Security Act of 1974. "ESA Blockage Event" means, with respect to any Mill Owner or its respective Energy Services Agreement or its Mill, that: (a) such Energy Services Agreement or the Master Operating Agreement has been declared unenforceable by a Governmental Authority having jurisdiction, unless the Company has delivered to the applicable Senior Secured Parties and the -34- Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (i) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by the Company and such Mill Owner, (ii) such declaration of enforceability has been overruled, reversed or rescinded by such Governmental Authority or by another Governmental Authority having final jurisdiction or greater jurisdiction than such first Governmental Authority or (iii) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (b) such Mill Owner has either (i) terminated, or delivered written notice pursuant to the Master Operating Agreement of its intention to terminate (which notice has not been rescinded), its rights and obligations under such Energy Services Agreement or the Master Operating Agreement in connection with a Mill Closure with respect to such Mill or (ii) denied that it has any obligations and substantially ceased performance under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that either (A) such Energy Services Agreement or the Master Operating Agreement (as the case may be) has been reinstated on identical and enforceable terms by the Company and such Mill Owner or, provided that another Person is reasonably capable of performing such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement (as the case may be), by the Company and such other Person or (B) the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (c) a default has occurred and is continuing in respect of such Mill Owner's obligations under such Energy Services Agreement or the Master Operating Agreement, unless, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been terminated as a result of such default, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); (d) based upon the knowledge of either of the Mobile Energy Parties, it is reasonably likely that, on or prior to the next Distribution Date, either (i) there will be a Mill -35- Closure with respect to such Mill or (ii) such Mill Owner will deliver written notice pursuant to the Master Operating Agreement of such Mill Owner's intention to terminate its rights and obligations under such Energy Services Agreement or the Master Operating Agreement, unless, in either case, if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been terminated as a result of such Mill Closure, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be); or (e) a Bankruptcy Event has occurred and is continuing in respect of such Mill Owner, unless (i) the obligations of such Mill Owner under such Energy Services Agreement and the Master Operating Agreement have been expressly assumed with the approval of a court of competent jurisdiction or (ii) if such Energy Services Agreement or the Master Operating Agreement with respect to such Mill Owner has been rejected or otherwise terminated, the Company has delivered to the applicable Senior Secured Parties and the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirement with respect to such Energy Services Agreement or the Master Operating Agreement (as the case may be). "Event of Default" means, so long as there are any Financing Commitments or any Financing Liabilities outstanding, an "Event of Default" under the Indenture, an "Event of Default" under the Tax- Exempt Indenture or an "Event of Default" under the Working Capital Facility. "Event of Default Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more Persons in substitution for or replacement of any such Project Contract, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that such alternative Contract (a) contains substantially equivalent terms and conditions or, if such terms and conditions are no longer available on a commercially reasonable basis, the terms and conditions then available on a commercially reasonable basis, (b) would, after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, maintain a minimum annual Senior Debt Service Coverage Ratio for each Fiscal Year through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) projected to be equal to or greater than the lesser of (i) the minimum annual Senior Debt Service Coverage Ratio projected to have been in effect for such Fiscal Year had -36- performance under such Project Contract continued and (ii) 1.2 to 1.0 and (c) is reasonably capable of being performed by the parties thereto. Notwithstanding the foregoing, such alternative Contract need not satisfy the conditions described in clauses (a) and (b) above, provided that (A) the Company delivers to the applicable Senior Secured Parties an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that the Company has satisfied the Restricted Payment Alternative Agreement Requirements (other than the conditions set forth in subclauses (C) and (D) of clause (b)(ii) of the definition of Restricted Payment Alternative Agreement Requirements with respect to such alternative Contract) and (B) after giving effect to such alternative Contract and based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.2 to 1.0. "Event of Eminent Domain" means any compulsory transfer or taking, or transfer under threat of compulsory transfer or taking, of a material part of the Energy Complex by any Governmental Authority or any Person acting with the authority thereof for more than six (6) months, unless such transfer or taking is the subject of a Good Faith Contest. "Event of Loss" means any physical loss or destruction of, or destruction to, the Energy Complex, or any other event that causes all or a material part of the Energy Complex to be rendered unfit for normal use for any reason whatsoever, including through failure of title. "Excess Loss Proceeds" means, with respect to any Event of Loss or Event of Eminent Domain, monies in an amount equal to the excess, if any, of all of the Loss Proceeds with respect to such Event of Loss or Event of Eminent Domain (as the case may be) over the total cost of the rebuilding, repair, restoration or replacement of the Energy Complex or any part thereof that has been affected by such Event of Loss or Event of Eminent Domain (as the case may be). "Exchange Act" means the Securities Exchange Act of 1934. "Financing Commitment" means any commitment pursuant to the Financing Documents to provide credit to the Company. "Financing Documents" means all Contracts evidencing or securing the Financing Liabilities. "Financing Liabilities" means all indebtedness, liabilities and obligations of the Mobile Energy Parties (including principal, interest, fees, reimbursement obligations, penalties, indemnities and legal expenses, whether due to acceleration or otherwise) owing to the Senior Secured Parties (of whatsoever nature and however evidenced) under or pursuant to (a) the Indenture (including the -37- Guaranty), (b) the Senior Securities, (c) the IDB Lease Agreement, (d) the Tax-Exempt Indenture, (e) the Working Capital Facility and any evidence of indebtedness entered into thereunder and (f) the other Security Documents, in the case of clause (a) through (f) above, whether direct or indirect, primary or secondary, fixed or contingent or now or hereafter arising out of or relating to any such Contract. "Financing Statements" means Uniform Commercial Code financing statements filed in connection with the other Security Documents. "First Mortgage Bonds" means the Indenture Securities issued on the Closing Date under the first Series Supplemental Indenture to the Indenture. "Fiscal Quarter" means the period of time beginning at 12:01 a.m. on the first day of each calendar quarter and ending at midnight on the last day of such calendar quarter. "Fiscal Year" means the period of time beginning at 12:01 a.m. on January 1 of each year and ending at midnight on December 31 of such year. "Fitch" means Fitch Investors Service, L.P., a New York limited partnership. "Fuel Inventory" means fuel inventory of the Energy Complex, in whatever form, including oil, gas, coal, black liquor, biomass and sludge. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "GDPIPD" means the Gross Domestic Product Implicit Price Deflator as published in the United States Department of Commerce, Bureau of Analysis publication entitled "Survey of Current Business." If the Gross Domestic Product Implicit Price Deflator ceases to exist or is no longer available, the Company, with the approval of the Independent Engineer, shall designate a substitute index that is reasonably similar to the Gross Domestic Product Implicit Price Deflator. "GDPIPD Factor" means, with respect to each Fiscal Year, the GDPIPD most recently published during or prior to such Fiscal Year divided by the GDPIPD published with respect to December 1994; provided, however, that such GDPIPD Factor shall not be less than one (1). "Good Faith Contest" means the contest of an item if (a) such item is diligently contested in good faith by appropriate proceedings and adequate reserves or bonding are established in accordance with GAAP with respect to such item and (b) the failure to pay or comply with such item during the period of such contest would not result in a Material Adverse Effect. -38- "Governmental Approvals" means those authorizations, consents, approvals, waivers, exemptions, variances, registrations, certifications, permissions, permits and licenses with any Governmental Authority required for the ownership and operation of the Energy Complex and the performance of a Person's obligations under the Project Documents. "Governmental Authority" means any Federal, state, city, county, municipal, foreign, international, regional or other governmental or regulatory authority, agency, department, board, body, instrumentality, commission, arbiter or court. "Guaranteed Obligations" means all indebtedness, liabilities, obligations, covenants and duties of, and all terms and conditions to be observed by, the Company (including in its capacity as a "debtor in possession" under the Bankruptcy Code) due or owing to, or in favor or for the benefit of, the Senior Secured Parties under the Security Documents or the Working Capital Facility (as the case may be), in each case (a) whether due or owing to, or in favor or for the benefit of, the Senior Secured Parties or any other Person that becomes the Indenture Trustee, the Tax-Exempt Indenture Trustee or the Working Capital Facility Provider (as the case may be) by reason of any succession or assignment at any time thereafter and (b) whether or not an allowable claim against the Company under the Bankruptcy Code, or otherwise enforceable against the Company, and including, in any event, interest accruing after the filing by or against the Company of a petition under the Bankruptcy Code; provided, however, that the satisfaction of the Guaranteed Obligations shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement to the extent such assets are not commingled with any of Mobile Energy's other assets or any monies or assets of the Company. "Guaranty" means the unconditional guaranty by Mobile Energy of the Guaranteed Obligations included in Article XIV of the Indenture, Article VIII of the IDB Lease Agreement and Article VIII of the Working Capital Facility (as the case may be). "Hazardous Materials" means hazardous wastes, hazardous substances, hazardous constituents, air contaminants or toxic substances, whether solids, liquids or gases, including substances defined or otherwise regulated as "hazardous materials," "regulated substances," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "carcinogens," "hazardous air pollutants," "criteria pollutants," "reproductive toxins," "radioactive materials," "toxic chemicals," or other similar designations in, or otherwise subject to regulation under, any Environmental Requirement, including petroleum hydrocarbons, asbestos-containing materials, urea formaldehyde foam insulation, polychlorinated biphenyls and radionuclides. "Holder" means a Person in whose name an Indenture Security or a Tax-Exempt Indenture Security (as the case may be) is registered -39- in the register providing for the registration, including upon transfer or exchange, thereof pursuant to the Indenture or the Tax- Exempt Indenture (as the case may be). "IDB" means The Industrial Development Board of the City of Mobile, Alabama. "IDB Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses, indemnification payments or other amounts to the IDB under the Financing Documents, other than (a) rent payments under the IDB Lease Agreement and (b) payments in respect of principal of and premium, if any, and interest on the 1994 Bonds. "IDB Lease Agreement" means the Amended and Restated Lease and Agreement dated as of August 1, 1995 among the IDB and the Mobile Energy Parties. "IDB Request" and "IDB Order" mean, respectively, a written request or order signed in the name of the IDB by an Authorized Officer of the IDB and delivered to the Tax-Exempt Indenture Trustee. "Income Tax Deficiency" means (a) with respect to the second Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the sum of (A) the combined Federal and State of Alabama quarterly estimated income tax payments that would have been required to be paid by all Members during such Fiscal Year prior to such Distribution Date and (B) one-half of the amounts estimated to be required to be paid for County and City of Mobile, Alabama income taxes in respect of such Fiscal Year, if any, all calculated, solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (1) be a member of a consolidated, affiliated, combined, unitary or other tax group, (2) be a party to any tax sharing arrangements with any other Person and (3) have income, loss or credits (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the first Distribution Date during such Fiscal Year in excess of the amount of distributions, if any, that would have been calculated by clause (b) below with respect to such Distribution Date and (b) with respect to the first Distribution Date during any Fiscal Year, an amount equal to the excess, if any, of (i) an amount equal to the estimate, as of such Distribution Date, of the combined Federal, State of Alabama, and County and City of Mobile, Alabama income taxes that relate to the immediately preceding Fiscal Year of all Members, all calculated solely for this purpose, as if such Members collectively were a single "stand-alone" domestic Alabama corporation for purposes of Federal, state and local taxes that would not (A) be a member of a consolidated, affiliated, combined, unitary or other tax group, (B) be a party to any tax sharing -40- arrangements with any other Person and (C) have income, loss or credits (including loss and credit carryovers) available to it that would not be attributable to any ownership interest in the Company over (ii) the amount of distributions, if any, from the Distribution Account and the Subordinated Fee Account made on the second Distribution Date of such prior Fiscal Year. "Indenture" means the Trust Indenture dated as of August 1, 1995 among the Mobile Energy Parties and the Indenture Trustee. "Indenture Accounts" means, with respect to the Indenture Securities of any series, the Indenture Securities Account and each Debt Service Reserve Account (if any) established for the benefit of Holders of the Indenture Securities of such series. "Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Indenture Securities" means all Debt issued pursuant to the Indenture. "Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Indenture Trustee by the Company pursuant to the granting and assigning clauses of the Indenture and (b) the Shared Collateral. "Indenture Securities Interest Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Principal Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Securities Redemption Subaccount" means the subaccount of the Indenture Securities Account so designated established and created under Section 4.1 of the Indenture. "Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Independent Engineer" means Stone & Webster Engineering Corporation or another nationally recognized consulting or engineering firm appointed Independent Engineer pursuant to the terms of the Intercreditor Agreement. -41- "Independent Engineer Agreement" means the Independent Engineer Agreement dated as of August 1, 1995 between the Company and the Independent Engineer or any other similar Contract among such Persons. "Independent Engineer Confirmation" means a certificate signed by an authorized representative of the Independent Engineer confirming the reasonableness of statements and projections contained in certain Officer's Certificates delivered to the applicable Senior Secured Parties or the Collateral Agent under the Financing Documents, which confirmation may not be unreasonably withheld, conditioned or delayed. "Independent Insurance Advisor" means Sedgwick James or another nationally recognized insurance advisory firm appointed as insurance advisor under the Indenture and the Tax-Exempt Indenture by the Collateral Agent. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 among the Senior Secured Parties, the Collateral Agent, the IDB and the Mobile Energy Parties. "Intercreditor Agreement Accounts" means, collectively, the Completion Account, the Revenue Account, the Mill Owner Reimbursement Account, the Working Capital Facility Account, the Operating Account, the Maintenance Reserve Account, the Loss Proceeds Account, the Subordinated Debt Account, the Subordinated Fee Account and the Distribution Account. "Intercreditor Parties" means, collectively, the Senior Secured Parties, the IDB, the Mobile Energy Parties, any Subordinated Debt Provider and any other Person party to the Intercreditor Agreement (other than the Collateral Agent). "Interest Payment Date" means each January 1 and July 1 of each year, commencing January 1, 1996. "Investment Grade" means a rating in one of the four highest categories (without regard to subcategories within such rating categories) by a Rating Agency. "Law" means any constitution, treaty, statute, code, ordinance, regulation, order, decree, writ or judicial or arbitral decision. "Lease" means the Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July, 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Lease Documents" means, collectively, the IDB Lease Agreement, the Tax-Exempt Indenture (including any Series Supplemental Indenture) and (to the extent relating to, or -42- securing, the Tax-Exempt Indenture Securities) the other Financing Documents. "Lease Indemnity" means the Letter Agreement dated August 1, 1995 by the Mobile Energy Parties in favor of Scott, providing for the indemnification of Scott with respect to matters arising under the Utilities Land Sublease dated as of December 1, 1983, as amended, between Scott and the IDB. "Leased Land" means the land underlying the components of the Tax-Exempt Project marked on Exhibit A to the IDB Lease Agreement. "Lenders" has the meaning specified in the Working Capital Facility. "Lien" means any lien, claim, security interest, mortgage, trust arrangement, judgment, pledge, option, charge, easement, encumbrance, title retention, conditional sales agreement, encroachment, right-of-way, building or use restriction, preferential right or any other security agreement, arrangement or similar right in favor of any Person, whether voluntarily incurred or arising by operation of law, and includes any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "Loss Proceeds" means, as applicable, Casualty Proceeds or Eminent Domain Proceeds. "Loss Proceeds Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Excess Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Expenditures" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, other than (a) fuel costs and expenses, (b) labor and employee expenses, including fringe benefits and labor relations expense, (c) payments for insurance premiums and like insurance related expenses required or otherwise maintained under any Project Document, (d) costs and expenses of consumable items such as process or cleaning chemicals and lubricants, (e) equipment rental, small tools and vehicle maintenance expenses, (f) costs and expenses associated with legal, accounting and other office and administrative functions, (g) permitting fees, (h) costs and expenses of safety supplies, office supplies and other office expenses, (i) property taxes and payments made in lieu of taxes, (j) computer maintenance expenses, (k) any amounts payable for services rendered under the Common Services Agreement, (l) ash disposal costs, (m) liquidated damages payable to the Mill Owners under the Master Operating Agreement, (n) amounts payable to the -43- Mill Owners in connection with the exercise of Mill Owner Step-In Rights, (o) any amounts required to be rebated to the United States government pursuant to Section 148 of the Code in connection with any series of the Tax-Exempt Indenture Securities (to the extent not already provided for in the Tax-Exempt Indenture) and (p) payments to the IDB (including IDB Claims and payments required to be made by the Company with respect to the 1994 Bonds), in the case of clauses (a) through (p) above, to the extent the foregoing costs or expenses are not customarily treated as capital expenditures. "Maintenance Plan" means the maintenance plan and budget for the Energy Complex, as the same may be amended, restated, supplemented or otherwise modified from time to time and as more particularly described in Section 5.12 of the Indenture or Section 4.12 of the IDB Lease Agreement (or any comparable provision of the Working Capital Facility) (as the case may be). "Maintenance Plan Funding Subaccount" means the subaccount of the Maintenance Reserve Account so designated established and created under Section 2.2(b) of the Intercreditor Agreement. "Maintenance Reserve Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Maintenance Reserve Account Balance" means, with respect to the Current Fiscal Quarter, the sum of (a) the monies on deposit in the Maintenance Reserve Account, (b) amounts available to be drawn or called upon under any Reserve Account Security deposited in the Maintenance Plan Funding Subaccount and (c) the monies on deposit in, or otherwise credited to (by means of a guaranty, capital infusion agreement or otherwise), the Mill Owner Maintenance Reserve Account, in the case of clauses (a), (b) and (c) above, at the beginning of the Current Fiscal Quarter. "Maintenance Reserve Account Required Deposit" means, with respect to any Fiscal Quarter during any Fiscal Year (the "Current Fiscal Quarter"), one or more deposits into the Maintenance Reserve Account on Monthly Transfer Dates occurring during the Current Fiscal Quarter in an aggregate amount equal to the excess of the sum of paragraphs (a), (b) and (c) below over the Maintenance Reserve Account Balance with respect to the Current Fiscal Quarter: (a) the amount of Maintenance Reserve Account Required Deposits with respect to each Fiscal Quarter preceding the Current Fiscal Quarter that were required to be deposited into the Maintenance Reserve Account during each such Fiscal Quarter but were not, and have not been since, so deposited; (b) the aggregate amount of any withdrawals from the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account during each Fiscal Quarter preceding the Current Fiscal Quarter that were in excess of the aggregate projected Maintenance Expenditures for each such Fiscal -44- Quarter (as specified in the Maintenance Plan) but were not, and have not been since, redeposited in the Maintenance Reserve Account; and (c) the greatest of: (i) if the Current Fiscal Quarter is the first Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding sixteen (16) Fiscal Quarters (in each case as specified in the Maintenance Plan) by sixteen (16); (ii) if the Current Fiscal Quarter is the first or second Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fifteen (15) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fifteen (15); (iii) if the Current Fiscal Quarter is the first, second or third Fiscal Quarter of such Fiscal Year, the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for the Current Fiscal Quarter and the immediately succeeding fourteen (14) Fiscal Quarters (in each case as specified in the Maintenance Plan) by fourteen (14); and (iv) if the Current Fiscal Quarter is the first, second, third or fourth Fiscal Quarter of such Fiscal Year, the greatest of the amount obtained by dividing the aggregate of the projected Maintenance Expenditures for any period consisting of the Current Fiscal Quarter and any number of consecutive Fiscal Quarters from one (1) to thirteen (13) immediately succeeding the Current Fiscal Quarter (in each case as specified in the Maintenance Plan) by such number of consecutive Fiscal Quarters. "Manager" means Mobile Energy and any Person appointed as an additional, substitute or replacement manager of the Company pursuant to the terms of the Articles of Organization. "Master Operating Agreement" means the Amended and Restated Master Operating Agreement dated as of July 13, 1995 among the Company (as assignee of Mobile Energy), Scott, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Material Adverse Effect" means (a) a change in the financial condition of either of the Mobile Energy Parties or the Energy Complex that would reasonably be expected to materially and adversely affect the ability of either of the Mobile Energy Parties to pay principal of and interest on the Senior Debt as and when -45- required or (b) any event or occurrence of whatever nature that would materially and adversely affect (i) the ability of either of the Mobile Energy Parties to perform its obligations under the Project Documents or (ii) the Lien of the Security Documents. "Member" means any Person owning a membership interest in the Company. "Mill Closure" means (a) a public announcement by a Mill Owner that it will close its respective Mill for a period of at least one (1) year or that it will reduce production of pulp, paper or tissue (as applicable) at such Mill (permanently or for a period of at least two (2) years) to less than ten percent (10%) of 1994 production levels or (b) the occurrence of a two (2) year period during which, for any reason other than the occurrence of a Force Majeure Event (as defined in the Master Operating Agreement), such Mill Owner's production of pulp, paper or tissue (as applicable) at such Mill is less than ten percent (10%) of 1994 production levels. "Mill Owner Maintenance Reserve Account" means the account so designated established and created pursuant to the Master Operating Agreement for the sole benefit of the Mill Owners. "Mill Owner Maintenance Reserve Account Agreement" means the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among Southern, the Company and the Mill Owners. "Mill Owner Reimbursement Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Mill Owner Step-In Rights" has the meaning specified in the Master Operating Agreement. "Mill Owners" means, collectively, the Pulp Mill Owner, the Tissue Mill Owner and the Paper Mill Owner. "Mills" means, collectively, the Pulp Mill, the Tissue Mill and the Paper Mill. "Mixed-Use Bonds" means, collectively, the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series A and the IDB's Industrial Development Revenue Bonds (Scott Paper Company Project), Series B, in each case issued under and secured by a Trust Indenture dated as of December 1, 1984, as supplemented by a First Supplemental Indenture thereto dated as of June 1, 1985, between the IDB and AmSouth Bank of Alabama, as trustee. "Mobile Energy" means Mobile Energy Services Holdings, Inc., an Alabama corporation. "Mobile Energy Parties" means, collectively, the Company and Mobile Energy. -46- "Mobile Energy Request" or "Mobile Energy Order" means, respectively, a written request or order signed in the name of Mobile Energy by an Authorized Officer of Mobile Energy and delivered to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be). "Mobile Facility" means the integrated pulp, paper and tissue manufacturing facility located on a 730-acre site along the Mobile River and the Chickasaw Creek in Mobile, Alabama, comprised of the Mills and the Energy Complex. "Monthly Transfer Date" means the last Business Day of each month of each Fiscal Year, commencing with the first such day occurring after the Closing Date. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation. "Mortgage" means the Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 among the Company, the IDB and the Mortgagee. "Mortgagee" means Bankers Trust (Delaware), or any other Person appointed as a substitute or replacement Mortgagee under the Mortgage. "1983 Bonds" means the IDB's Exempt Facilities Revenue Bonds (Scott Paper Company Project), 1983 Series B, issued under and secured by a Trust Indenture dated as of December 1, 1983 between the IDB and BankAmerica Trust Company of New York, as trustee. "1984 Bonds" means the IDB's Variable Rate Demand Solid Waste Revenue Refunding Bonds (Scott Paper Company Project) Series 1984 A, B, C, D and E issued under and secured by the 1984 Indenture. "1984 Indenture" means the Trust Indenture dated as of December 1, 1984, as supplemented by the First Supplemental Indenture thereto dated as of January 1, 1985 and the Second Supplemental Indenture thereto dated as of August 1, 1995, between the IDB and Chemical Bank, as trustee. "1984 Lease" means the Lease and Agreement dated December 1, 1984, as amended by Amendment No. 1 thereto dated as of November 8, 1994 and Amendment No. 2 thereto dated as of December 9, 1994, between the IDB and the Company (as assignee of Mobile Energy (as assignee of Scott)). "1994 Bond Payment Date" means each June 1 and December 1 of each year, commencing December 1, 1995. "1994 Bond Trustee" means Bankers Trust (Delaware), in its capacity as trustee under the 1994 Indenture. -47- "1994 Bonds" means the IDB's Industrial Development Revenue Bonds (Scott Paper Recovery Boiler Project) 1994 Series A. For all purposes of the Financing Documents, (a) payments in respect of the principal of and premium, if any, and interest on the 1994 Bonds shall be treated as neither Operation and Maintenance Costs nor Senior Debt Service Requirements (or any other debt service) and (b) receipts (or deemed receipts) in respect of the 1994 Bonds shall not be treated as Revenues. "1994 Indenture" means the Trust Indenture dated as of December 1, 1994 between the IDB and the 1994 Bond Trustee. "1995 Bonds" has the meaning specified in Section 2.17(a) of the Tax-Exempt Indenture, which means the Tax-Exempt Bonds. "Non-Affiliate Subordinated Debt" means any unsecured loan or loans from any Person that is not an Affiliate of the Company pursuant to a Subordinated Loan Agreement, the amounts necessary for repayment of which have been included in the Annual Budget approved by the Collateral Agent and the Independent Engineer. "Nondisturbance Agreement" means the Estoppel and Nondisturbance Agreement dated as of December 12, 1994 between TRT and the Company (as assignee of Mobile Energy). "Officer's Certificate" means a certificate that has been signed by an Authorized Officer of either of the Mobile Energy Parties or of Southern (as the case may be). "O&M Agreement" means the Facility Operations and Maintenance Agreement dated as of December 12, 1994 between the Company (as assignee of Mobile Energy) and the Operator. "Operating Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Operating Agreement" means the Operating Agreement of the Company dated as of July 13, 1995, as amended by the First Amendment thereto dated as of July 13, 1995, among the Members. "Operation and Maintenance Costs" means all costs and expenses of operating and maintaining the Energy Complex and, when the Company is exercising the Company Step-In Rights, the Pulp Mill Step-In Equipment, including and together with (a) Subordinated Fees, (b) Maintenance Expenditures and (c) any such costs and expenses specified in clauses (a) through (p) of the definition of Maintenance Expenditures (other than (i) rent payments under the IDB Lease Agreement and (ii) payments of principal of and premium, if any, and interest on the 1994 Bonds). "Operator" means Southern Electric, in its capacity as operator under the O&M Agreement. -48- "Opinion of Counsel" means a written opinion of counsel for any Person either expressly referred to in any Financing Document to which the Collateral Agent or any of the Senior Secured Parties is a party or otherwise satisfactory to the Collateral Agent or such Senior Secured Party (which may include counsel for either of the Mobile Energy Parties, whether or not such counsel is an employee of either or both of them). "Optional Modifications" means all modifications to the Energy Complex that are not Required Modifications. "Optional Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Outstanding" means, when used with respect to any of the Senior Securities (however referenced in any Financing Document), as of the date of determination, all such Senior Securities theretofore authenticated and delivered under the Indenture or the Tax-Exempt Indenture (as the case may be), except: (a) such Senior Securities theretofore canceled by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or delivered to either such Trustee for cancellation; (b) such Senior Securities or portions thereof deemed to have been paid within the meaning of, in the case of the Indenture, Section 12.1 thereof and, in the case of the Tax- Exempt Indenture, Section 12.1 thereof (as the case may be); and (c) such Senior Securities that have been exchanged for other Senior Securities or Senior Securities in lieu of which other Senior Securities have been authenticated and delivered pursuant to the Indenture or the Tax-Exempt Indenture (as the case may be) unless held by a Holder in whose hands such Senior Securities constitute valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Senior Securities (however referenced in any Financing Document) Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or the Tax-Exempt Indenture (as the case may be) or whether or not a quorum is present at a meeting of Holders of such Senior Securities, such Senior Securities owned by either of the Mobile Energy Parties (or any Affiliate thereof) shall be disregarded and deemed not to be Outstanding, except that, in determining whether or not the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to presence of a quorum, only such Senior Securities that a Responsible Officer of the Indenture Trustee or the Tax-Exempt -49- Indenture Trustee (as the case may be) knows to be so owned shall be so disregarded. Any such Senior Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) such pledgee's right so to act with respect to such Senior Securities and that such pledgee is not a Mobile Energy Party (or any Affiliate thereof). "Paper Mill" means the paper mill located at the Mobile Facility, which as of the Closing Date is owned by S.D. Warren. "Paper Mill Energy Services Agreement" means the Paper Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated July 13, 1995, between the Paper Mill Owner and the Company (as assignee of Mobile Energy). "Paper Mill Owner" means S.D. Warren, in its capacity as owner of the Paper Mill. "Paying Agent" means any Person acting as Paying Agent pursuant to, in the case of the Indenture, Section 9.14(b) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(b) thereof. "Percentage Share" means an amount (expressed as a percentage) equal to: (a) with respect to the Working Capital Facility, (i) the Working Capital Facility Commitment in effect immediately prior to any deposit into the Working Capital Facility Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(i) of the Intercreditor Agreement divided by (ii) the Combined Exposure immediately prior to such deposit; (b) with respect to the Indenture, (i) the principal amount of the Indenture Securities Outstanding immediately prior to any transfer to the Indenture Trustee for deposit into the Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain pursuant to Section 6.2(b)(ii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer; and (c) with respect to the Tax-Exempt Indenture, (i) the principal amount of the Tax-Exempt Indenture Securities Outstanding immediately prior to any transfer to the Tax- Exempt Indenture Trustee for deposit into the Tax-Exempt Indenture Securities Account of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain -50- pursuant to Section 6.2(b)(iii) of the Intercreditor Agreement divided by (ii) in the case of Excess Loss Proceeds, the Combined Exposure and, in the case of Redistributed Proceeds, the aggregate principal amount of the Senior Securities Outstanding, in each case immediately prior to such transfer. "Permitted Indebtedness" means (a) in the case of the Company: (i) the First Mortgage Bonds; (ii) Debt incurred under a Working Capital Facility having a Working Capital Facility Commitment not to exceed $15,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time, provided (and the Working Capital Facility shall contain provisions to such effect) that (A) no more than $5,000,000 (multiplied by the Working Capital Escalation Factor in effect at any given time) of such Debt may be scheduled to mature during any calendar month, (B) any Working Capital Facility Loan advanced thereunder shall mature no later than ninety-three (93) days from the date such Working Capital Facility Loan was first advanced, (C) the Company shall be required to repay all amounts advanced thereunder so that no amounts are outstanding once during each Fiscal Year (other than the Fiscal Year ending December 31, 1995) for a period of five (5) consecutive days and (D) the Working Capital Facility Provider thereunder shall become a party to the Intercreditor Agreement; (iii) the Tax-Exempt Bonds; (iv) reimbursement obligations in respect of letters of credit (if any) and other financial obligations arising under the Project Contracts and obligations arising under the Lease Indemnity; (v) purchase money obligations incurred to finance discrete items of equipment not comprising an integral part of the Energy Complex that extend only to the equipment being financed and that do not in the aggregate have annual debt service or lease obligations exceeding $2,000,000 (multiplied by the GDPIPD Factor in effect at the time such obligations were incurred); (vi) trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (vii) obligations in respect of surety bonds or similar instruments in an aggregate amount not exceeding $10,000,000 (multiplied by the GDPIPD Factor in effect at the time such obligations were incurred) at any one time outstanding; (viii) Affiliate Subordinated Debt; (ix) Replacement Debt permitted to be issued pursuant to the terms of the Financing Documents; (x) Debt permitted to be issued pursuant to the terms of the Financing Documents for Required Modifications and Optional Modifications; (xi) Non-Affiliate Subordinated Debt (including any Non-Affiliate Subordinated Debt permitted by clause (x) above) in an aggregate principal amount not to exceed $75,000,000 (multiplied by the GDPIPD Factor in effect at the time such Debt was incurred) permitted to be issued pursuant to the terms of the Financing Documents; (xii) Refunding Debt permitted to be issued pursuant to the terms of the Financing Documents; and (xiii) the Company's obligations in respect of the 1994 Bonds, the Mixed-Use Bonds, the Environmental Bonds and the Refunding Letter of Credit; and (b) in the case of Mobile Energy, the Guaranty. -51- "Permitted Investments" means investments in securities that are: (a) direct obligations of the United States of America or of any agency thereof; (b) obligations fully guaranteed by the United States of America or any agency thereof; (c) time deposits (which may be represented by certificates of deposit) issued by commercial banks organized under the laws of the United States of America or of any political subdivision thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union having a combined capital and surplus of at least $500,000,000 and having long-term unsecured Debt having a rating at least equal to (i) the highest rating assigned to the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be) by at least two of the Rating Agencies or (ii) "B" by Thompson Bankwatch, Inc. (in either case provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such bank); (d) open market commercial paper of any corporation incorporated or doing business under the laws of the United States of America or of any political subdivision thereof then rated at least A-1/P-1 (or an equivalent thereof) by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such corporation); (e) obligations issued or guaranteed by, and any other obligations the interest on which is excluded from income for Federal income tax purposes issued by, any state of the United States of America or the District of Columbia or the Commonwealth of Puerto Rico or any political subdivision, agency, authority or instrumentality thereof, which issuer or guarantor has (i) a short-term Debt rating which is (on the date of acquisition thereof) A- 1/P-1 (or an equivalent thereof) or better and (ii) a long-term Debt rating that is (on the date of acquisition thereof) "A" or better, in each case by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such issuer or guarantor); (f) guaranteed investment contracts of any financial institution organized under the laws of the United States of America or any state thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Union, which financial institution has assets of at least $5 billion in the aggregate and has a long term Debt rating that is (on the date of acquisition thereof) "A" or better by at least two of the Rating Agencies (provided that such investments shall not be comprised of more than $30,000,000 in principal amount at any given time from any one such institution); (g) investment contracts of any financial institution either (i) (A) fully secured by direct obligations of the United States, (B) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States or (C) securities or receipts evidencing ownership interests in obligations or specified portions thereof described in clause (A) or (B) above, in each case guaranteed as a full faith and credit obligation of the United States, having a market value at least equal to 102% of the amount deposited thereunder and possession of which obligation is held under arrangements satisfactory to the Collateral Agent, the -52- Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) or (ii) with long-term Debt ratings of "A" or higher and short-term ratings in one of the highest two major categories by any of the Rating Agencies; (h) a contract or investment agreement with a provider or guarantor (i) which provider or guarantor is rated at least "A" or equivalent by each of the Rating Agencies (provided that if a guarantor is party to the rating, the guaranty is unconditional and is confirmed in writing prior to any assignment by the provider to another subsidiary of such guarantor), (ii) providing that monies invested shall be payable to the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall be payable to the Collateral Agent) without condition (other than notice) and without breakage fee or other penalty, upon not more than two (2) Business Days' notice for application when and as required or permitted under the Indenture, the Intercreditor Agreement or the Tax-Exempt Indenture (as applicable), (iii) stating that such contract or agreement is unconditional, expressly disclaiming any right of setoff and providing for immediate termination in the event of insolvency of the provider and termination upon demand of the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) (except to the extent the monies invested constitute Shared Collateral, which shall provide for termination upon demand of the Collateral Agent) (which demand shall only be made at the direction of the Company) after any payment or other covenant default by the provider and (iv) the terms and provisions of which are in form and substance satisfactory to the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be); and (i) investments in money market funds registered under the Investment Company Act of 1940 then rated in the highest category by S&P and Moody's. "Permitted Liens" means: (a) Liens specifically created, required or permitted by the Indenture, the Tax-Exempt Indenture or the IDB Lease Agreement; (b) the Liens created, or purported to be created, on the Collateral pursuant to the Security Documents; (c) Liens for taxes that are either not yet due, are due but payable without penalty or are the subject of a Good Faith Contest; (d) any exceptions to title that are set forth on Schedule B--Section 2 of the title insurance policy delivered to the Collateral Agent on the Closing Date (to the extent that such exceptions have not been released or subordinated prior to the Closing Date); (e) such minor defects, easements, rights of way, restrictions, irregularities, encumbrances and clouds on title and statutory liens that do not materially impair the property affected thereby and that do not individually or in the aggregate materially impair the value of the security interests granted under the Financing Documents; (f) the easements and other rights in favor of third-parties contained in the Project Contracts as of the Closing Date; (g) deposits or pledges to secure statutory obligations or appeals, release of attachments, stays of execution or injunction, performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or for purposes of like general nature in the ordinary -53- course of business; (h) Liens in connection with worker's compensation, unemployment insurance or other social security or pension obligations; (i) legal or equitable encumbrances deemed to exist by reason of the existence of any litigation or other legal proceeding if the same are the subject of a Good Faith Contest (excluding any attachment prior to judgment, judgment lien or attachment in aid of execution on a judgment); (j) mechanic's, workmen's, materialmen's, construction or other like Liens arising in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations that are not yet due or that are the subject of a Good Faith Contest; (k) Liens securing purchase money obligations that constitute Permitted Indebtedness; (l) Liens in favor of the Mill Owners on the Mill Owner Maintenance Reserve Account, including monies on deposit therein or otherwise credited thereto (in accordance with the Mill Owner Maintenance Reserve Account Agreement) not exceeding $2,000,000, to the extent arising under the Master Operating Agreement or the Mill Owner Maintenance Reserve Account Agreement; and (m) Liens on cash collateral not exceeding $1,500,000 in favor of the issuer of the Refunding Letter of Credit. "Person" means any individual, sole proprietorship, corporation, partnership, limited liability company, joint venture, trust, unincorporated association, institution, Governmental Authority or any other entity. "Place of Payment" means, when used with respect to the Senior Securities of any series, the office or agency maintained pursuant to, in the case of the Indenture, Section 9.14(a) thereof and, in the case of the Tax-Exempt Indenture, Section 9.13(a) thereof and, in either case, such other place or places, if any, where the principal of and premium, if any, and interest on the Senior Securities of such series are payable as specified in the Series Supplemental Indenture to the Indenture or the Tax-Exempt Indenture (as the case may be) establishing the Senior Securities of such series. "Predecessor Securities" means, with respect to any particular Senior Security, every previous Senior Security evidencing all or a portion of the same Debt as that evidenced by such particular Senior Security. For purposes of this definition, any Senior Security authenticated and delivered under, in the case of any Indenture Security, Section 2.9 of the Indenture and, in the case of any Tax-Exempt Indenture Security, Section 2.9 of the Tax-Exempt Indenture in lieu of a lost, destroyed or stolen Senior Security shall be deemed to evidence the same Debt as such lost, destroyed or stolen Senior Security. "Prepayment Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Principal Payment Date" means in respect of (a) the Indenture Securities, any January 1 or July 1 on which principal payments are -54- due to Holders thereof and (b) the Tax-Exempt Indenture Securities, any January 1 on which principal payments are due to Holders thereof. "Processing Services" has the meaning specified in the Master Operating Agreement. "Project Contracts" means, collectively, (a) the Energy Services Agreements, (b) the Master Operating Agreement, (c) the Lease, (d) the Supplementary Lease, (e) the O&M Agreement, (f) the Common Services Agreement, (g) the Water Agreement, (h) the Boiler Ash Agreement, (i) the Environmental Indemnity Agreements, (j) the Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of June 16, 1995 and the Second Amendment thereto dated as of July 13, 1995, between Scott and the Company (as assignee of Mobile Energy), (k) the Employee Transition Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, among Scott, the Company (as assignee of Mobile Energy) and Southern Electric, (l) the SCS Agreement, (m) the Easement Deeds, (n) the Asset Purchase Agreement dated as of December 12, 1994 between Scott, as seller, and the Company (as assignee of Mobile Energy), as buyer, (o) the Coal Supply Agreement, (p) any other Contract entered into by either of the Mobile Energy Parties for the provision of fuel to the Energy Complex, (q) the IDB Lease Agreement, (r) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (s) the Construction, Financing and Installment Sale Agreement dated as of April 1, 1973 between the IDB and Scott, (t) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (u) the Facilities Lease and Agreement dated as of December 1, 1984 between the IDB and Scott, (v) the Sublease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (w) the Construction, Financing and Installment Sale Agreement dated as of September 1, 1976 between the IDB and Scott, (x) the Lease and Assignment Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (y) the Recovery Boiler Facilities Lease and Agreement dated as of December 1, 1994 between the IDB and Scott, (z) the Lease Assignment and Assumption Agreement dated as of December 12, 1994 between Scott and the Company (as assignee of Mobile Energy), (aa) the Nondisturbance Agreement, (bb) the Recognition Agreements, (cc) the Mill Owner Maintenance Reserve Account Agreement and (dd) the Transfer Agreement. "Project Costs" means costs and expenses (other than financing costs and expenses) paid, incurred or to be incurred by the Company after the Closing Date to complete the capital improvements to the Energy Complex specified in the Master Operating Agreement in accordance with the Capital Budget and certain other planned expenditures relating to the Energy Complex. -55- "Project Documents" means, collectively, the Project Contracts and the Financing Documents. "Project Participant" means each Person that is party to a Project Document. "Prudent Plant Operating Standards" has the meaning specified in the Master Operating Agreement. "Pulp Mill" means the pulp mill (including a process water plant and waste water treatment plant) located at the Mobile Facility, which as of the Closing Date is owned by Scott. "Pulp Mill Energy Services Agreement" means the Pulp Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1994, between the Pulp Mill Owner and the Company (as assignee of Mobile Energy). "Pulp Mill Owner" means Scott, in its capacity as owner of the Pulp Mill. "Pulp Mill Step-In Equipment" has the meaning specified in the Master Operating Agreement. "PURPA" means the Public Utility Regulatory Policies Act of 1978. "Qualified Engineer" means an independent engineer listed on Schedule 1 to the Intercreditor Agreement, as such Schedule may be amended from time to time in accordance with Section 11.3 of the Intercreditor Agreement. "Qualifying Facility" means a "Qualifying Cogeneration Facility" as specified in section 3(18)(B) of the Federal Power Act or a qualifying small power production facility within the meaning of section 201 of PURPA. "Rating Agencies" means, collectively, S&P, Fitch and Moody's, together with any other nationally recognized credit agency of similar standing if any such Person is not then currently rating the proposed subject of such rating. "Receivables" means all of the Company's rights to payment for goods sold or leased or services performed by the Company, including (a) rights evidenced by an account, note, contract, security, instrument, chattel paper or other evidence of indebtedness and (b) all "accounts" as defined in Section 9-106 of the Uniform Commercial Code as in effect in the State of New York on the Closing Date. "Recognition Agreements" means, collectively, (a) the Recognition, Cooperation and Consent Agreement relating to the Mixed-Use Bonds dated as of August 1, 1995 among the Company, the IDB, AmSouth Bank of Alabama, TRT and the Collateral Agent and (b) -56- the Recognition, Cooperation and Consent Agreement relating to the Tax-Exempt Bonds dated as of August 1, 1995 among the Company, the IDB, the Tax-Exempt Indenture Trustee and the Collateral Agent. "Redemption Date" has the meaning specified (a) in the case of the Indenture, in Section 6.2 thereof and (b) in the case of the Tax-Exempt Indenture, in Section 6.2 thereof. "Redistributed Proceeds" means, with respect to any Excess Loss Proceeds, the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the Working Capital Facility Distribution Amount in respect of such Excess Loss Proceeds. "Refunding Debt" means Debt, the proceeds of which are used to refund outstanding Senior Debt. "Refunding Letter of Credit" means one or more letters of credit issued by a commercial bank in an aggregate amount not to exceed $1,500,000 to provide for the payment of accrued interest on the 1984 Bonds upon the redemption thereof. "Regular Record Date" means, for the Stated Maturity of any Senior Security of a series, or for the Stated Maturity of any installment of principal thereof or payment of interest thereon, the 15th day (whether or not a Business Day) of the month prior to such Stated Maturity, or any other date specified for such purpose in the form of Senior Security of such series attached to the Series Supplemental Indenture to the Indenture or the Tax-Exempt Indenture (as the case may be) relating to the Senior Securities of such series. "Replacement Debt" means Senior Securities, the proceeds of which are used to refinance all or a portion of the outstanding Tax-Exempt Indenture Securities (whether by effecting a gross-up of, or by the issuance of Senior Securities to replace, affected Tax-Exempt Indenture Securities) upon the occurrence of a Determination of Taxability. "Replacement Facility" means a facility with materially different performance capabilities from the Energy Complex that can be built to provide services to some or all of the Mills following the occurrence of an Event of Loss or an Event of Eminent Domain. "Required Deposit" means, at the time of any Required Deposit Event with respect to any Reserve Account Security on deposit in any Reserve Account Security Account, an amount equal to the aggregate Available Amount under such Reserve Account Security at such time; provided, however, that if such Required Deposit Event results from the occurrence of a Debt Service Event, such amount shall be equal to the aggregate amount required to be transferred pursuant to, if such Reserve Account Security Account is (a) the Maintenance Plan Funding Subaccount, Section 3.5(c) of the Intercreditor Agreement, (b) the Distribution Account, Section -57- 3.8(b) of the Intercreditor Agreement, (c) a Debt Service Reserve Account, Section 4.5 of the Indenture and (d) a Tax-Exempt Debt Service Reserve Account, Section 4.6 of the Tax-Exempt Indenture. "Required Deposit Event" means (a) in the case of any Reserve Account Letter of Credit on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Reserve Account Letter of Credit, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Reserve Account Letter of Credit, unless such Reserve Account Letter of Credit has been replaced with monies or other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to such date, (iii) the occurrence of a Credit Standard Event or Default Event with respect to such Reserve Account Letter of Credit and the continuance thereof for a period of five (5) days, unless such Reserve Account Letter of Credit has been replaced with other Reserve Account Security (other than, if such Reserve Account Security Account is a Tax-Exempt Debt Service Reserve Account, a Southern Guaranty) prior to the expiration of such period or (iv) the date on which a Trigger Event Notice has been delivered and (b) in the case of any Southern Guaranty on deposit in any Reserve Account Security Account, (i) the occurrence of any Debt Service Event with respect to such Southern Guaranty, (ii) the date that is fifteen (15) days prior to the occurrence of any Termination Event with respect to such Southern Guaranty, unless such Southern Guaranty has been replaced with monies or other Reserve Account Security prior to such date, (iii) the occurrence of a Credit Standard Event with respect to such Southern Guaranty and the continuance thereof for a period of fifteen (15) days, unless (A) the Collateral Agent or the Indenture Trustee (as the case may be) shall have been provided with an Officer's Certificate of Southern certifying as to the determination that the Southern Credit Standard has been satisfied after such occurrence and prior to the expiration of such period or (B) such Southern Guaranty has been replaced with monies or other Reserve Account Security prior to the expiration of such period, (iv) the occurrence of a Default Event and the continuance thereof for a period of five (5) days, unless such Southern Guaranty has been replaced with other Reserve Account Security prior to the expiration of such period or (v) the date on which a Trigger Event Notice has been delivered. "Required Interest Deposit" means, in the case of any Monthly Transfer Date with respect to: (a) the Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date, is equal to the amount of interest on the Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a -58- Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Interest Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to the next succeeding Interest Payment Date (unless such next succeeding Interest Payment Date is January 1, 2020, in which case together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to December 1, 2019), is equal to the amount of interest on the Tax-Exempt Indenture Securities becoming due on such Interest Payment Date (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Interest Payment Date, in which case the amount of interest payable on the Tax- Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax- Exempt Indenture Securities, is equal to the amount of interest thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). "Required Modifications" means those modifications reasonably necessary for the Energy Complex to remain in compliance with all material Governmental Approvals and maintain, at a minimum, the Maximum Capacity (as defined in the Master Operating Agreement) levels as in effect on the Closing Date. -59- "Required Modifications Subaccount" means the subaccount of the Completion Account so designated established and created under Section 2.2(c) of the Intercreditor Agreement. "Required Principal Deposit" means in the case of any Monthly Transfer Date with respect to: (a) the Indenture Securities Principal Subaccount, an amount equal to one-sixth (1/6th) of the amount of principal of the Indenture Securities becoming due on each Principal Payment Date therefor occurring within the six (6) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within six (6) months after the Closing Date or any other date on which any Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date) (such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (c) below in lieu of this paragraph (a)); (b) the Tax-Exempt Indenture Securities Principal Subaccount, one-twelfth (1/12th) (unless such Monthly Transfer Date occurs on or after January 1, 2019, in which case one- eleventh (1/11th)) of the amount of principal of the Tax- Exempt Indenture Securities becoming due on each Principal Payment Date therefor occurring within the twelve (12) months immediately succeeding the month in which such Monthly Transfer Date occurs (unless such Principal Payment Date occurs within twelve (12) months after the Closing Date or any other date on which any Tax-Exempt Indenture Securities are originally issued, in which case an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to such Principal Payment Date, is equal to the amount of principal thereof becoming due on such Principal Payment Date)(such amount to be reduced if and to the extent that a Redemption Date or Prepayment Date for any of the Tax-Exempt Indenture Securities is on or precedes such Principal Payment Date, in which case the amount of principal payable with respect to the Tax-Exempt Indenture Securities to be so redeemed or prepaid shall be provided for pursuant to paragraph (d) below in lieu of this paragraph (b)); -60- (c) the Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be); and (d) the Tax-Exempt Indenture Securities Redemption Subaccount, an amount that, after giving effect to monies on deposit therein immediately prior to such Monthly Transfer Date and together with a uniform amount to be deposited therein on each succeeding Monthly Transfer Date prior to each succeeding Redemption Date or Prepayment Date for the Tax- Exempt Indenture Securities, is equal to the amount of principal thereof and premium, if any, thereon becoming due on each such Redemption Date or Prepayment Date (as the case may be). "Required Senior Creditors" means Senior Secured Parties holding or otherwise representing 331/3% of the Combined Exposure. "Reserve Account Letter of Credit" means a letter of credit issued by a commercial bank whose long-term unsecured Debt is rated at least "A" by S&P, "A" by Fitch and "A2" by Moody's. "Reserve Account Security" means either, or any combination of, (a) one or more Southern Guaranties or (b) one or more Reserve Account Letters of Credit. "Reserve Account Security Accounts" means, collectively, each Debt Service Reserve Account (if any), each Tax-Exempt Debt Service Reserve Account (if any), the Maintenance Plan Funding Subaccount and the Distribution Account. "Responsible Officer" means, when used with respect to the Collateral Agent, the Indenture Trustee and the Tax-Exempt Indenture Trustee, (a) any officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) within the Corporate Trust Office of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be), including any vice president, any assistant vice president, any assistant secretary or any assistant treasurer, (b) any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) performing functions similar to those performed by any of the officers designated in clause (a) above and (c) with respect to a particular corporate trust matter, any other officer of the Collateral Agent, the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) to whom such matter is referred because of such other officer's knowledge of and familiarity with the particular subject. -61- "Restricted Payment Alternative Agreement Requirements" means, with respect to any Project Contract, another Contract entered into by the Company with one or more other Persons in substitution for or replacement of any such Project Contract that has been declared unenforceable or rejected or otherwise terminated, with respect to some or all of the Processing Services or other services formerly provided by or to the Company thereunder, provided that either (a) the Company has delivered to the Collateral Agent a letter from any two of the Rating Agencies (then currently rating the Indenture Securities or the Tax-Exempt Indenture Securities) confirming that, after giving effect to such alternative Contract, the ratings of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) are Investment Grade or (b) the Company (i) has provided to the Collateral Agent the Revenue Sufficiency Certification and (ii) has delivered to the Collateral Agent an Officer's Certificate, together with an Independent Engineer Confirmation, certifying that (A) the term of such alternative Contract extends through the earlier of (1) the final maturity of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) and (2) the term of such Project Contract, (B) such alternative Contract contains termination provisions no less favorable to the Company than those contained in such Project Contract, (C) such alternative Contract has been in full force and effect for at least thirty-six (36) months, (D) the average of the two annual Senior Debt Service Coverage Ratios for the four immediately preceding semi-annual payment periods was equal to at least 1.25 to 1.0 and, based on projections prepared by the Company on a reasonable basis, the average of the annual Senior Debt Service Coverage Ratios through the final maturity date of the Outstanding Indenture Securities or the Outstanding Tax-Exempt Indenture Securities (as the case may be) is projected to be at least 1.25 to 1.0 and (E) such alternative Contract is reasonably capable of being performed by the parties thereto. "Restricted Payments" means, collectively, (a) payments from the Subordinated Fee Account or any other payment in respect of Subordinated Fees, (b) distributions (from the Distribution Account or otherwise), including a return of capital contributions and dividends, paid to, or at the direction or for the benefit of, any Affiliate of the Company, but excluding distributions of cash from any Account to the extent such cash has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents, (c) the payment of principal of or premium, if any, or interest on any Affiliate Subordinated Debt, (d) the repurchase by the Company of any interest of any Member, or (e) the making of any loans or other advances from the Company to any Affiliate of the Company, but excluding advances of cash to the extent such cash (i) has been replaced with Reserve Account Security in accordance with the terms of the Financing Documents or (ii) constitutes a payment required under the O&M Agreement or the SCS Agreement. "Revenue Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. -62- "Revenue Sufficiency Certification" means an Officer's Certificate of the Company, together with an Independent Engineer Confirmation, to the effect that, based upon projections prepared by the Company in accordance with Section 1.15 of the Indenture or Section 1.12 of the IDB Lease Agreement, or of any comparable provision of the Working Capital Facility, the Project Contracts then in effect (including any alternative Contract entered into, or to be entered into, by the Company with one or more other Persons in substitution or replacement of any other Project Contract as contemplated by the Event of Default Alternative Agreement Requirements or the Restricted Payment Alternative Agreement Requirements) generate sufficient Revenues to enable the Company to pay its debts and other obligations (including Operation and Maintenance Costs) when they become due through the final maturity of the Outstanding Indenture Securities or the Tax-Exempt Indenture Securities (as the case may be). "Revenues" means (without duplication), for any period, the revenues received by the Company for use of the services and facilities of the Energy Complex including (a) amounts received by the Company under the Project Contracts, (b) interest and other income earned and credited on monies deposited in the Accounts (to the extent not retained in such Accounts), (c) the proceeds of the sale of any part of the Energy Complex, provided that such sale is not prohibited by the Financing Documents, (d) the proceeds of any business interruption insurance and other payments received for interruption of operations (excluding any proceeds of any liability or physical damage insurance) and (e) all other monies that have been deposited into the Revenue Account as required or permitted by the terms of the Financing Documents. Notwithstanding the foregoing, "Revenues" do not include (i) capital contributions to the Company, (ii) the proceeds of any Debt or Loss Proceeds, (iii) amounts received by the Company in connection with the exercise of Company Step-In Rights (to the extent in excess of the Company's expenses incurred in connection therewith, including the cure or the attempted cure of the related Pulp Mill Triggering Event (as defined in the Master Operating Agreement)), (iv) monies transferred from the Completion Account to the Revenue Account pursuant to Section 3.9(c) of the Intercreditor Agreement, (v) monies transferred from any Debt Service Reserve Account to the Revenue Account pursuant to Section 4.5 of the Indenture, (vi) amounts received by the Company with respect to the 1994 Bonds and (vii) monies deposited into any Reserve Account Security Account in replacement (or satisfaction) of Reserve Account Security on deposit therein (including monies deposited into the Maintenance Plan Funding Subaccount pursuant to the last sentence of Section 3.5(a) of the Intercreditor Agreement). "S&P" means Standard & Poor's Ratings Group, a New York corporation. "Scott" means Scott Paper Company, a Pennsylvania corporation. -63- "SCS" means Southern Company Services, Inc., an Alabama corporation. "SCS Agreement" means the Agreement dated July 14, 1995 between SCS and the Company. "S.D. Warren" means S.D. Warren Company, a Pennsylvania corporation. "SEC" means the Securities and Exchange Commission of the United States of America. "Secretary" means, in the case of a corporation (including Mobile Energy) or limited liability company (including the Company) the secretary or an assistant secretary of such corporation or limited liability company (as the case may be). "Secured Obligations" means, collectively, the Financing Liabilities, the Trustee Claims, the Collateral Agent Claims and the IDB Claims. "Secured Party" means Bankers Trust (Delaware) or any other Person appointed as a substitute or replacement Secured Party under the Security Agreement. "Securities" has the meaning specified (a) in the case of the Indenture, in the first "WHEREAS" clause thereof and (b) in the case of the Tax-Exempt Indenture, in the last "WHEREAS" clause thereof. "Securities Act" means the Securities Act of 1933. "Security Agreement" means the Assignment and Security Agreement dated as of August 1, 1995 among the Company, the IDB and the Secured Party. "Security Documents" means, collectively, (a) the Mortgage, (b) the Security Agreement, (c) the Indenture (including any Series Supplemental Indenture), (d) the Intercreditor Agreement, (e) the Tax-Exempt Indenture (including any Series Supplemental Indenture), (f) the IDB Lease Agreement, (g) the Consents to Assignment and (h) each Financing Statement. "Security Interest" means the Liens created, or purported to be created, on Shared Collateral pursuant to any Security Document. "Security Register" has the meaning specified in Section 2.8 of the Indenture or Section 2.8 of the Tax-Exempt Indenture (as the case may be). "Security Registrar" means any Person acting as Security Registrar under the Indenture or the Tax-Exempt Indenture pursuant to Section 9.14 or Section 9.13 (as the case may be) thereof. -64- "Senior Creditor Certificate" means a certificate of a Senior Secured Party, signed by an Authorized Representative of such Senior Secured Party, (a) setting forth the principal amount of the Financing Liabilities due or owing to, or in favor of or for the benefit of, such Senior Secured Party as of the date of such certificate and the outstanding unutilized Financing Commitments of such Senior Secured Party as of the date of such certificate, (b) setting forth a contact person for such Senior Secured Party, including phone and facsimile numbers for such person, (c) directing the Collateral Agent to take a specified action and (d) stating specifically the action the Collateral Agent is directed to take and the Security Document and the provision thereof pursuant to which the Collateral Agent is being directed to act. "Senior Debt" means, collectively, the Outstanding Senior Securities and the outstanding Working Capital Facility Loans. "Senior Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operation and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account and the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Senior Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (iv) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (v) the aggregate amount of overdue payments in respect of clauses (b)(i) through (iv) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Senior Debt Service Coverage Ratio. "Senior Debt Service Requirement" means, for any period, the sum of (a) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (b) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (c) all amounts payable by the Company during such -65- period in respect of payment obligations under the Working Capital Facility (other than repayment of principal), (d) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents and (e) the aggregate amount of overdue payments in respect of the foregoing from previous periods, in each case determined on a cash basis in accordance with GAAP. "Senior Debt Termination Date" means the date on which all Financing Liabilities, other than contingent liabilities and obligations that are unasserted at such date, have been paid and satisfied in full and all Financing Commitments have been terminated. "Senior Secured Parties" means, collectively, (a) the Indenture Trustee (on behalf of the Holders of the Indenture Securities from time to time and, solely in its capacity as trustee on behalf of such Holders, itself), (b) the Tax-Exempt Indenture Trustee (on behalf of the Holders of the Tax-Exempt Indenture Securities from time to time and, solely in its capacity as trustee on behalf of such Holders, itself) and (c) the Working Capital Facility Provider (on behalf of the Lenders from time to time and itself). "Senior Securities" means, collectively, the Indenture Securities and the Tax-Exempt Indenture Securities. "Series Supplemental Indenture" means an indenture supplemental to the Indenture or the Tax-Exempt Indenture entered into by the Mobile Energy Parties or the IDB (as the case may be) and the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) for the purpose of establishing, in accordance with such indenture, the title, form and terms of the Senior Securities of any series. "Shared Collateral" means all Collateral other than (a) the Collateral referenced in clause (a) of the definition of Indenture Securities Collateral and (b) the Collateral referenced in clause (a) of the definition of Tax-Exempt Indenture Securities Collateral. "Sinking Fund" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Redemption Dates" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). "Sinking Fund Requirements" has the meaning specified in Section 7.2 of the Indenture or Section 7.2 of the Tax-Exempt Indenture (as the case may be). -66- "Site" means the real property on which the Energy Complex is situated, as more fully described in the Mortgage. "Southern" means The Southern Company, a Delaware corporation. "Southern Credit Standard" means, at any time, (a) Southern's outstanding senior long-term Debt is then rated at least, and not rated less than, "A" by either S&P or Moody's (unless such senior long-term Debt is not then rated by either S&P or Moody's, in which case each Designated Southern Subsidiary has outstanding senior long-term Debt that is then rated at least, and not rated less than, BBB by S&P or Baa2 by Moody's) and (b) the sum of (i) cash and cash equivalents (including marketable securities) of Southern and the Designated Southern Subsidiaries, (ii) amounts available from committed credit facilities of Southern and the Designated Southern Subsidiaries and (iii) amounts available from commercial paper authorized to be issued by Southern and rated not less than A-1/P-1 by S&P or Moody's (in each case as of the end of Southern's most recently completed fiscal quarter and provided that such cash and cash equivalents and other amounts are available, without restriction, for distribution to the Collateral Agent or the Indenture Trustee, upon fifteen (15) days' notice) is equal to at least the aggregate amount of Southern Guaranties then outstanding multiplied by four. "Southern Electric" means Southern Electric International, Inc., a Delaware corporation. "Southern Guaranty" means one or more unconditional, absolute and irrevocable guaranties from Southern to be delivered to (a) the Collateral Agent for deposit into the Maintenance Plan Funding Subaccount or the Distribution Account pursuant to and in accordance with Section 3.15(a) of, and in substantially the form attached as Exhibit C to, the Intercreditor Agreement or (b) the Indenture Trustee for deposit into each Debt Service Reserve Account (if any) pursuant to and in accordance with Section 4.6(a) of, and in substantially the form attached as Exhibit A to, the Indenture, provided that, in the case of clause (a) and (b) above, the Southern Credit Standard is satisfied at the time of such delivery and deposit. "Southern Master Tax Sharing Agreement" means the Income Tax Allocation Agreement dated as of December 29, 1981 among Southern and its corporate subsidiaries. "Special Record Date" means, with respect to the payment of any defaulted principal or interest, a date fixed by the Indenture Trustee or the Tax-Exempt Indenture Trustee (as the case may be) pursuant to, in the case of the Indenture Trustee, Section 2.10 of the Indenture and, in the case of the Tax-Exempt Indenture Trustee, Section 2.10 of the Tax-Exempt Indenture. "Stated Maturity" means, when used with respect to any Senior Security or any installment of principal thereof or payment of -67- interest thereon, the date specified in such Senior Security as the fixed date on which such Senior Security or such installment of principal or payment of interest is due and payable. "Subordinated Debt" means, collectively, Affiliate Subordinated Debt and Non-Affiliate Subordinated Debt. "Subordinated Debt Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Debt Provider" means any Person providing Subordinated Debt pursuant to a Subordinated Loan Agreement. "Subordinated Fee" means a fee in exchange for the provisions of goods or services to either of the Mobile Energy Parties, the payment of which is fully subordinated to the Secured Obligations as to payment and exercise of remedies and that is payable only to the extent it would otherwise be distributable if on deposit in the Distribution Account. "Subordinated Fee Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Subordinated Loan Agreement" means a binding agreement with a Subordinated Debt Provider providing unsecured debt financing for the benefit of the Energy Complex and on terms and conditions that shall satisfy the requirements of the Financing Documents. "Supplementary Lease" means the Supplementary Lease Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between Scott, as lessor, and the Company (as assignee of Mobile Energy), as lessee. "Tax-Exempt Bonds" means the Tax-Exempt Indenture Securities issued on the Closing Date under the Tax-Exempt Indenture. "Tax-Exempt Debt Service Reserve Account" means the Account so designated established and created under Section 4.4(a) of the Tax- Exempt Indenture and any Account so designated and created under any Series Supplemental Indenture to the Tax-Exempt Indenture for the benefit of Holders of the Tax-Exempt Indenture Securities established thereunder. "Tax-Exempt Debt Service Reserve Account Required Balance" means (a) in respect of the Tax-Exempt Debt Service Reserve Account established and created under Section 4.4(a) of the Tax-Exempt Indenture, the amount designated in Section 4.4(b) thereof and (b) in respect of any other Tax-Exempt Debt Service Reserve Account, the amount so designated in the Series Supplemental Indenture to the Tax-Exempt Indenture establishing such Tax-Exempt Debt Service Reserve Account. -68- "Tax-Exempt Indenture" means the Amended and Restated Trust Indenture dated as of August 1, 1995 between the IDB and the Tax- Exempt Indenture Trustee. "Tax-Exempt Indenture Accounts" means, with respect to the Tax-Exempt Indenture Securities of any series, the Tax-Exempt Indenture Securities Account and each Tax-Exempt Debt Service Reserve Account (if any) established for the benefit of Holders of the Tax-Exempt Indenture Securities of such series. "Tax-Exempt Indenture Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement, an amount equal to the Tax-Exempt Indenture's Percentage Share of (a) such Excess Loss Proceeds and (b) the Redistributed Proceeds with respect to such Excess Loss Proceeds. "Tax-Exempt Indenture Securities" means all Outstanding Debt issued pursuant to the Tax-Exempt Indenture. "Tax-Exempt Indenture Securities Account" means the Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Collateral" means, collectively, (a) all of the collateral mortgaged, pledged or assigned, or purported to be mortgaged, pledged or assigned, to the Tax-Exempt Indenture Trustee by the IDB pursuant to the granting and assigning clauses of the Tax-Exempt Indenture and (b) the Shared Collateral. "Tax-Exempt Indenture Securities Interest Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Principal Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Securities Redemption Subaccount" means the subaccount of the Tax-Exempt Indenture Securities Account so designated established and created under Section 4.1 of the Tax- Exempt Indenture. "Tax-Exempt Indenture Trustee" means First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America. "Tax-Exempt Project" means those portions of the Energy Complex financed with the proceeds of the 1983 Bonds, as described generally in Exhibit A to the IDB Lease Agreement. -69- "Termination Event" means, with respect to any Reserve Account Security, such Reserve Account Security shall have terminated or expired (other than any termination thereof pursuant to the last sentence of Section 3.8(c) of the Intercreditor Agreement). "Third Party Engineer" means the independent engineering firm chosen from the list of engineers maintained as Schedule 1 to the Intercreditor Agreement and appointed Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Third Party Engineer Dispute Resolution" means the dispute resolution process involving a Third Party Engineer pursuant to Section 11.2 of the Intercreditor Agreement. "Tissue Mill" means the tissue mill located at the Mobile Facility, which as of the Closing Date is owned by Scott. "Tissue Mill Energy Services Agreement" means the Tissue Mill Energy Services Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, between the Tissue Mill Owner and the Company (as assignee of Mobile Energy). "Tissue Mill Owner" means Scott, in its capacity as owner of the Tissue Mill. "Total Debt Service Coverage Ratio" means, for any period and without duplication, the ratio of (a) (i) the sum of (A) all Revenues for such period and (B) the amount of interest and other income earned and credited on monies deposited in the Accounts (to the extent retained in such Accounts) for such period minus (ii) the sum of (A) Operations and Maintenance Costs for such period (except for such costs paid with monies on deposit in the Maintenance Reserve Account or the Mill Owner Maintenance Reserve Account) and (B) the aggregate of the amounts deposited into the Maintenance Reserve Account for such period (but for purposes of calculating any projected Total Debt Service Coverage Ratio, not less than the Maintenance Reserve Account Required Deposit for such period) and the Mill Owner Maintenance Reserve Account for such period to (b) the sum of (i) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the Outstanding Indenture Securities, (ii) all amounts payable by the Company during such period in respect of rent under the IDB Lease Agreement, (iii) all amounts payable by the Company during such period in respect of payment obligations under the Working Capital Facility (other than repayments of principal), (iv) all amounts payable by the Company as fees and other expenses (including any interest thereon) to any fiduciary acting in such capacity under the Security Documents, (v) all amounts payable by the Company during such period in respect of principal of and premium, if any, and interest on the outstanding Subordinated Debt, (vi) all amounts payable by the Company during such period as fees and other expenses (including any interest thereon) to any Subordinated Debt Provider and (vii) the aggregate -70- amount of overdue payments in respect of clauses (b)(i) through (vi) above from previous periods, in each case determined on a cash basis in accordance with GAAP. Neither payments (including deemed payments) nor receipts (including deemed receipts) in respect of principal of or premium, if any, or interest on the 1994 Bonds shall be included for purposes of calculating the Total Debt Service Coverage Ratio. "Transfer Agreement" means the Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement dated July 14, 1995 between Mobile Energy and the Company. "Trigger Event" means (a) an Event of Default under the Indenture and an acceleration of Indenture Securities thereunder, (b) an Event of Default under the Tax-Exempt Indenture and an acceleration of Tax-Exempt Indenture Securities thereunder, (c) an Event of Default under the Working Capital Facility and an acceleration of Working Capital Facility Loans thereunder or (d) a Bankruptcy Event in respect of either of the Mobile Energy Parties and the expiration of the shortest applicable grace period with respect thereto. "Trigger Event Period" means that a Trigger Event shall have occurred and be continuing, provided that, except in the case of any such Trigger Event that shall have resulted from a Bankruptcy Event in respect of either of the Mobile Energy Parties, the written request of the Required Senior Creditors specified in Section 5.1(a) of the Intercreditor Agreement shall have been delivered to the Collateral Agent and not been rescinded. "TRT" means Three Rivers Timber Company, a Washington corporation. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which the Indenture was executed, except as provided in Section 11.6 thereof; provided, however, that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended. "Trustee Claims" means all obligations of the Mobile Energy Parties, now or hereafter existing, to pay fees, costs, expenses or other amounts to (a) the Indenture Trustee under the Indenture or (b) the Tax-Exempt Indenture Trustee under the Tax-Exempt Indenture. "Uniform Commercial Code" means the Uniform Commercial Code of the jurisdiction the law of which governs the Contract in which such term is used. "U.S. Government Obligations" means non-callable direct obligations of or obligations as to which the payment of principal of and interest is unconditionally guaranteed by the United States of America. -71- "Water Agreement" means the Water Procurement and Effluent Service Agreement dated as of December 12, 1994, as amended by the First Amendment thereto dated as of July 13, 1995, among the Company (as assignee of Mobile Energy), the Pulp Mill Owner, the Paper Mill Owner and the Tissue Mill Owner. "Wind-Up Event" means, at any time upon and after a Trigger Event, the application of monies on deposit in any of the Intercreditor Agreement Accounts, or of proceeds from any sale, disposition or other realization of any Shared Collateral (other than the Intercreditor Agreement Accounts), in either case to the payment of amounts owing in respect of any Senior Debt and as a result of the exercise of remedies by the Collateral Agent under Article V of the Intercreditor Agreement. "Working Capital Escalation Factor" means, with respect to any Fiscal Year, a factor (calculated in June of such Fiscal Year) equal to the amount obtained by (a) dividing (i) the GDPIPD most recently published during such Fiscal Year by (ii) the GDPIPD published during the prior Fiscal Year on the date that most closely corresponds to, and is on or prior to, the date of such GDPIPD most recently published (provided that if the amount obtained is less than or equal to 1.015, then such amount shall be deemed to equal 1.015), (b) then subtracting 0.015, and (c) then multiplying by the Working Capital Escalation Factor with respect to the immediately preceding Fiscal Year. "Working Capital Facility" means the Revolving Credit Agreement dated as of August 1, 1995 between the Company and the Working Capital Facility Provider or any other Contract between the Company and a Working Capital Facility Provider pursuant to which funds for the working capital requirements of the Company are provided. "Working Capital Facility Account" means the Account so designated established and created under Section 2.2(a) of the Intercreditor Agreement. "Working Capital Facility Commitment" means the aggregate of the commitments of the Lenders under the Working Capital Facility. "Working Capital Facility Distribution Amount" means, in respect of any Excess Loss Proceeds with respect to an Event of Loss or Event of Eminent Domain to be applied pursuant to Section 6.2(b) of the Intercreditor Agreement and provided that the Working Capital Facility Commitment is subject to reduction in connection with such Event of Loss or Event of Eminent Domain pursuant to the terms of the Working Capital Facility, an amount equal to the excess, if any, of the Working Capital Facility's Percentage Share of such Excess Loss Proceeds over the unutilized Working Capital Facility Commitment in effect immediately prior to such reduction, unless the Company would not be able to borrow Working Capital Facility Loans (because the conditions set forth in Article III of the Working Capital Facility are not available or not satisfied), -72- in which case the lesser of (a) the Working Capital Facility's Percentage Share of such Excess Loss Proceeds and (b) the outstanding Working Capital Loans at such time. "Working Capital Facility O&M Loan" means a Working Capital Facility Loan, to the extent the proceeds thereof are applied to Operation and Maintenance Costs other than (a) rebates to the United States government pursuant to Section 148 of the Code, (b) Maintenance Expenditures and (c) payments of IDB Claims. "Working Capital Facility Provider" means Banque Paribas, a French banking corporation, and each other Person providing funds to the Company pursuant to a Working Capital Facility. "Working Capital Facility Loan" means a Loan (as defined in the Working Capital Facility) advanced by the Working Capital Facility Provider pursuant to the Working Capital Facility. -73- EX-10.10 11 Exhibit 10.10 SECOND AMENDMENT TO SUPPLEMENTARY LEASE AGREEMENT THIS SECOND AMENDMENT TO SUPPLEMENTARY LEASE AGREEMENT (the "Second Amendment"), is made as of this 1st day of August, 1995, by and between SCOTT PAPER COMPANY, a Pennsylvania corporation (as "Lessor") and MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (as "Lessee"). W I T N E S S E T H: WHEREAS, Lessor and Mobile Energy Services Company, Inc., an Alabama corporation ("MESC") did enter into that certain Supplementary Lease Agreement, dated as of December 12, 1994 (the "Original Lease"), the subject of which was to lease certain improved real property which is more particularly described on Exhibit "B" attached to the Original Lease (the "Original Leased Premises"), and WHEREAS, the Original Lease was amended by that certain First Amendment to Supplementary Lease Agreement ("First Amendment"), dated as of July 13, 1995 (the Original Lease, as amended by the First Amendment shall sometimes be referred to herein as the "Lease"), and WHEREAS, Lessee is the successor-in-interest to Mobile Energy Services Holdings, Inc., an Alabama corporation, which is formerly known as "Mobile Energy Services Company, Inc.," and WHEREAS, Lessor and Lessee desire to modify and amend the Original Lease to change, among other matters, the description of the Original Premises, upon the terms and conditions herein contained. NOW THEREFORE, for and in consideration of the mutual covenants contained herein, and for Ten and No/100 Dollars ($10.00) and other good and valuable consideration, paid by the parties hereto to one another, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties hereto hereby covenant and agree as follows: 1. Leased Premises. Lessor shall lease and rent to Lessee, and Lessee shall lease and rent from Lessor, from and after the date hereof, that certain tract of land as shown on Exhibit "A" attached hereto and by this reference incorporated herein (the "Premises"), such that from and after the date hereof, the "Leased Premises," as such term is used in the Lease shall be deemed to be the Premises, as depicted and described on Exhibit "A" attached to this Second Amendment. Lessee hereby forever releases any rights Lessee might have in and to any part of the Original Leased Premises, except as expressly granted herein. 2. No Other Modification. Lessor and Lessee hereby affirm, confirm, and ratify the Lease, as amended hereby, and agree that the Lease, including terms granting certain options of Lessee to purchase the Premises, is and shall remain in full force and effect. 3. Transfers, Successors and Assigns. This Second Amendment shall inure to the benefit of and be binding upon Lessor, Lessee and their respective transfers, successors and assigns. IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to be executed and delivered on the day and year first above written. "LESSOR" SCOTT PAPER COMPANY, a Pennsylvania corporation By: /s/ Name: Thomas C. Deas, Jr. Title:________________ "LESSEE" MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company By: /s/ Name: Mark R. Ogle Title: Vice President State of PENNSYLVANIA} } County of DELAWARE } I DIANE M. DE ORIO, a Notary Public in and for said County, in said State, hereby certify that THOMAS C. DEAS, JR., whose name as ASSISTANT TREASURER of SCOTT PAPER COMPANY, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal, this the 17th day of August, 1995. /s/ Notary Public State of New York } } County of New York } I Juan Ospina, a Notary Public in and for said County, in said State, hereby certify that Mark R. Ogle, whose name as Vice President of Mobile Energy Services Company, L.L.C. is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal, this the 23 day of August, 1995. /s/ Notary Public EXHIBIT "A" Property Description of Leased Premises ALL that certain plot, piece or parcel of land, situate, lying and being in the City of Mobile, County of Mobile, and State of Alabama, bounded and described as follows: Parcel I Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the Office of the Judge of Probate of Mobile County, Alabama, said point being 3570.10 feet North and 431.54 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270056.327 and East 326422.733; Thence N-10-53'-56"-W for 356.22 ft.; Thence S-89-01'-08"-E for 105.36 ft.; Thence S-68-5 2'-49"-E for 194.97 ft.; Thence S-15-17'-38"-E for 241.11 ft.; Thence S-80-56'-54"-W for 287.04 ft. to the Point of Beginning. Said Parcel (the "East Fuel Tank Parcel") lying and being in Lot 11 of the Scott Paper Company Subdivision and containing 1.968 acres, more or less. LESS AND EXCEPT: Beginning at a point 38.85 feet South and 7.65 feet West of the North East corner of the Parcel described above, said point being at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270295.212 and East 326634.957; Thence S-42-00'- 44"-W for 42.00 ft.; Thence N-47-59'-16"-W for 50.00 ft.; Thence N-42-00'-44"-E for 42.00 ft.; Thence S-47-59'-16"-E for 50 ft. to the Point of Beginning. Said Parcel (the "Excluded Parcel") lying entirely within the East Fuel Tank Parcel described above and containing 2100.00 square feet, more or less. Parcel II Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the judge of Probate of Mobile County, Alabama: Said point being 2027.703 feet North and 2186.144 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, West Zone, NAD 1927, North 268513.927, East 328177.335: Thence N-41(degree)-44'-09"-E for 195.20 feet; Thence S-26(degree)-32'-42"-E for 119.38 feet; Thence S-34(degree)-20'-56"-E for 102.00 feet; Thence S-41(degree)-44'-09"-W for 144.25 feet; Thence Northwesterly, around a curve to the left having a radius of 438.67 feet and a Delta angle of 27(degree)-48'-23", the Chord of which bears N-43(degree)- 25'-40"-W for 210.66 feet, for an arc distance of 212.74 feet to the Point of Beginning. Said Parcel lying and being entirely within the boundaries of Lot 11 of the aforesaid Scott Paper Company Subdivision, and containing 0.759 acres, more or less. EX-10.11 12 Exhibit 10.11 This instrument prepared by and Cross Reference: When recorded, please return to: RP4222, Page 1248 and Troutman Sanders LLP RP 4285, Page 0949 NationsBank Plaza, Suite 5200 Mobile County, 600 Peachtree Street, N.E. Alabama Records Attention: Elizabeth B. Chandler, Esq. THIRD AMENDMENT TO SUPPLEMENTARY LEASE AGREEMENT THIS THIRD AMENDMENT TO SUPPLEMENTARY LEASE AGREEMENT (the "Third Amendment"), is made as of this 8th day of December, 1995, by and between SCOTT PAPER COMPANY, a Pennsylvania corporation (as "Lessor") and MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (as "Lessee"). W I T N E S S E T H: WHEREAS, Lessor and Mobile Energy Services Company, Inc., an Alabama corporation ("MESC") did enter into that certain Supplementary Lease Agreement, dated as of December 12, 1994 (the "Original Lease"), the subject of which was to lease certain improved real property which is more particularly described on Exhibit "B" attached to the Original Lease (the "Original Leased Premises") and a memorandum of which was recorded in RP 4222, Page 1248, Office of the Judge of Probate, Mobile County, Alabama records, and WHEREAS, the Original Lease was amended by that certain First Amendment to Supplementary Lease Agreement ("First Amendment"), dated as of July 13, 1995, and that certain Second Amendment to Supplementary Lease Agreement ("Second Amendment"), dated as of August 1, 1995, a memorandum of which was recorded in RP 4285, Page 0949, Office of the Judge of Probate, Mobile County, Alabama records (the Original Lease, as amended by the First Amendment and the Second Amendment shall sometimes be referred to herein as the "Lease"), and WHEREAS, Lessee is the successor-in-interest to Mobile Energy Services Holdings, Inc., an Alabama corporation, which is formerly known as "Mobile Energy Services Company, Inc.," and WHEREAS, Lessor and Lessee desire to modify and amend the Lease to change, among other matters, the description of the Original Leased Premises, upon the terms and conditions herein contained. NOW THEREFORE, for and in consideration of the mutual covenants contained herein, and for Ten and No/100 Dollars ($10.00) and other good and valuable consideration, paid by the parties hereto to one another, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties hereto hereby covenant and agree as follows: 1. Leased Premises. Lessor shall lease and rent to Lessee, and Lessee shall lease and rent from Lessor, from and after the date hereof, that certain tract of land as shown on Exhibit "A" attached hereto and by this reference incorporated herein (the "Additional Premises"), such that from and after the date hereof, the "Leased Premises," as such term is used in the Lease shall be deemed to be the Premises, as described on Exhibit "B" attached hereto and by this reference incorporated herein. Lessee hereby forever releases any rights Lessee might have in and to that portion of the Original Leased Premises, more particularly described on Exhibit "C" attached hereto and by this reference incorporated herein. 2. No Other Modification. Lessor and Lessee hereby affirm, confirm, and ratify the Lease, as amended hereby, and agree that the Lease, including terms granting certain options of Lessee to purchase the Premises, is and shall remain in full force and effect. 3. Transfers, Successors and Assigns. This Third Amendment shall inure to the benefit of and be binding upon Lessor, Lessee and their respective transfers, successors and assigns. IN WITNESS WHEREOF, the undersigned have caused this Third Amendment to be executed and delivered on the day and year first above written. "LESSOR" SCOTT PAPER COMPANY, a Pennsylvania corporation By: /s/ Name: Thomas C. Deas, Jr. Title: Assistant Treasurer "LESSEE" MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company By: /s/ Name: S. Marce Fuller Title: Vice President -2- State of Alabama County of Mobile I Gail Bryant Yance, a Notary Public in and for said County, in said State, hereby certify that Thomas C. Deas, Jr., whose name as Assistant Secretary of Scott Paper Company, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal, this the 8th day of December, 1995. /s/ Notary Public [Affix Notary Seal] State of Georgia County of Fulton I Jane C. Bryan, a Notary Public in and for said County, in said State, hereby certify that S. Marce Fuller, whose name as Vice President of Mobile Engery Services Co., LLC, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal, this the 16th day of January, 1996. /s/ Notary Public [Affix Notary Seal] -3- EXHIBIT "A" Beginning at a point in Lot 11 of Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the Judge of Probate of Mobile County, Alabama, said point being 2029.873 feet North and 2185.566 feet East of the Site of the Great Magnolia and at Alabama State Plane Coordinate, West Zone, N 268516.099, E 328173.913; Thence N-41(degree)-44'-09" E for 197.45 ft.; Thence S-26(degree)- 32'-42"-E for 4.30 ft.; Thence S-41(degree)-44'-09"-W for 195.20 ft. to a point on a curve to the left having a radius of 438.37 ft., the chord of which bears N-57(degree)-35'-46"-W for 4.05 ft. for an arc distance of 4.05 ft. to the Point of Beginning. Said parcel lying and being in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64 page 39 in the office of the Judge of Probate of Mobile, County, Alabama, and containing 785.121 square feet, more or less. -4- EXHIBIT "B" ALL that certain plot, piece or parcel of land, situate, lying and being in the City of Mobile, County of Mobile, and State of Alabama, bounded and described as follows: Parcel I Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the Office of the Judge of Probate of Mobile County, Alabama, said point being 3570.10 feet North and 431.54 feet East of the Site of the Great Magnolia, and at Alabama State Plan Coordinate, (West Zone, NAD 1927), North 270056.327 and East 326422.733; Thence N-10-53'-56"-W for 356.22 ft.; Thence S-89-01'-08"-E for 105.36 ft.; Thence S-68-5 2'-49"-E for 194.97 ft.; Thence S-15-17'-38"-E for 241.11 ft.; Thence S-80-56'-54"-W for 287.04 ft. to the Point of Beginning. Said Parcel (the "East Fuel Tank Parcel") lying and being in Lot 11 of the Scott Paper Company Subdivision and containing 1.968 acres, more or less. LESS AND EXCEPT: Beginning at a point 38.85 feet South and 7.65 feet West of the North East corner of the Parcel described above, said point being at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270295.212 and East 326634.957; Thence S-42-00'- 44"-W for 42.00 ft.; Thence N-47-59'-16"-W for 50.00 ft.; Thence N-42-00'-44"-E for 42.00 ft.; Thence S-47-59'-16"-E for 50 ft. to the Point of Beginning. Said Parcel (the "Excluded Parcel") lying entirely within the East Fuel Tank Parcel described above and containing 2100.00 square feet, more or less. Parcel II Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the Judge of Probate of Mobile County, Alabama; Said point being 2029.873 feet North and 2185.566 feet East of the Site of the Great Magnolia, and at Alabama State Plan Coordinate, West Zone, NAD 1927, North 268516.099, East 328173.913; Thence N-41(degree)-44'-09"-E for 197.45 feet; Thence S-26(degree)-32'-42"-E for 123.69 feet; Thence S-34(degree)- 20'-56"-E for 96.39 feet; Thence 41(degree)-44'-09"-W for 143.79 feet; Thence Northwesterly, around a curve to the left having a radius of 438.37 feet and a Delta angle of 27(degree)-35'-10", the Chord of which bears N-44(degree)-04'-04"-W for 209.02 feet, for an arc distance of 211.06 feet to the Point of Beginning. Said Parcel lying and being entirely within the boundaries of Lot 11 of the aforesaid Scott Paper Company Subdivision, and containing 0.759 acres, more or less. -5- EXHIBIT "C" Beginning at a point in Lot 11 of Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the Judge of Probate of Mobile County, Alabama, said point being 1879.685 feet North and 2330.945 feet East of the Site of the Great Magnolia and at Alabama State Plane Coordinate, West Zone, N 268365.911, E 328365.911; Thence N-41(degree)-44'-09"-E for 143.79 ft.; Thence S-34(degree)- 20'-56"-E for 5.61 ft.; Thence S-41(degree)-44'-09"-W for 144.25 ft. to a point on a curve to the left having a radius of 438.37 ft., the chord of which bears N-29(degree)-56"-04"-W for 5.74 ft., for an arc distance of 5.74 ft. to the Point of the Beginning. Said parcel lying and being in Lot 11 of the Scott Paper Company as recorded in Map Book 64 page 39 in the office of the Judge of Probate of Mobile County, Alabama, and containing 784.370 square feet, more or less. -6- EX-10.16 13 Exhibit 10.16 This instrument prepared by and when recorded, please return to: Elizabeth B. Chandler, Esq. Troutman Sanders LLP 600 Peachtree Street, Suite 5200 Atlanta, Georgia 30308-2216 EASEMENT DEED WITNESSETH this Easement Deed ("Easement Deed") by and between Scott Paper Company and Mobile Energy Services Company, L.L.C., dated as of the 8th day of December, 1995. R E C I T A L S (i) Scott Paper Company ("Scott") is a Pennsylvania corporation with an office at Scott Plaza, Philadelphia, Pennsylvania 19113-1585; and (ii) Mobile Energy Services Company, L.L.C. ("MESC"), is an Alabama limited liability company whose principal place of business is at 200 Bay Bridge Road, Mobile, Alabama 36652; and (iii)Scott owns Lots 8, 10, and 11 (separately, "Lot 8," "Lot 10," or "Lot 11," Lot 8 and 11 together, "Lots 8 and 11") of the Scott Paper Company Subdivision (the "Scott Subdivision") as shown on a plat thereof recorded in Map Book 64, page 39, in the Office of the Judge of Probate of Mobile County, Alabama; and (iv) By lease agreement ("MESC Lease") dated as of December 12, 1994, Scott leased and demised unto Mobile Energy Services Holdings, Inc. ("MESH") (formerly known as "Mobile Energy Services Company, Inc.") portions of Lot 11, a memorandum of which is recorded in Real Property Book 4222, page 1248, in the Office of the Judge of Probate of Mobile County, Alabama; and (v) By bill of sale dated as of December 12, 1994, and pursuant to the Asset Lease Assumption Agreements, Scott transferred to MESH various utility and recovery pipes, structures, and equipment (collectively, the "MESC Equipment") situated upon the Leased Premises and upon Lots 8 and 11; and (vi) Scott, MESH and S.D. Warren Company entered that certain unrecorded Master Operating Agreement ("Master Operating Agreement") dated as of December 12, 1994; and (vii)By Omnibus Deed, Bill of Sale, General Assignment and Conveyance, dated as of July 14, 1995, MESH transferred the MESC Equipment to MESC and assigned all of MESH's right, title, and interest in and to the MESC Lease; and (viii) By Second Amendment to Supplementary Lease Agreement, dated as of August 1, 1995, Scott and MESC amended the MESC lease to substitute for the Original - 1 - Leased Premises the legal descriptions which are attached hereto as Exhibit "A" and by this reference incorporated herein (collectively, the "Leased Premises"), a memorandum of which is recorded in Real Property Book ___, page ___, in the Office of the Judge of Probate, Mobile County, Alabama records; and (ix) Scott and MESC agree that MESC may need access to (1) various utility and recovery pipes, structures, and equipment (collectively, the "Pulp Mill Utility Equipment") that benefit the Leased Premises and that are situated upon Lots 8 and 11, and/or (ii) certain services utilized by MESC employees, invitees and/or licensees ("Utilized Services") performed or provided for the benefit of the Leased Premises at facilities situated upon, or to which access is obtained through and/or over, Lot 8, Lot 11, and/or Lots 8 and 11, and (iii) the Leased Premises; and (x) MESC acknowledges that it is aware that Scott intends to construct a clarifier on the portion of Lot 11 (the "Clarifier Site") to the north and the west of Parcel II of the Leased Premises in the vicinity of "Landing Lane" west of its intersection with "Environmental Land", and MESC agrees that it will select routes for the various services across Lot 11 to and from Parcel II of the Leased Premises that will not occupy the Clarifier Site; and (xi) Capitalized terms used herein that are not otherwise defined herein shall have the meanings given in Exhibit A to the Master Operating Agreement; and AGREEMENTS AND GRANTS OF EASEMENTS 1. Scott and MESC hereby agree that the RECITALS hereto, Exhibit "A" hereto, the Master Operating Agreement, and Exhibit "A" to the Master Operating Agreement shall be, and hereby are, incorporated herein as a part of this Easement Deed. 2. For and in consideration of the premises, the mutual covenants herein contained, the sum of Ten and No/100ths Dollars ($10.00), and other good and valuable consideration in hand paid to Scott by MESC, the receipt and sufficiency of which Scott hereby acknowledges and confirms, Scott does, subject to the reservations and restrictions set forth herein, hereby grant, bargain, sell, and convey unto MESC a non-exclusive easement upon, over, beneath, and across Lot 11, as indicated below (excluding the Clarifier Site) (and Lots 8 and/or 10 where indicated below), for the following purposes: - 2 - a. Ingress to and egress from, and for operation and use of, all pipes located on the Lots 8 and 11 utilized by or in connection with the Leased Premises; b. Pedestrian and vehicular ingress to and egress from the Leased Premises and the buildings and facilities at which the Utilized Services are provided or performed, over that part of Environmental Lane situated in Lot 10 and all present and future roads located on Lot 11, including (except as to "Landing Lane," west of its intersection with "Environmental Lane") and otherwise without limitation, all of the roads shown as being located on Lot 11 at the Pulp Mill on the Scott Paper Company Mill Wide Road Plan, Drawing A52045, prepared by BE&K Engineering Company in February, 1991, and revised on February 26, 1991, April 23, 1991, and August 8, 1993; c. Ingress to and egress from the location of, and for the support, use, installation (in such location(s) thereof as to be mutually agreed upon by Scott and MESC), repair, replacement, alteration, and restoration, of the electrical wiring and facilities owned by MESC and located on Lot 8 and/or Lot 10 and/or Lot 11 for the use of the Leased Premises; d. Ingress to and egress from the location of, and for the installation, operation and maintenance of a storm sewer system in such location(s) thereof as to be mutually agreed upon by Scott and MESC to benefit Parcel II of the Leased Premises on, under, over, and across: (i) that part of Lot 11 lying due east of Parcel II of the Leased Premises; and (ii) if a storm sewer connection exists as of the date hereof on Lot 10, that part of Lot 10 between such existing storm sewer connection and Parcel II of the Leased Premises; e. Ingress to and egress from the location of, and for the installation, operation and maintenance of a potable water system to benefit Parcel II the Leased Premises on, under, over and across Lot 11 (excluding the Clarifier Site) in such location(s) as to be mutually agreed upon by Scott and MESC; f. Ingress to and egress from the location of, and for the installation, operation and maintenance of a process sewer system in such location(s) as to be mutually agreed upon by Scott and MESC to benefit Parcel II of the Leased Premises on, under, over, and across: (i) Lot 11 (excluding the Clarifier Site); and (ii) if a process sewer connection exists as of the date hereof on Lot 10, that part of Lot 10 between such existing process sewer connection and Parcel II of the Leased Premises; g. Ingress to and egress from the location of, and for the installation, operation and maintenance of a sanitary sewer system to benefit Parcel II of the Leased Premises on, under, over, and across Lot 11 (excluding the Clarifier Site) in such location(s) as to be mutually agreed upon by Scott and MESC; - 3 - h. Ingress to and egress from the location of, and for the installation, operation and maintenance of telephone and communications lines to benefit Parcel II of the Leased Premises on, under, over and across Lot 10 and Lot 11 in such location(s) as to be mutually agreed upon by Scott and MESC; i. Ingress to and egress from the location of, and for support, operation, use, maintenance, repair, (and in such location(s) as to be mutually agreed upon by Scott and MESC, the construction, erection, replacement, improvement, alteration, and reinstallation of), to the extent owned by MESC for the operation and use of the Leased Premises the fire protection system located on Lots 8 and 11; j. Ingress to and egress from, and for the operation and use of a drainage system in such location(s) as to be mutually agreed upon by Scott and MESC on, under, over, and across: (i) that part of Lot 11 lying due east of Parcel II of the Leased Premises, including, but not limited to, the right to discharge surface water, if any, from the Parcel II of the Leased Premises on to that part of Lot 11 lying due east of Parcel II of the Leased Premises from time to time; and (ii) if a surface water drain exists as of the date hereof on Lot 10, the right to tie into such existing surface water drain on Lot 10 together with ingress thereto and egress therefrom; k. Ingress to and egress from, and for the installation, maintenance, operation and use of all existing pipes, electrical lines, instrument lines, and communication lines serving Parcel I of the Leased Premises; together with all rights and privileges necessary for the use, maintenance, and enjoyment by MESC of the aforesaid easements (the "Easements"). TO HAVE AND TO HOLD the Easements unto MESC and its successors and assigns from the date hereof until the termination of the Easements as set forth herein. 3. In addition, Scott does, subject to the reservations and restrictions set forth herein, hereby grant, bargain, sell and convey unto MESC a non-exclusive temporary construction easement (the "Interim Easement") upon, over, beneath, and across the a strip of land lying between Parcel II of the Leased Premises and the boundary of Lot 11 or a distance of fifty feet, whichever is larger, but excluding the Clarifier Site for the storage of materials during the construction of a maintenance facility (the "Maintenance Facility") on Parcel II of the Leases Premises; TO HAVE AND TO HOLD such Interim Easement unto MESC and its successors and assigns from the date hereof until the termination of such Interim Easement as set forth herein. - 4 - 4. MESC shall exercise its easement rights granted hereunder in such a manner as not to interfere unreasonably with the use, occupancy, or enjoyment of Lot 8, Lot 11, and/or Lots 8 and 11 or the improvements thereon, taking such precautions as may be reasonably necessary to prevent unnecessary foreseeable damage to adjacent or adjoining property or injury to persons. Upon MESC's completion of any maintenance, repair, or replacement work, MESC shall restore the subject area to its former condition (insofar as possible) with all debris removed. 5. Scott shall not interfere in any manner with the easements granted hereunder, nor with the location any of the MESC Equipment, Pulp Mill Utility Equipment, or Utilized Services to which MESC has access, use and/or other rights hereunder, except as expressly permitted as hereinafter provided. Scott reserves the right to relocate, at its sole cost and expense, any and/or all of the MESC Equipment located on Lot 8, Lot 10, Lot 11, and/or Lots 8 and 11, the Pulp Mill Utility Equipment and the Utilized Services (collectively, the "Pulp Mill Facilities") subject to the following restraints on such relocation rights: a. Scott shall have the right from time to time to relocate any one or more of such Pulp Mill Facilities to other locations within the Pulp Mill Lots, subject to the terms and provisions of this Easement Deed. b. Prior to any relocation of any one or more of the Pulp Mill Facilities, Scott shall give thirty (30) days' written notice of the proposed relocation(s) to MESC and to the Site Operating Committee. The notice shall include a detailed description of the design for the relocated Pulp Mill Facility. With respect to the relocation of any Pulp Mill Facility that transfers electricity, gas, any fluid, or any other Metered Flow, the proposed design for the relocated Pulp Mill Facility shall ensure that the relocated Pulp Mill Facility will not cause any increase in costs to MESC or any system changes reasonably unacceptable to MESC. c. Scott shall not commence construction of any such relocated Pulp Mill Facility without obtaining MESC's written approval of the proposed design for the relocated Pulp Mill Facility, provided, however, that MESC shall not unreasonably withhold such approval. Any dispute regarding the withholding of such approval shall be resolved as provided in the Master Operating Agreement. d. Scott shall conduct such post-construction tests of any such relocated Pulp Mill Facility as may be reasonably required by MESC. Any dispute regarding such required tests shall be resolved as provided in the Master Operating Agreement. e. If relocating a Pulp Mill Facility shall require an outage, shutdown, or slowdown, the Site Operating Committee shall determine the appropriate date and time for - 5 - such relocation, provided however, that such relocation shall occur not later than the next scheduled Cold Shutdown. 6. This Easement Deed and the easements created hereunder shall run with the land and are and shall be binding upon and inure to the benefit of Scott and MESC and their respective successors and assigns. The easements herein granted to MESC may be utilized by MESC's employees, invitees, and licensees. 7. The Interim Easement herein granted to MESC hereunder shall cease and terminate upon the earlier to occur of (a) May 30, 1996, and (b) the thirtieth (30th) day following the date upon which the facility that MESC desires to construct upon Parcel II of the Leased Premises is substantially completed. 8. The easement herein granted to MESC pursuant to Paragraph B hereof and all rights of MESC hereunder, except to the extent otherwise provided in Paragraph 7, shall cease and terminate upon the expiration or termination of all rights of MESC under the MESC Lease, including, without limitation, as applicable, upon the expiration or termination of all of any New Tenant's rights under a New Lease entered into pursuant to the Mortgagee Cure Rights set forth in Section 11.5 of the MESC Lease. IN WITNESS WHEREOF, Scott and MESC have caused their names to be executed hereto as of the date first set out above by their duly authorized representatives. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 6 - SCOTT PAPER COMPANY By: /s/ As Its: Assistant Treasurer STATE OF ALABAMA COUNTY OF MOBILE I, the undersigned Notary Public in and for said County in said State, hereby certify that Thomas C. Deas, Jr., whose name as Assistant Treasurer of Scott Paper Company, a Pennsylvania corporation, is signed to the foregoing easement deed, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal this the 8th day of December, 1995. /s/ Notary Public [AFFIX NOTARIAL SEAL] My Commission Expires: April 23, 1997 - 7 - MOBILE ENERGY SERVICES COMPANY, L.L.C. By: /s/ As Its: Vice President STATE OF GEORGIA COUNTY OF FULTON I, the undersigned Notary Public in and for said County in said State, hereby certify that S. Marce Fuller, whose name as Vice President of Mobile Energy Services Company, L.L.C., an Alabama limited liability company, is signed to the foregoing easement deed, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal this the 16th day of January, 1996. /s/ Notary Public [AFFIX NOTARIAL SEAL] My Commission Expires: June 19, 1996 - 8 - EXHIBIT "A" ALL that certain plot, piece or parcel of land, situate, lying and being in the City of Mobile, County of Mobile, and State of Alabama, bounded and described as follows: Parcel I Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the Office of the Judge of Probate of Mobile County, Alabama, said point being 3570.10 feet North and 431.54 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270056.327 and East 326422.733; Thence N-10-53'-56"-W for 356.22 ft.; Thence S-89-01'-08"-E for 105.36 ft.; Thence S-68-5 2'-49"-E for 194.97 ft.; Thence S-15-17'-38"-E for 241.11 ft.; Thence S-80-56'- 54"-W for 287.04 ft. to the Point of Beginning. Said Parcel (the "East Fuel Tank Parcel") lying and being in Lot 11 of the Scott Paper Company Subdivision and containing 1.968 acres, more or less. LESS AND EXCEPT: Beginning at a point 38.85 feet South and 7.65 feet West of the North East corner of the Parcel described above, said point being at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270295.212 and East 326634.957; Thence S-42-00'-44"-W for 42.00 ft.; Thence N-47- 59'-16"-W for 50.00 ft.; Thence N-42-00'-44"-E for 42.00 ft.; Thence S-47-59'-16"-E for 50 ft. to the Point of Beginning. Said Parcel (the "Excluded Parcel") lying entirely within the East Fuel Tank Parcel described above and containing 2100.00 square feet, more or less. Parcel II Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the Judge of Probate of Mobile County, Alabama; Said point being 2029.873 feet North and 2185.566 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, West Zone, NAD 1927, North 268516.033, East 328173.913; Thence N-41(degree)-44'-09"-E for 197.45 feet; Thence S-26(degree)-32'-42"-E for 123.69 feet; Thence S- 34(degree)-20'-56"-E fir 96.39 feet; Thence S-41(degree)-44'-09"-W for 143.79 feet; Thence Northwesterly, around a curve to the left having a radius of 438.37 feet and a Delta angle of 27(degree)-35'-10", the Chord of which bears N-44(degree)-04'-04"-W for 209.02 feet, for an arc distance of 211.06 feet to the Point of Beginning. Said Parcel lying and being entirely within the boundaries of Lot 11 of the aforesaid Scott Paper Company Subdivision, and containing 0.759 acres, more or less. EX-10.42 14 Exhibit 10.42 CONSENT AND AGREEMENT THIS CONSENT AND AGREEMENT (this "Consent"), dated as of August 1, 1995, is executed by SCOTT PAPER COMPANY, a Pennsylvania corporation (the "Consenting Party"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Borrower")(which is an indirect wholly-owned subsidiary of The Southern Company, a Delaware corporation ("Southern")), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Collateral Agent"). A. The Borrower, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (the "Taxable Indenture"), pursuant to which the Borrower (i) is issuing its First Mortgage Bonds (the "Taxable Bonds"), the proceeds of which will be used to (among other things) repay to Southern a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Master Operating Agreement (as hereinafter defined)) and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. The Borrower, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995A (the "Tax-Exempt Bonds" and, together with the Taxable Bonds, the "Bonds") to be issued for the benefit of the Borrower pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture" and, together with the Taxable Indenture, the "Indentures") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax- Exempt Bonds will be used to refinance the 1984 Tax-Exempt Bonds and to pay for certain other costs. C. The Borrower and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of the Borrower. D. The Consenting Party and Mobile Energy have entered into (i) that certain Amended and Restated Master Operating Agreement dated as of July 13, 1995 and effective as of December 12, 1994 (the "Master Operating Agreement"); (ii) that certain 1984 Tax-Exempt Lease Agreement dated as of December 12, 1994; (iii) that certain 1984 Taxable Lease Agreement dated as of December 12, 1994; (iv) that certain 1973 Tax-Exempt Lease Agreement dated as of December 12, 1994; (v) that certain 1976 Tax-Exempt Lease Agreement dated as of December 12, 1994; (vi) that certain Lease Assignment Agreement dated as of December 12, 1994; (vii) that certain Lease dated as of December 12, 1994 (as amended pursuant to the First Amendment to Lease Agreement dated as of July 13, 1995); (viii) that certain Supplementary Lease dated as of December 12, 1994 (as amended pursuant to the First Amendment to Supplementary Lease Agreement dated as of July 13, 1995); (ix) that certain Scott Environmental Indemnity Agreement dated as of December 12, 1994 (as amended pursuant to the First Amendment to Environmental Indemnity Agreement dated as of July 13, 1995); (x) that certain Transition Agreement dated as of December 12, 1994 (as amended pursuant to the First Amendment to Transition Agreement dated as of July 13, 1995); (xi) those certain Memoranda of Leases dated as of December 12, 1994; (xii) that certain Common Services Agreement dated as of December 12, 1994; and (xiii) those certain Easement Deeds to which the Consenting Party is a party dated as of December 12, 1994 (collectively, as the same may be amended, waived or otherwise modified, the "Contracts"). E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and the Borrower dated as of July 14, 1995, Mobile Energy has assigned to the Borrower, and the Borrower has assumed, all of Mobile Energy's rights and obligations under the Contracts. F. The Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Collateral Agent, the Borrower and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement") and the other Financing Documents (as defined in the Master Operating Agreement). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Consenting Party acknowledges the assignments referred to in Recitals E and F above and hereby irrevocably consents to such assignments, and each of the parties hereto agrees as follows: -2- (a) Definitions; Rules of Interpretation. Unless otherwise defined herein, all terms used in this Consent shall have the meanings given in Exhibit A to the Master Operating Agreement. Except as otherwise expressly provided herein, the rules of interpretation set forth in said Exhibit A shall apply to this Consent. The parties hereto acknowledge that the Collateral Agent, acting on behalf of the Secured Parties, is a "Lender" within the meaning of the Master Operating Agreement, and that, without the consent of the parties hereto, no other Person (other than a secured Lender who executes a counterpart of, or acknowledges to be bound by, this Consent) shall be deemed a Lender under the Contracts. Any such Lenders shall coordinate so as not to give any conflicting instructions or demands to the Consenting Party. (b) Step-In Rights. The Mill Owners shall have the right to exercise the Mill Owner Step-In Rights in accordance with Section 11.4(a)(ii) of the Master Operating Agreement. The Collateral Agent acknowledges that (A) the Mill Owner Step-In Rights give the Mill Owners the right, under the circumstances set forth in Section 11.4(a)(ii) of the Master Operating Agreement, to, among other things, take possession of or obtain entry to the Energy Complex and to assume and exercise operational control of the Energy Complex and (B) in so assuming or exercising operational control of the Energy Complex, the Mill Owners may exclude the Collateral Agent from assuming or exercising operational control of the Energy Complex until such time as the Collateral Agent shall have foreclosed upon the Energy Complex, subject to Section 1(d) hereof. The parties hereto agree that if the Mill Owners continue to exercise the Mill Owner Step-In Rights at the end of the initial term of the Contracts, the Borrower may not exercise the renewal term for the Contracts; provided that, if the Mill Owners desire to continue their Mill Owner Step-in Rights, and if there is any Original Debt (as hereinafter defined) outstanding under the Financing Documents at the end of such initial term, a Master Operating Agreement Renewal Term shall be deemed to be exercised, which such renewal term shall terminate on the earlier of the expiration of such Master Operating Agreement Renewal Term and the date no Original Debt remains outstanding without prejudice to the Mill Owners' rights to terminate the Mill Owner Step-In Rights at any time pursuant to the terms of the Contracts and to terminate or allow the Contracts to expire in accordance with their terms (subject to the provisions of Section 1(e) hereof). If at any time on or after December 16, 2019 the Mill Owners are exercising the Mill Owner Step-In Rights at the time all Original Debt outstanding has been repaid, the Mill Owners may, at the option of the Mill Owners exercised in their sole and absolute discretion, elect to acquire all of the Borrower's right, title and interest in and to the Energy Complex by written notice delivered to the Borrower and the Lender, provided that in the event any of the Mill Owners exercises the foregoing option, the Borrower and the Collateral Agent shall execute and deliver all agreements, instruments and other documents, and shall take or cause to be taken such other -3- actions as required under applicable law, as shall be necessary to assign and transfer all of the Borrower's right, title and interest in and to the Energy Complex to the Mill Owners that elect to exercise said option; and provided, further, that such option shall expire, if not theretofore exercised, immediately upon the cessation of such Mill Owner Step-In Rights. "Original Debt" shall mean all Indebtedness (as defined in Section 1(l) hereof) the aggregate scheduled annual debt service for which in any year does not exceed that set forth on Schedule I hereto. Without limiting the foregoing, "Original Debt" shall include Indebtedness outstanding from time to time under the Working Capital Facility complying with clause (b) of Section (l) hereof, provided that the limitations contained in the preceding sentence regarding scheduled annual debt service on Original Debt not exceeding the amount set forth on Schedule I hereto shall be determined without regard to principal payments under the Working Capital Facility. For purposes hereof, "debt service" means payments of principal, interest and other payments, costs, fees and expenses under any Indebtedness. Nothing in this Section 1(b) shall be deemed to limit or restrict any of the other rights and remedies available to the Collateral Agent under the Financing Documents (subject to the other terms and provisions hereof) and no provision of any of the Financing Documents shall be deemed to limit or restrict any of the other rights and remedies of the Consenting Party hereunder (subject to the other terms and provisions hereof). Notwithstanding any provision to the contrary set forth herein, the failure to exercise any Mill Owner Step-In Rights shall not act as a waiver or release of such Mill Owner Step-In Rights and the termination of the exercise of any Mill Owner Step-In Rights shall not act as a waiver or release of any other Mill Owner Step-In Rights that may arise after such termination; provided that no provision in this Consent shall be deemed to permit the Mill Owners, upon termination of Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event, to elect to exercise Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event that was in existence and of which the Mill Owners were aware at the time of such termination, or otherwise to increase the availability or scope of Mill Owner Step-In Rights beyond that specified in the Master Operating Agreement and the other Contracts. (c) Cure Rights and Payments. Subject to Section 1(b) hereof, the Collateral Agent shall be entitled to exercise all rights and to cure any defaults of the Borrower under and strictly in accordance with the terms of the Contracts (or as otherwise expressly provided in this Consent), and the Consenting Party agrees to permit and accept such exercise and cure by the Collateral Agent in accordance with their terms except as expressly provided herein. The Consenting Party agrees to render all payments due by it to the Borrower under the Contracts directly to the Collateral Agent, c/o Bankers Trust Company, for deposit into -4- the Borrower's Account No. 15351 maintained with Bankers Trust Company, or to such other person and/or at such other address as the Collateral Agent may from time to time specify in writing to the Consenting Party. Upon receipt by the Consenting Party of notice from the Collateral Agent that a Trigger Event (as defined in the Intercreditor Agreement as in effect on the date hereof) has occurred, the Consenting Party agrees, subject to Section 1(b) hereof, to render all performance due by it under the Contracts and this Consent to the Collateral Agent for the benefit of the Secured Parties. The Borrower hereby acknowledges and agrees that payments made by the Consenting Party to the Collateral Agent in accordance with the Collateral Agent's directions pursuant to this Section 1(c) and performance to the Collateral Agent shall satisfy the Consenting Party's obligations to make payments or to perform such obligations (as the case may be) to the Borrower in accordance with the Contracts, and shall relieve the Consenting Party of all liability with respect to such payments or performance. During the term of this Consent, the Borrower hereby waives any right it may have to require that payments be made or performance be rendered in any manner other than the manner designated by the Collateral Agent pursuant to this Section 1(c). (d) Foreclosure. (i) The Collateral Agent shall not commence foreclosure proceedings upon the Energy Complex or the Contracts without first providing the Consenting Party with fifteen (15) days advance written notice thereof. Contemporaneously with or immediately following such foreclosure upon the Contracts, the Collateral Agent shall notify the Consenting Party that the Collateral Agent or a purchaser (either such person, in such circumstance, constituting a "New Owner") has succeeded to the Borrower's interest under the Contracts pursuant to documentation satisfactory to the Consenting Party and the New Owner. At the time of foreclosure, the Collateral Agent shall not make an assignment of the Contracts to a third party unless (i) such third party assumes liability for all of the Borrower's and the Collateral Agent's (as the case may be) obligations under the Contracts (including the obligation to continue operation of the Energy Complex in accordance with the terms of the Contracts) (provided that the New Owner need not assume obligations under any Contract with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing) pursuant to documentation satisfactory to the Consenting Party in form and substance and (ii) such third party is a Qualified Purchaser and has substantial expertise (or is controlled or managed by, or has retained as an operator of the Energy Complex, a person with substantial expertise) in operating and managing facilities similar to the Energy Complex and there is a reasonable basis to conclude that the operations at the Energy Complex will be conducted in accordance with Prudent Plant Operating Standards following such assignment. (ii) If the Collateral Agent determines that it wishes to foreclose upon (or accept title in lieu of foreclosure to) the Energy Complex, the Lease, the Supplementary Lease and the Easement -5- Deeds but not to foreclose upon (or accept title in lieu of foreclosure to) all of the other Contracts (other than Contracts as to which a Mill Owner Event of Default has occurred and is continuing), the Collateral Agent shall provide written notice to the Mill Owners of such determination. The Mill Owners may elect by written notice to the Collateral Agent within thirty (30) days of receipt of the foregoing notice (or on the date that the Collateral Agent obtains title to the Energy Complex, if later) to take possession of and operate the Energy Complex: (A) for a period of up to eighteen months, commencing on the date of receipt by the Collateral Agent of the Mill Owners' written notice of election (the "Limited Standstill Period"), provided that, and for so long as, (1) during the Limited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights (or, if the Energy Complex is not operable, the Mill Owners shall use their good faith efforts to restore the Energy Complex to operability) and no Liquidated Damages shall be payable and (2) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties; or (B) for an unlimited period, commencing on the date of receipt by the Collateral Agent of the Mill Owners' written notice of election (the "Unlimited Standstill Period"), provided that, and for so long as, (1) any of (a) the second Demand Anniversary Date has not occurred, (b) the annualized Demand Charge for the then current Demand Period is set at a level equal to or greater than 77% of the Demand Charge during the First Contract Year (the "Minimum Demand Charge") or (c) if the provisions of clause (b) are not satisfied, the Mill Owners commit to pay the Collateral Agent during the then current Demand Period all amounts payable under the Contracts and agree that the Demand Charge for the then current Demand Period shall be deemed to equal the Minimum Demand Charge, (2) during the Unlimited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect, and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights and shall comply with all obligations of the Mill Owners under the Contracts (including, without limitation, the obligation to pay Demand Charges, subject to Demand Charge Reductions), except that (i) all liabilities incurred in connection with the operation of the Energy Complex during the Unlimited Standstill Period (excluding debt service on the Original Debt outstanding, but including, without limitation, rent, real estate taxes and similar impositions that are otherwise payable by the lessee under the Lease and the Supplementary Lease, operation and maintenance expenses and capital expenditures, and all amounts payable to the Mill Owners in -6- reimbursement thereof) shall be expressly subordinated and junior in right of payment to the payment of scheduled debt service on Original Debt outstanding; (ii) except as provided in clause (iv) of Section 1(d)(ii)(B)(2) hereof, no rights of set-off, counterclaim, deduction or defense of any kind shall be exercised or asserted against the Demand Charges and other amounts payable to the Collateral Agent under the Contracts or payment thereof; (iii) no Liquidated Damages shall be payable; and (iv) all amounts payable by the Mill Owners under the Contracts in excess of the sum of (w) scheduled debt service on the Original Debt outstanding, (x) operation and maintenance expenses, (y) capital expenditures and (z) amounts otherwise payable to the Mill Owners pursuant to rights of set-off, counterclaim, deduction or defense, shall be applied to redemption of the Original Debt outstanding, which shall be redeemed in accordance with the terms thereof to the extent of such available funds, and (3) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties. (iii) If at any time none of the conditions specified in Section 1(d)(ii)(B)(1) hereof is satisfied, the Collateral Agent shall have the right to convert the Unlimited Standstill Period into a Limited Standstill Period, in which case the Mill Owners' rights to enter into an Unlimited Standstill Period shall terminate. If at any time any of the other conditions specified in Section 1(d)(ii)(A) or 1(d)(ii)(B) hereof is not satisfied, the Collateral Agent may elect to terminate the Limited Standstill Period or the Unlimited Standstill Period (as the case may be). (iv) Upon termination (or, in the case of the Limited Standstill Period, expiration) of the Limited Standstill Period or the Unlimited Standstill Period (as the case may be), the New Owner may elect either to assume all of the Contracts (other than obligations under any Contracts with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing, which the New Owner may either assume or not assume, at its option) or to terminate all of the Contracts (other than, if the New Owner so elects, the Lease, the Supplemental Lease and the Easement Deeds) and to dispose of the Energy Complex in any manner that it chooses. If the New Owner elects to assume the Contracts, the term of each Contract shall be deemed to be extended by the term of the Limited Standstill Period if, at the end of such Contract's term, any Original Debt is outstanding. (v) The Borrower and the Collateral Agent acknowledge and agree that (A) during the Limited Standstill Period or Unlimited Standstill Period, the Mill Owners shall have the right and option to purchase the Energy Complex for a purchase price equal to all outstanding principal and interest due and owing to the Secured Parties in respect of the Original Debt outstanding and (B) at the end of the initial term of the Lease, the Mill Owners shall have -7- the right and option to purchase the Energy Complex in accordance with Article 15 of the Lease and, in each case, the Mill Owners shall acquire the Energy Complex free and clear of all liens and encumbrances that at any time secured the repayment of the Original Debt outstanding; provided that all Original Debt outstanding and all other amounts payable to the Senior Secured Parties or the New Owner (as the case may be) under the Contracts shall have been paid in full. (vi) Notwithstanding any provision in the Contracts or the arrangements establishing the Mill Owner Maintenance Reserve Account to the contrary, the Borrower agrees that in the event the Mill Owners are operating the Energy Complex during the Limited Standstill Period or the Unlimited Standstill Period, the Mill Owner Maintenance Reserve Account shall be available to the Mill Owners (but not to the Collateral Agent) for the payment of operation, maintenance or capital expenses. (e) Termination/Transfer. (i) The Consenting Party will not, without the prior written consent of the Collateral Agent, (A) cancel or terminate any of the Contracts except as provided in the Contracts and in accordance with Section 1(e)(ii) hereof, or consent to or accept any cancellation or termination thereof by the Borrower, (B) sell, assign or otherwise dispose of (by operation of law or otherwise) any part of its interest in the Contracts, except as set forth in Article 15 of the Master Operating Agreement, or (C) amend or modify the Contracts in any respect that may reasonably be expected to have a material effect on the Borrower's rights or obligations. The Consenting Party agrees to deliver duplicates or copies of all (i) notices of default delivered under or pursuant to any of the Contracts to the Collateral Agent promptly upon delivery thereof to the Borrower (and the Consenting Party agrees that no such notice of default shall be effective until received by Collateral Agent), and (ii) amendments to any of the Contracts that in any respect may reasonably be expected to have a material effect on the Borrower's rights or obligations (and the Consenting Party agrees that no such amendment shall be effective until received by the Collateral Agent); provided, that any failure by the Consenting Party to deliver to the Collateral Agent any such duplicates or copies shall not subject the Consenting Party to any liability whatsoever. (ii) The Consenting Party will not terminate the Contracts or any of its obligations thereunder on account of any default or breach of the Borrower thereunder without (A) in the case of a default by the Borrower that is the failure by the Borrower to pay amounts to the Consenting Party which are due and payable under the Contracts, first providing to the Collateral Agent written notice of such default and ninety (90) days from the date such notice is delivered to the Collateral Agent to pay such amounts and (B) in the case of a default that cannot be cured by the payment of money to the Consenting Party, first providing to the Collateral Agent written notice of such default and a reasonable opportunity (in any event at least ninety (90) days but no more than one hundred eighty -8- (180) days) to cure such breach or default so long as the Collateral Agent or its designee shall have commenced to cure the breach or default within such ninety-day period and thereafter diligently pursues such cure to completion and continues to perform any monetary obligations of the Borrower to the Consenting Party under the Contracts and all other obligations of the Borrower under the Contracts are performed by the Borrower (or the Collateral Agent on behalf of the Borrower) or with respect to any defaults that are not susceptible of being cured by the Collateral Agent, to rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. If possession of the Energy Complex (by way of foreclosure proceedings or otherwise) is necessary to cure such breach or default, the Collateral Agent or its successor, transferee or assignee will be allowed a reasonable period to complete such proceedings or otherwise accomplish such possession; provided, that in no event shall such additional period exceed thirty (30) days. The Collateral Agent acknowledges and agrees that during the foregoing time periods the Consenting Party shall be entitled to exercise any set-off right which the Consenting Party may have against the Borrower under the Contracts. If the Collateral Agent or its successor, transferee or assignee is prohibited by any court order or bankruptcy or insolvency proceedings from curing the default or from commencing or prosecuting foreclosure proceedings, the foregoing time periods shall be extended by the period of such prohibition. Subject to Section 1(d) hereof, the Consenting Party consents to the transfer of the Borrower's interest under the Contracts to the Collateral Agent for the benefit of the Secured Parties or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by the Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale or conveyance, the Consenting Party shall recognize the Collateral Agent or other purchaser or grantee as the applicable party under the transferred Contracts (provided that the Collateral Agent or such purchaser or grantee assumes the obligations of the Borrower under the transferred Contracts as provided in Section 1(d) hereof). (f) Bankruptcy. In the event that any of the Contracts is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, or if any of the Contracts is terminated for any reason other than a default that could have been but was not cured by the Collateral Agent as provided in Section 1(e)(ii) hereof, and if, within sixty (60) days after such rejection or termination, the Collateral Agent or its successor, transferee or assignee shall so request, the Consenting Party will execute and deliver to the Collateral Agent or its successor, transferee or assignee for the benefit of the Secured Parties a new Contract, which Contract shall be on substantially the same terms and conditions as the original Contract for the remaining term of the Contract before giving effect to such rejection or termination -9- (but in no event on less favorable terms and conditions as the original Contract). (g) Liability. (i) None of the Collateral Agent, the Secured Parties or the holders of Bonds shall be liable for any of the obligations or duties of the Borrower (including, without limitation, the obligation to deliver title to the Energy Complex free of any lien upon the exercise of a Repurchase Option (as defined in the Master Operating Agreement) by the Consenting Party), unless and until the Collateral Agent or its successor expressly assumes the Contracts or any or all of such obligations or duties. (ii) In the event the Collateral Agent or its successor elects to perform the Borrower's obligations under the Contracts or to enter into any new Contract as provided in Section 1(d), 1(e)(ii) or 1(f) hereof, the Collateral Agent, the Secured Parties and the holders of Bonds, and their successors, shall have no liability to the Consenting Party for the performance of such obligations, and the sole recourse of the Consenting Party in seeking the enforcement of such obligations shall be to such parties' interest in the Energy Complex. (iii) It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it. (h) Cure Duties; Assignment. In the event the Collateral Agent or its successor, transferee or assignee succeeds to the Borrower's interest under the Contracts, the Collateral Agent or its successor, transferee or assignee shall cure any defaults of the Borrower existing under the Contracts that are reasonably capable of being cured and, with respect to any defaults that are not susceptible of being cured by the Collateral Agent, shall rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. The Collateral Agent shall have the right to assign its interest in this Consent to any person or entity to whom the Original Debt is transferred, provided such transferee assumes the obligations of the Borrower (or the Collateral Agent, as the case may be) under this Consent. Upon such assignment, the Collateral Agent and the Secured Parties (including their agents and employees) shall be released from any further liability under this Consent and the Contracts to the extent of the interest assigned. (i) Insurance Proceeds. The parties hereto acknowledge and agree that the disposition of insurance proceeds with respect to the Energy Complex is subject to the terms and conditions of Section 10.7 of the Master Operating Agreement and this Section 1(i), and the Collateral Agent acknowledges that the independent engineer under the Financing Documents shall be required, if appropriate, to deliver to the Collateral Agent the -10- certificate contemplated by Section 3.10(c) of the Intercreditor Agreement (a copy of which is attached as Exhibit A thereto), such certificate not to be unreasonably withheld. Notwithstanding anything herein or in the Master Operating Agreement to the contrary, the parties hereto acknowledge that until all Original Debt has been paid in full, Casualty Proceeds and Eminent Domain Proceeds (each as defined in the Intercreditor Agreement) will be disposed of pursuant to the terms of Sections 3.10 and 6.2 of the Intercreditor Agreement, which provisions shall not be amended, supplemented or otherwise modified, directly or indirectly, without the prior written consent of the Consenting Party. (j) Borrower Not to Cause Breach. The Borrower hereby irrevocably waives any rights that it may have, including those arising under any of the Contracts, to seek or compel the Consenting Party to act in a manner that is inconsistent with this Consent while this Consent is in effect. (k) Acknowledgment of Lien. The Consenting Party hereby acknowledges that the Energy Complex is subject to the lien of the Financing Documents. The Collateral Agent, the Secured Parties and the holders of the Bonds have no obligation to release such lien until all obligations secured thereby have been paid in full. (l) Approval Rights; Additional Debt. The Borrower and the Collateral Agent agree that they will not amend, modify, supplement or provide waivers under the Financing Documents that would result in (A) the scheduled annual debt service (as "debt service" is defined in Section 1(b) hereof), except for principal payments under the Working Capital Facility, in any year being greater than the scheduled annual debt service for such year as set forth on Schedule I hereto, (B) the Working Capital Facility having terms and conditions (including the maximum aggregate principal amount that can be outstanding thereunder) inconsistent with those described in clause (a)(ii) of the definition of "Permitted Indebtedness" contained in the Indenture (as such definition is in effect as of the date hereof, provided that amendments to such definition shall be permitted to reduce any payments of principal, interest or other amounts that may be scheduled to become due in any month) or (C) any modifications, direct or indirect, to the provisions of Sections 3.10 and 3.11 of the Intercreditor Agreement. This provision is not intended to apply to consensual restructurings of Original Debt due to non-payment of Original Debt that results in an accrual of past due scheduled annual debt service, and is not intended to require the Collateral Agent or the Secured Parties to exercise remedies. The Borrower agrees not to (and the Collateral Agent acknowledges that the Borrower is not permitted to) (i) make, issue or cause to be suffered secured Indebtedness that would result in the scheduled annual debt service in any year, except for principal payments under the Working Capital Facility, being greater than the scheduled annual debt service for such years as set forth on Schedule I hereto, and (ii) issue unsecured Indebtedness that, when taken together with all -11- other Indebtedness, would exceed Original Debt in an amount greater than $5,000,000 (in the aggregate) escalated at the rate of change in the PPI. As a condition to the Borrower's issuance of any additional secured Indebtedness, the Borrower shall cause the holder of any additional secured Indebtedness to execute a counterpart of, or acknowledge to be bound by, this Consent. "Indebtedness" shall mean at any date, without duplication, (a)(i) all obligations of the Borrower for borrowed money, (ii) all obligations of the Borrower evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of the Borrower to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business and that mature not more than 180 days after the date originally incurred, (iv) the aggregate of all guarantee or purchase obligations of the Borrower with respect to capital stock of any person, including any capital stock of a consolidated subsidiary that is required to be shown as a liability on a balance sheet of the Borrower, (v) the aggregate of all redeemable shares of common or preferred stock of the Borrower, (vi) all obligations of the Borrower, whether direct or contingent, matured or unmatured, to reimburse banks in respect of drawings made under letters of credit that are issued to secure or provide for the payment of Indebtedness of the Borrower, (vii) foreign currency exchanges, (viii) currency and interest rate swaps and similar derivatives, and (ix) commodities hedges and (b) in each case to the extent, and only to the extent, such obligations (or the Borrower's liability with respect thereto) are required to be shown as a liability on a consolidated balance sheet of the Borrower prepared as of such date, (i) all obligations of the Borrower as lessee under capital leases, (ii) all Indebtedness of others secured by a lien on any asset of the Borrower, whether or not such Indebtedness is assumed by the Borrower, and (iii) all Indebtedness of others guaranteed by the Borrower. "Indebtedness" shall not include (i) purchase money notes secured by equipment (but otherwise non-recourse to the Borrower's other properties) that is not material to the operations of the Energy Complex, (ii) financial instruments that could not reasonably be expected to have a material adverse effect on the Borrower and (iii) the Borrower's obligations (if any) in respect of the 1994 Bonds, the 1984 Taxable Lease Agreement, the 1973 Tax- Exempt Lease Agreement and the 1976 Tax-Exempt Lease Agreement, except for any refinancing by the Borrower of any such obligation. (m) The Collateral Agent hereby acknowledges that it has no lien on the Mill Owner Maintenance Reserve Account established pursuant to the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among the Borrower, Southern, the Consenting Party (in its capacity as the owner and operator of the Tissue Mill and the Pulp Mill) and S.D. Warren (in its capacity as the owner and operator of the Paper Mill) or any amounts on deposit therein. (n) Mill Owner Payment Default Cure Right. The Mill Owners shall be entitled to cure any payment defaults of the Borrower under and strictly in accordance with the terms of the -12- Borrower's cure rights under the Financing Documents. The Collateral Agent agrees to deliver to the Mill Owners duplicates or copies of all notices of payment default delivered under or pursuant to any of the Financing Documents to the Borrower, and the Collateral Agent agrees that no notice of payment default shall be effective until received by the Mill Owners; provided, that any failure by the Collateral Agent to deliver to the Mill Owners any such duplicates or copies shall not subject the Collateral Agent to any liability whatsoever; and provided, further, that the Mill Owners shall be entitled to reimbursement for any amounts paid thereby to cure any payment default to the extent that such reimbursement is made from funds that otherwise are permitted to be distributed to the equity holders of the Borrower under the Financing Documents. The Borrower agrees to provide each of the Mill Owners with one copy of the Financing Documents (including any amendments or modifications thereto), as well as copies of all notices of default from the Secured Parties, all material notices to bondholders (including notices from the Secured Parties to the bondholders) and copies of all financial statements provided to the Secured Parties. (o) The Borrower hereby acknowledges and agrees to the terms and conditions set forth in this Consent, and agrees that to the extent any of the terms and conditions set forth herein are inconsistent with the terms and conditions of the Project Documents, the terms and conditions of this Consent shall control. 2. The Consenting Party hereby represents and warrants that: (a) The Consenting Party is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. The execution, delivery and performance by the Consenting Party of the Contracts and this Consent have been duly authorized by all necessary corporate action, and do not and will not require any further consents or approvals which have not been obtained, or violate any provision of the corporate charter or by-laws of the Consenting Party or any law, regulation, order, judgment, injunction or similar matters or breach any agreement presently in effect with respect to or binding on the Consenting Party or its properties or result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, charge or encumbrance of any nature that could adversely affect the Consenting Party's ability to perform its obligations under the Contracts or this Consent; (b) This Consent and the Contracts have been duly executed and delivered and are legal, valid and binding obligations of the Consenting Party enforceable against the Consenting Party in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights, and (ii) the application of general principles of equity (regardless of whether -13- such enforceability is considered in a proceeding in equity or at law); (c) As of the date hereof, the Contracts are in full force and effect and, except as described in Recital D above, have not been amended, supplemented or otherwise modified, other than such amendments, supplements and modifications as may have been agreed to by the Site Operating Committee that do not materially affect the material obligations of the Consenting Party under the Contracts; and (d) None of senior management of the Consenting Party, the Pulp Mill SOC Representative and the Tissue Mill SOC Representative has actual knowledge of any facts that would allow the Consenting Party to terminate this Consent or the Contracts, and the Consenting Party has no present intention to deliver a notice of default or a notice of termination thereunder; the consummation of any transaction contemplated by this Consent to take place on the date hereof would not allow the Consenting Party to terminate this Consent or the Contracts. (e) The Consenting Party has no actual notice of any assignment of any Contract (other than the assignment referred to in Recital E above and the assignment contemplated by this Consent). (f) The Consenting Party has not assigned, transferred or hypothecated the Contracts or any interest therein. 3. All notices required or permitted hereunder shall be in writing and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by telefacsimile and (c) if otherwise delivered, upon the earlier of receipt or two (2) business days after being sent by registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to the Consenting Party: Attention: Thomas C. Deas, Jr. Scott Paper Company Scott Plaza Philadelphia, Pennsylvania 19113-1585 Telecopy No.: (610) 522-5665 Telephone No.: (610) 522-5560 -14- If to the Collateral Agent: Attention: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Telecopy No.: 212-250-6961 Telephone No.: 212-250-6826 If to the Borrower: Attention: Mobile Energy Services Company, L.L.C. 900 Ashwood Parkway, Suite 300 Atlanta, Georgia 30338 Telecopy No.: 770-673-7781 Telephone No.: 770-392-7644 with a copy to: Mobile Energy Services Company, L.L.C. P.O. Box 2747 200 Bay Bridge Road Mobile, Alabama 36652 Telecopy No.: 334-452-6337 Telephone No.: 334-330-3600 4. This Consent shall be binding upon and benefit the successors and assigns of the Consenting Party, the Borrower, the Collateral Agent, the Secured Parties and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents and that, if required by Section 1(l) hereof, countersigns this Consent). The Consenting Party agrees to confirm such continuing obligation in writing upon the reasonable request of the Borrower, the Collateral Agent, the Secured Parties or any of their respective successors, transferees or assigns. No termination, amendment, variation or waiver of any provisions of this Consent shall be effective unless in writing and signed by the Consenting Party, the Collateral Agent and, in the case of a termination, amendment, variation, or waiver sought prior to a Trigger Event, the Borrower. This Consent shall be governed by the laws of the State of New York, without reference to principles of conflict of laws (other than Section 5-1401 of the New York General Obligations Law). 5. If any term or provision hereof is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the other terms and provisions hereof, which shall remain binding and enforceable, and to the extent possible, all of such other provisions shall remain in full force and effect. -15- 6. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 7. Subject to the following Section 8, this Consent shall be deemed to be terminated and of no further force and effect when the Consenting Party receives written notice from the Borrower and the Collateral Agent stating that no Original Debt is outstanding and all amounts owing to the Secured Parties in respect of the Original Debt (including, without limitation, principal, interest, fees and reimbursement obligations, whether upon maturity, acceleration or otherwise) have been paid in full; provided, however, that the obligations of the Borrower to provide the Consenting Party with copies of the Borrower's financial statements as required under Section 1(n) shall survive the termination of this Consent. 8. If at any time any payment in respect of Original Debt is rescinded or must otherwise be restored or returned by the holder of such Original Debt in connection with any bankruptcy, insolvency or other similar or related proceeding, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of the Borrower's property, the rights and obligations of the holder of such Original Debt under this Consent shall continue to be effective, or be reinstated as of the time such payment in respect of Original Debt is so rescinded or must otherwise be restored, as the case may be, all as though such payment had not been made. -16- IN WITNESS WHEREOF, the parties hereto by their officers thereunto duly authorized, have duly executed this Consent as of the date set forth below. Dated as of: August 1, 1995 SCOTT PAPER COMPANY, a Pennsylvania corporation By: /s/ Name: Thomas C. Deas Title: Assistant Treasurer BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent By: /s/ Name: James H. Stallkamp Title: President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as Borrower By: /s/ Name: Christopher J. Kysar Title: Vice President ACKNOWLEDGED: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President SCHEDULE I Total Debt Service (in thousands) 1995 40,500 1996 40,500 1997 40,000 1998 40,000 1999 39,500 2000 39,000 2001 38,500 2002 38,000 2003 37,500 2004 37,000 2005 36,500 2006 36,000 2007 35,500 2008 35,000 2009 34,500 2010 34,000 2011 33,500 2012 33,000 2013 32,500 2014 32,000 2015 31,500 2016 31,500 2017 35,000 2018 35,000 2019 through January 3, 2020 35,000 thereafter 0 EX-10.43 15 Exhibit 10.43 CONSENT AND AGREEMENT THIS CONSENT AND AGREEMENT (this "Consent"), dated as of August 1, 1995, is executed by SCOTT PAPER COMPANY, a Pennsylvania corporation (the "Consenting Party"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Borrower")(which is an indirect wholly-owned subsidiary of The Southern Company, a Delaware corporation ("Southern")), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Collateral Agent"). A. The Borrower, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (the "Taxable Indenture"), pursuant to which the Borrower (i) is issuing its First Mortgage Bonds (the "Taxable Bonds"), the proceeds of which will be used to (among other things) repay to Southern a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Master Operating Agreement (as hereinafter defined)) and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. The Borrower, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995 (the "Tax-Exempt Bonds" and, together with the Taxable Bonds, the "Bonds") to be issued for the benefit of the Borrower pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture" and, together with the Taxable Indenture, the "Indentures") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax- Exempt Bonds will be used to refinance the 1984 Tax-Exempt Bonds and to pay for certain other costs. C. The Borrower and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of the Borrower. D. The Consenting Party and Mobile Energy have entered into (i) that certain Asset Purchase Agreement dated as of December 12, 1994; (ii) that certain Assignment and Assumption Agreement dated as of December 12, 1994; and (iii) that certain Employee Transition Agreement dated as of December 12, 1994, as amended pursuant to the First Amendment to Employee Transition Agreement dated as of July 13, 1995 (collectively, as the same may be amended, waived or otherwise modified, the "Contracts"). E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and the Borrower dated as of July 14, 1995, Mobile Energy has assigned to the Borrower, and the Borrower has assumed, all of Mobile Energy's rights and obligations under the Contracts. F. The Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Collateral Agent, the Borrower and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement") and the other Financing Documents (as defined in the Amended and Restated Master Operating Agreement dated as of July 13, 1995 and effective as of December 12, 1994 (the "Master Operating Agreement"). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Consenting Party acknowledges the assignments referred to in Recitals E and F above and hereby irrevocably consents to such assignments, and each of the parties hereto agrees as follows: (a) Unless otherwise defined herein, all terms used in this Consent shall have the meanings given in Exhibit A to the Master Operating Agreement. Except as otherwise expressly provided herein, the rules of interpretation set forth in said Exhibit A shall apply to this Consent. (b) The Collateral Agent shall be entitled to exercise all rights of the Borrower under the Contracts and to cure any defaults of the Borrower under the Contracts within the time periods set forth in the Contracts or within thirty (30) days of receiving notice of such default, whichever is later. Upon receipt of the foregoing notice from the Collateral Agent, the Consenting Party agrees to accept such exercise and cure by the Collateral Agent, in each case strictly in accordance with the Contracts (except as provided above) and to render all performance due by it under the Contracts and this Consent to the Collateral Agent. The Consenting Party agrees to make all payments (if any) to be made by -2- it under the Contracts directly to the Collateral Agent for the benefit of the Secured Parties upon receipt of the Collateral Agent's written instructions and each of the Consenting Party and the Collateral Agent agree that any payments made by the Consenting Party to the Collateral Agent pursuant to such instructions shall satisfy the Consenting Party's obligations to make such payments to the Borrower in accordance with the Contracts and shall relieve the Consenting Party of all liability with respect to such payments. To the extent that the Collateral Agent assumes all of the Borrower's indemnification rights under the Contracts, the Borrower shall not be entitled to indemnification thereunder with respect to identical claims. (c) The Consenting Party agrees to deliver duplicates or copies of all notices of default delivered under or pursuant to the Contracts to the Collateral Agent promptly upon receipt thereof; provided that any failure by the Consenting Party to deliver to the Collateral Agent any such duplicates or copies shall not subject the Consenting Party to any liability whatsoever. 2. The Consenting Party will not, without the prior written consent of the Collateral Agent, terminate, amend or modify the Contracts in any respect that has a material adverse effect on the Borrower's rights or obligations. 3. This Consent shall be binding upon and benefit the successors and assigns of the Consenting Party, the Borrower, the Collateral Agent, the Secured Parties and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents and that countersigns this Consent). This Consent shall be governed by the laws of the State of New York, without reference to principles of conflict of laws (other than Section 5-1401 of the New York General Obligations Law). 4. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 5. It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and invested in it. -3- IN WITNESS WHEREOF, the parties hereto by their officers thereunto duly authorized, have duly executed this Consent as of the date set forth below. Dated as of: August 1, 1995 SCOTT PAPER COMPANY, a Pennsylvania corporation By: /s/ Name: Thomas C. Deas, Jr. Title: Assistant Treasurer BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent By: /s/ Name: James H. Stallkamp Title:President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as Borrower By: /s/ Name: Christopher J. Kysar Title: Vice President ACKNOWLEDGED: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President EX-10.44 16 Exhibit 10.44 CONSENT AND AGREEMENT THIS CONSENT AND AGREEMENT (this "Consent"), dated as of August 1, 1995, is executed by S.D. WARREN COMPANY, a Pennsylvania corporation (the "Consenting Party"), in its capacity as Paper Mill Owner, MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Borrower")(which is an indirect wholly-owned subsidiary of The Southern Company, a Delaware corporation ("Southern")), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Collateral Agent"). A. The Borrower, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (the "Taxable Indenture"), pursuant to which the Borrower (i) is issuing its First Mortgage Bonds (the "Taxable Bonds"), the proceeds of which will be used to (among other things) repay to Southern a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Master Operating Agreement (as hereinafter defined)) and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. The Borrower, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995A (the "Tax-Exempt Bonds" and, together with the Taxable Bonds, the "Bonds") to be issued for the benefit of the Borrower pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture" and, together with the Taxable Indenture, the "Indentures") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax- Exempt Bonds will be used to refinance the 1984 Tax-Exempt Bonds and to pay for certain other costs. C. The Borrower and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of the Borrower. D. The Consenting Party and Mobile Energy have entered into (i) that certain Amended and Restated Master Operating Agreement dated as of July 13, 1995 and effective as of December 12, 1994 (the "Master Operating Agreement"); (ii) that certain Paper Mill Energy Services Agreement dated as of December 12, 1994 (as amended by the First Amendment thereto dated as of July 13, 1995); (iii) that certain Paper Mill Environmental Indemnity Agreement (as amended by the First Amendment thereto dated as of July 13, 1995); (iv) that certain Water Procurement and Effluent Service Agreement dated as of December 12, 1994 (as amended by the First Amendment thereto dated as of July 13, 1995); (v) those certain Easement Deeds to which the Consenting Party is a party dated as of December 12, 1994; and (vi) that certain Common Services Agreement dated as of December 12, 1994 (as amended by the First Amendment thereto dated as of July 13, 1995 (collectively, as the same may be amended, waived or otherwise modified, the "Contracts"). E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and the Borrower dated as of July 14, 1995, Mobile Energy has assigned to the Borrower, and the Borrower has assumed, all of Mobile Energy's rights and obligations under the Contracts. F. The Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Collateral Agent, the Borrower and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement") and the other Financing Documents (as defined in the Master Operating Agreement). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Consenting Party acknowledges the assignments referred to in Recitals E and F above and hereby irrevocably consents to such assignments, and each of the parties hereto agrees as follows: (a) Definitions; Rules of Interpretation. Unless otherwise defined herein, all terms used in this Consent shall have the meanings given in Exhibit A to the Master Operating Agreement. Except as otherwise expressly provided herein, the rules of interpretation set forth in said Exhibit A shall apply to this Consent. The parties hereto acknowledge that the Collateral Agent, acting on behalf of the Secured Parties, is a "Lender" within the meaning of the Master Operating Agreement, and that, without the consent of the parties hereto, no other Person (other than a secured Lender who executes a counterpart of, or acknowledges to be -2- bound by, this Consent) shall be deemed a Lender under the Contracts. Any such Lenders shall coordinate so as not to give any conflicting instructions or demands to the Consenting Party. (b) Step-In Rights. The Mill Owners shall have the right to exercise the Mill Owner Step-In Rights in accordance with Section 11.4(a)(ii) of the Master Operating Agreement. The Collateral Agent acknowledges that (A) the Mill Owner Step-In Rights give the Mill Owners the right, under the circumstances set forth in Section 11.4(a)(ii) of the Master Operating Agreement, to, among other things, take possession of or obtain entry to the Energy Complex and to assume and exercise operational control of the Energy Complex and (B) in so assuming or exercising operational control of the Energy Complex, the Mill Owners may exclude the Collateral Agent from assuming or exercising operational control of the Energy Complex until such time as the Collateral Agent shall have foreclosed upon the Energy Complex, subject to Section 1(d) hereof. The parties hereto agree that if the Mill Owners continue to exercise the Mill Owner Step-In Rights at the end of the initial term of the Contracts, the Borrower may not exercise the renewal term for the Contracts; provided that, if the Mill Owners desire to continue their Mill Owner Step-in Rights, and if there is any Original Debt (as hereinafter defined) outstanding under the Financing Documents at the end of such initial term, a Master Operating Agreement Renewal Term shall be deemed to be exercised, which such renewal term shall terminate on the earlier of the expiration of such Master Operating Agreement Renewal Term and the date no Original Debt remains outstanding without prejudice to the Mill Owners' rights to terminate the Mill Owner Step-In Rights at any time pursuant to the terms of the Contracts and to terminate or allow the Contracts to expire in accordance with their terms (subject to the provisions of Section 1(e) hereof). If at any time on or after December 16, 2019 the Mill Owners are exercising the Mill Owner Step-In Rights at the time all Original Debt outstanding has been repaid, the Mill Owners may, at the option of the Mill Owners exercised in their sole and absolute discretion, elect to acquire all of the Borrower's right, title and interest in and to the Energy Complex by written notice delivered to the Borrower and the Lender, provided that in the event that any of the Mill Owners exercises the foregoing option, the Borrower and the Collateral Agent shall execute and deliver all agreements, instruments and other documents, and shall take or cause to be taken such other actions as required under applicable law, as shall be necessary to assign and transfer all of the Borrower's right, title and interest in and to the Energy Complex to the Mill Owners that elect to exercise said option; and provided, further, that such option shall expire, if not theretofore exercised, immediately upon the cessation of such Mill Owner Step-In Rights. "Original Debt" shall mean all Indebtedness (as defined in Section 1(l) hereof) the aggregate scheduled annual debt service for which in any year does not exceed that set forth on Schedule I hereto. Without limiting the foregoing, "Original Debt" shall include Indebtedness -3- outstanding from time to time under the Working Capital Facility complying with clause (b) of Section 1(l) hereof, provided that the limitations contained in the preceding sentence regarding scheduled annual debt service on Original Debt not exceeding the amount set forth on Schedule I hereto shall be determined without regard to principal payments under the Working Capital Facility. For purposes hereof, "debt service" means payments of principal, interest and other payments, costs, fees and expenses under any Indebtedness. Nothing in this Section 1(b) shall be deemed to limit or restrict any of the other rights and remedies available to the Collateral Agent under the Financing Documents (subject to the other terms and provisions hereof) and no provision of any of the Financing Documents shall be deemed to limit or restrict any of the other rights and remedies of the Consenting Party hereunder (subject to the other terms and provisions hereof). Notwithstanding any provision to the contrary set forth herein, the failure to exercise any Mill Owner Step-In Rights shall not act as a waiver or release of such Mill Owner Step-In Rights and the termination of the exercise of any Mill Owner Step-In Rights shall not act as a waiver or release of any other Mill Owner Step-In Rights that may arise after such termination; provided that no provision in this Consent shall be deemed to permit the Mill Owners, upon termination of Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event, to elect to exercise Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event that was in existence and of which the Mill Owners were aware at the time of such termination, or otherwise to increase the availability or scope of Mill Owner Step-In Rights beyond that specified in the Master Operating Agreement and the other Contracts. (c) Cure Rights and Payments. Subject to Section 1(b) hereof, the Collateral Agent shall be entitled to exercise all rights and to cure any defaults of the Borrower under and strictly in accordance with the terms of the Contracts (or as otherwise expressly provided in this Consent), and the Consenting Party agrees to permit and accept such exercise and cure by the Collateral Agent in accordance with their terms except as expressly provided herein. The Consenting Party agrees to render all payments due by it to the Borrower under the Contracts directly to the Collateral Agent, c/o Bankers Trust Company, for deposit into the Borrower's Account No. 15351 maintained with Bankers Trust Company, or to such other person and/or at such other address as the Collateral Agent may from time to time specify in writing to the Consenting Party. Upon receipt by the Consenting Party of notice from the Collateral Agent that a Trigger Event (as defined in the Intercreditor Agreement as in effect on the date hereof) has occurred, the Consenting Party agrees, subject to Section 1(b) hereof, to render all performance due by it under the Contracts and this Consent to the Collateral Agent for the benefit of the Secured Parties. The Borrower hereby acknowledges and agrees that payments -4- made by the Consenting Party to the Collateral Agent in accordance with the Collateral Agent's directions pursuant to this Section 1(c) and performance to the Collateral Agent shall satisfy the Consenting Party's obligations to make payments or to perform such obligations (as the case may be) to the Borrower in accordance with the Contracts, and shall relieve the Consenting Party of all liability with respect to such payments or performance. During the term of this Consent, the Borrower hereby waives any right it may have to require that payments be made or performance be rendered in any manner other than the manner designated by the Collateral Agent pursuant to this Section 1(c). (d) Foreclosure. (i) The Collateral Agent shall not commence foreclosure proceedings upon the Energy Complex or the Contracts without first providing the Consenting Party with fifteen (15) days advance written notice thereof. Contemporaneously with or immediately following such foreclosure upon the Contracts, the Collateral Agent shall notify the Consenting Party that the Collateral Agent or a purchaser (either such person, in such circumstance, constituting a "New Owner") has succeeded to the Borrower's interest under the Contracts pursuant to documentation satisfactory to the Consenting Party and the New Owner. At the time of foreclosure, the Collateral Agent shall not make an assignment of the Contracts to a third party unless (i) such third party assumes liability for all of the Borrower's and the Collateral Agent's (as the case may be) obligations under the Contracts (including the obligation to continue operation of the Energy Complex in accordance with the terms of the Contracts) (provided that the New Owner need not assume obligations under any Contract with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing) pursuant to documentation satisfactory to the Consenting Party in form and substance and (ii) such third party is a Qualified Purchaser and has substantial expertise (or is controlled or managed by, or has retained as an operator of the Energy Complex, a person with substantial expertise) in operating and managing facilities similar to the Energy Complex and there is a reasonable basis to conclude that the operations at the Energy Complex will be conducted in accordance with Prudent Plant Operating Standards following such assignment. (ii) If the Collateral Agent determines that it wishes to foreclose upon (or accept title in lieu of foreclosure to) the Energy Complex, the Lease, the Supplementary Lease and the Easement Deeds but not to foreclose upon (or accept title in lieu of foreclosure to) all of the other Contracts (other than Contracts as to which a Mill Owner Event of Default has occurred and is continuing), the Collateral Agent shall provide written notice to the Mill Owners of such determination. The Mill Owners may elect by written notice to the Collateral Agent within thirty (30) days of receipt of the foregoing notice (or on the date that the Collateral Agent obtains title to the Energy Complex, if later) to take possession of and operate the Energy Complex: -5- (A) for a period of up to eighteen months, commencing on the date of receipt by the Collateral Agent of the Mill Owners' written notice of election (the "Limited Standstill Period"), provided that, and for so long as, (1) during the Limited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights (or, if the Energy Complex is not operable, the Mill Owners shall use their good faith efforts to restore the Energy Complex to operability) and no Liquidated Damages shall be payable and (2) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties; or (B) for an unlimited period, commencing on the date of receipt by the Collateral Agent of the Mill Owners' written notice of election (the "Unlimited Standstill Period"), provided that, and for so long as, (1) any of (a) the second Demand Anniversary Date has not occurred, (b) the annualized Demand Charge for the then current Demand Period is set at a level equal to or greater than 77% of the Demand Charge during the First Contract Year (the "Minimum Demand Charge") or (c) if the provisions of clause (b) are not satisfied, the Mill Owners commit to pay the Collateral Agent during the then current Demand Period all amounts payable under the Contracts and agree that the Demand Charge for the then current Demand Period shall be deemed to equal the Minimum Demand Charge, (2) during the Unlimited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect, and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights and shall comply with all obligations of the Mill Owners under the Contracts (including, without limitation, the obligation to pay Demand Charges, subject to Demand Charge Reductions), except that (i) all liabilities incurred in connection with the operation of the Energy Complex during the Unlimited Standstill Period (excluding debt service on the Original Debt outstanding, but including, without limitation, rent, real estate taxes and similar impositions that are otherwise payable by the lessee under the Lease and the Supplementary Lease, operation and maintenance expenses and capital expenditures, and all amounts payable to the Mill Owners in reimbursement thereof) shall be expressly subordinated and junior in right of payment to the payment of scheduled debt service on Original Debt outstanding; (ii) except as provided in clause (iv) of Section 1(d)(ii)(B)(2) hereof, no rights of set-off, counterclaim, deduction or defense of any kind shall be exercised or asserted against the Demand Charges and other amounts payable to the Collateral Agent under the Contracts or payment thereof; (iii) no Liquidated Damages shall be payable; and (iv) all amounts payable by the Mill Owners under the Contracts in excess of the sum of (w) scheduled debt service -6- on the Original Debt outstanding, (x) operation and maintenance expenses, (y) capital expenditures and (z) amounts otherwise payable to the Mill Owners pursuant to rights of set-off, counterclaim, deduction or defense, shall be applied to redemption of the Original Debt outstanding, which shall be redeemed in accordance with the terms thereof to the extent of such available funds, and (3) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties. (iii) If at any time none of the conditions specified in Section 1(d)(ii)(B)(1) hereof is satisfied, the Collateral Agent shall have the right to convert the Unlimited Standstill Period into a Limited Standstill Period, in which case the Mill Owners' rights to enter into an Unlimited Standstill Period shall terminate. If at any time any of the other conditions specified in Section 1(d)(ii)(A) or 1(d)(ii)(B) hereof is not satisfied, the Collateral Agent may elect to terminate the Limited Standstill Period or the Unlimited Standstill Period (as the case may be). (iv) Upon termination (or, in the case of the Limited Standstill Period, expiration) of the Limited Standstill Period or the Unlimited Standstill Period (as the case may be), the New Owner may elect either to assume all of the Contracts (other than obligations under any Contracts with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing, which the New Owner may either assume or not assume, at its option) or to terminate all of the Contracts (other than, if the New Owner so elects, the Lease, the Supplemental Lease and the Easement Deeds) and to dispose of the Energy Complex in any manner that it chooses. If the New Owner elects to assume the Contracts, the term of each Contract shall be deemed to be extended by the term of the Limited Standstill Period if, at the end of such Contract's term, any Original Debt is outstanding. (v) The Borrower and the Collateral Agent acknowledge and agree that (A) during the Limited Standstill Period or Unlimited Standstill Period, the Mill Owners shall have the right and option to purchase the Energy Complex for a purchase price equal to all outstanding principal and interest due and owing to the Secured Parties in respect of the Original Debt outstanding and (B) at the end of the initial term of the Lease, the Mill Owners shall have the right and option to purchase the Energy Complex in accordance with Article 15 of the Lease and, in each case, the Mill Owners shall acquire the Energy Complex free and clear of all liens and encumbrances that at any time secured the repayment of the Original Debt outstanding; provided that all Original Debt outstanding and all other amounts payable to the Senior Secured Parties or the New Owner (as the case may be) under the Contracts shall have been paid in full. -7- (vi) Notwithstanding any provision in the Contracts or the arrangements establishing the Mill Owner Maintenance Reserve Account to the contrary, the Borrower agrees that in the event the Mill Owners are operating the Energy Complex during the Limited Standstill Period or the Unlimited Standstill Period, the Mill Owner Maintenance Reserve Account shall be available to the Mill Owners (but not to the Collateral Agent) for the payment of operation, maintenance or capital expenses. (e) Termination/Transfer. (i) The Consenting Party will not, without the prior written consent of the Collateral Agent, (A) cancel or terminate any of the Contracts except as provided in the Contracts and in accordance with Section 1(e)(ii) hereof, or consent to or accept any cancellation or termination thereof by the Borrower, (B) sell, assign or otherwise dispose of (by operation of law or otherwise) any part of its interest in the Contracts, except as set forth in Article 15 of the Master Operating Agreement, or (C) amend or modify the Contracts in any respect that may reasonably be expected to have a material effect on the Borrower's rights or obligations. The Consenting Party agrees to deliver duplicates or copies of all (i) notices of default delivered under or pursuant to any of the Contracts to the Collateral Agent promptly upon delivery thereof to the Borrower (and the Consenting Party agrees that no such notice of default shall be effective until received by Collateral Agent), and (ii) amendments to any of the Contracts that in any respect may reasonably be expected to have a material effect on the Borrower's rights or obligations (and the Consenting Party agrees that no such amendment shall be effective until received by the Collateral Agent); provided, that any failure by the Consenting Party to deliver to the Collateral Agent any such duplicates or copies shall not subject the Consenting Party to any liability whatsoever. (ii) The Consenting Party will not terminate the Contracts or any of its obligations thereunder on account of any default or breach of the Borrower thereunder without (A) in the case of a default by the Borrower that is the failure by the Borrower to pay amounts to the Consenting Party which are due and payable under the Contracts, first providing to the Collateral Agent written notice of such default and ninety (90) days from the date such notice is delivered to the Collateral Agent to pay such amounts and (B) in the case of a default that cannot be cured by the payment of money to the Consenting Party, first providing to the Collateral Agent written notice of such default and a reasonable opportunity (in any event at least ninety (90) days but no more than one hundred eighty (180) days) to cure such breach or default so long as the Collateral Agent or its designee shall have commenced to cure the breach or default within such ninety-day period and thereafter diligently pursues such cure to completion and continues to perform any monetary obligations of the Borrower to the Consenting Party under the Contracts and all other obligations of the Borrower under the Contracts are performed by the Borrower (or the Collateral Agent on behalf of the Borrower) or with respect to any defaults that are not susceptible of being cured by the Collateral Agent, to -8- rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. If possession of the Energy Complex (by way of foreclosure proceedings or otherwise) is necessary to cure such breach or default, the Collateral Agent or its successor, transferee or assignee will be allowed a reasonable period to complete such proceedings or otherwise accomplish such possession; provided, that in no event shall such additional period exceed thirty (30) days. The Collateral Agent acknowledges and agrees that during the foregoing time periods the Consenting Party shall be entitled to exercise any set-off right which the Consenting Party may have against the Borrower under the Contracts. If the Collateral Agent or its successor, transferee or assignee is prohibited by any court order or bankruptcy or insolvency proceedings from curing the default or from commencing or prosecuting foreclosure proceedings, the foregoing time periods shall be extended by the period of such prohibition. Subject to Section 1(d) hereof, the Consenting Party consents to the transfer of the Borrower's interest under the Contracts to the Collateral Agent for the benefit of the Secured Parties or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by the Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale or conveyance, the Consenting Party shall recognize the Collateral Agent or other purchaser or grantee as the applicable party under the transferred Contracts (provided that the Collateral Agent or such purchaser or grantee assumes the obligations of the Borrower under the transferred Contracts as provided in Section 1(d) hereof). (f) Bankruptcy. In the event that any of the Contracts is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, or if any of the Contracts is terminated for any reason other than a default that could have been but was not cured by the Collateral Agent as provided in Section 1(e)(ii) hereof, and if, within sixty (60) days after such rejection or termination, the Collateral Agent or its successor, transferee or assignee shall so request, the Consenting Party will execute and deliver to the Collateral Agent or its successor, transferee or assignee for the benefit of the Secured Parties a new Contract, which Contract shall be on substantially the same terms and conditions as the original Contract for the remaining term of the Contract before giving effect to such rejection or termination (but in no event on less favorable terms and conditions as the original Contract). (g) Liability. (i) None of the Collateral Agent, the Secured Parties or the holders of Bonds shall be liable for any of the obligations or duties of the Borrower (including, without limitation, the obligation to deliver title to the Energy Complex free of any lien upon the exercise of a Repurchase Option (as defined in the Master Operating Agreement) by the Consenting Party), unless and until the Collateral Agent or its successor -9- expressly assumes the Contracts or any or all of such obligations or duties. (ii) In the event the Collateral Agent or its successor elects to perform the Borrower's obligations under the Contracts or to enter into any new Contract as provided in Section 1(d), 1(e)(ii) or 1(f) hereof, the Collateral Agent, the Secured Parties and the holders of Bonds, and their successors, shall have no liability to the Consenting Party for the performance of such obligations, and the sole recourse of the Consenting Party in seeking the enforcement of such obligations shall be to such parties' interest in the Energy Complex. (iii) It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it. (h) Cure Duties; Assignment. In the event the Collateral Agent or its successor, transferee or assignee succeeds to the Borrower's interest under the Contracts, the Collateral Agent or its successor, transferee or assignee shall cure any defaults of the Borrower existing under the Contracts that are reasonably capable of being cured and, with respect to any defaults that are not susceptible of being cured by the Collateral Agent, shall rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. The Collateral Agent shall have the right to assign its interest in this Consent to any person or entity to whom the Original Debt is transferred, provided such transferee assumes the obligations of the Borrower (or the Collateral Agent, as the case may be) under this Consent. Upon such assignment, the Collateral Agent and the Secured Parties (including their agents and employees) shall be released from any further liability under this Consent and the Contracts to the extent of the interest assigned. (i) Insurance Proceeds. The parties hereto acknowledge and agree that the disposition of insurance proceeds with respect to the Energy Complex is subject to the terms and conditions of Section 10.7 of the Master Operating Agreement and this Section 1(i), and the Collateral Agent acknowledges that the independent engineer under the Financing Documents shall be required, if appropriate, to deliver to the Collateral Agent the certificate contemplated by Section 3.10(c) of the Intercreditor Agreement (a copy of which is attached as Exhibit A thereto), such certificate not to be unreasonably withheld. Notwithstanding anything herein or in the Master Operating Agreement to the contrary, the parties hereto acknowledge that until all Original Debt has been paid in full, Casualty Proceeds and Eminent Domain Proceeds (each as defined in the Intercreditor Agreement) will be disposed of pursuant to the terms of Sections 3.10 and 6.2 of the Intercreditor Agreement, which provisions shall not be amended, -10- supplemented or otherwise modified, directly or indirectly, without the prior written consent of the Consenting Party. (j) Borrower Not to Cause Breach. The Borrower hereby irrevocably waives any rights that it may have, including those arising under any of the Contracts, to seek or compel the Consenting Party to act in a manner that is inconsistent with this Consent while this Consent is in effect. (k) Acknowledgment of Lien. The Consenting Party hereby acknowledges that the Energy Complex is subject to the lien of the Financing Documents. The Collateral Agent, the Secured Parties and the holders of the Bonds have no obligation to release such lien until all obligations secured thereby have been paid in full. (l) Approval Rights; Additional Debt. The Borrower and the Collateral Agent agree that they will not amend, modify, supplement or provide waivers under the Financing Documents that would result in (A) the scheduled annual debt service (as "debt service" is defined in Section 1(b) hereof), except for principal payments under the Working Capital Facility, in any year being greater than the scheduled annual debt service for such year as set forth on Schedule I hereto, (B) the Working Capital Facility having terms and conditions (including the maximum aggregate principal amount that can be outstanding thereunder) inconsistent with those described in clause (a)(ii) of the definition of "Permitted Indebtedness" contained in the Indenture (as such definition is in effect as of the date hereof, provided that amendments to such definition shall be permitted to reduce any payments of principal, interest or other amount, that may be scheduled to become due in any month) or (C) any modifications, direct or indirect, to the provisions of Sections 3.10 and 3.11 of the Intercreditor Agreement. This provision is not intended to apply to consensual restructurings of Original Debt due to non-payment of Original Debt that results in an accrual of past due scheduled annual debt service, and is not intended to require the Collateral Agent or the Secured Parties to exercise remedies. The Borrower agrees not to (and the Collateral Agent acknowledges that the Borrower is not permitted to) (i) make, issue or cause to be suffered secured Indebtedness that would result in the scheduled annual debt service in any year, except for principal payments under the Working Capital Facility, being greater than the scheduled annual debt service for such years as set forth on Schedule I hereto, and (ii) issue unsecured Indebtedness that, when taken together with all other Indebtedness, would exceed Original Debt in an amount greater than $5,000,000 (in the aggregate) escalated at the rate of change in the PPI. As a condition to the Borrower's issuance of any additional secured Indebtedness, the Borrower shall cause the holder of any additional secured Indebtedness to execute a counterpart of, or acknowledge to be bound by, this Consent. "Indebtedness" shall mean at any date, without duplication, (a)(i) all obligations of the Borrower for borrowed money, (ii) all obligations of the Borrower evidenced by bonds, debentures, notes -11- or other similar instruments, (iii) all obligations of the Borrower to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business and that mature not more than 180 days after the date originally incurred, (iv) the aggregate of all guarantee or purchase obligations of the Borrower with respect to capital stock of any person, including any capital stock of a consolidated subsidiary that is required to be shown as a liability on a balance sheet of the Borrower, (v) the aggregate of all redeemable shares of common or preferred stock of the Borrower, (vi) all obligations of the Borrower, whether direct or contingent, matured or unmatured, to reimburse banks in respect of drawings made under letters of credit that are issued to secure or provide for the payment of Indebtedness of the Borrower, (vii) foreign currency exchanges, (viii) currency and interest rate swaps and similar derivatives, and (ix) commodities hedges and (b) in each case to the extent, and only to the extent, such obligations (or the Borrower's liability with respect thereto) are required to be shown as a liability on a consolidated balance sheet of the Borrower prepared as of such date, (i) all obligations of the Borrower as lessee under capital leases, (ii) all Indebtedness of others secured by a lien on any asset of the Borrower, whether or not such Indebtedness is assumed by the Borrower, and (iii) all Indebtedness of others guaranteed by the Borrower. "Indebtedness" shall not include (i) purchase money notes secured by equipment (but otherwise non-recourse to the Borrower's other properties) that is not material to the operations of the Energy Complex, (ii) financial instruments that could not reasonably be expected to have a material adverse effect on the Borrower and (iii) the Borrower's obligations (if any) in respect of the 1994 Bonds, the 1984 Taxable Lease Agreement, the 1973 Tax- Exempt Lease Agreement and the 1976 Tax-Exempt Lease Agreement, except for any refinancing by the Borrower of any such obligation. (m) The Collateral Agent hereby acknowledges that it has no lien on the Mill Owner Maintenance Reserve Account established pursuant to the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among the Borrower, Southern, S.D. Warren (in its capacity as the owner and operator of the Paper Mill) and Scott (in its capacity as the owner and operator of the Tissue Mill and the Pulp Mill) or any amounts on deposit therein. (n) Mill Owner Payment Default Cure Right. The Mill Owners shall be entitled to cure any payment defaults of the Borrower under and strictly in accordance with the terms of the Borrower's cure rights under the Financing Documents. The Collateral Agent agrees to deliver to the Mill Owners duplicates or copies of all notices of payment default delivered under or pursuant to any of the Financing Documents to the Borrower, and the Collateral Agent agrees that no notice of payment default shall be effective until received by the Mill Owners; provided, that any failure by the Collateral Agent to deliver to the Mill Owners any such duplicates or copies shall not subject the Collateral Agent to any liability whatsoever; and provided, further, that the Mill Owners shall be entitled to reimbursement for any amounts paid -12- thereby to cure any payment default to the extent that such reimbursement is made from funds that otherwise are permitted to be distributed to the equity holders of the Borrower under the Financing Documents. The Borrower agrees to provide each of the Mill Owners with one copy of the Financing Documents (including any amendments or modifications thereto), as well as copies of all notices of default from the Secured Parties, all material notices to bondholders (including notices from the Secured Parties to the bondholders) and copies of all financial statements provided to the Secured Parties. (o) The Borrower hereby acknowledges and agrees to the terms and conditions set forth in this Consent, and agrees that to the extent any of the terms and conditions set forth herein are inconsistent with the terms and conditions of the Project Documents, the terms and conditions of this Consent shall control. 2. The Consenting Party hereby represents and warrants that: (a) The Consenting Party is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. The execution, delivery and performance by the Consenting Party of the Contracts and this Consent have been duly authorized by all necessary corporate action, and do not and will not require any further consents or approvals which have not been obtained, or violate any provision of the corporate charter or by-laws of the Consenting Party or any law, regulation, order, judgment, injunction or similar matters or breach any agreement presently in effect with respect to or binding on the Consenting Party or its properties or result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, charge or encumbrance of any nature that could adversely affect the Consenting Party's ability to perform its obligations under the Contracts or this Consent; (b) This Consent and the Contracts have been duly executed and delivered and are legal, valid and binding obligations of the Consenting Party enforceable against the Consenting Party in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights, and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (c) As of the date hereof, the Contracts are in full force and effect and, except as described in Recital D above, have not been amended, supplemented or otherwise modified, other than such amendments, supplements and modifications as may have been agreed to by the Site Operating Committee that do not materially affect the obligations of the Consenting Party under the Contracts; and -13- (d) Neither senior management of the Consenting Party, nor the Paper Mill SOC Representative has actual knowledge of any facts that would allow the Consenting Party to terminate this Consent or the Contracts, and the Consenting Party has no present intention to deliver a notice of default or a notice of termination thereunder; the consummation of any transaction contemplated by this Consent to take place on the date hereof would not allow the Consenting Party to terminate this Consent or the Contracts. (e) The Consenting Party has no actual notice of any assignment of any Contract (other than the assignment referred to in Recital E above and the assignment contemplated by this Consent). (f) The Consenting Party has not assigned, transferred or hypothecated the Contracts or any interest therein. 3. All notices required or permitted hereunder shall be in writing and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by telefacsimile and (c) if otherwise delivered, upon the earlier of receipt or two (2) business days after being sent by registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to the Consenting Party: Attention: S.D. Warren Company 225 Franklin Street Boston, Massachusetts 02111 Telecopy No.: (617) 423-5451 Telephone No.: ________________ If to the Collateral Agent: Attention: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Telecopy No.: 212-250-6961 Telephone No.: 212-250-6826 If to the Borrower: Attention: Mobile Energy Services Company, L.L.C. 900 Ashwood Parkway, Suite 300 -14- Atlanta, Georgia 30338 Telecopy No.: 770-673-7781 Telephone No.: 770-392-7644 with a copy to: Mobile Energy Services Company, L.L.C. P.O. Box 2747 200 Bay Bridge Road Mobile, Alabama 36652 Telecopy No.: 334-452-6337 Telephone No.: 334-330-3600 4. This Consent shall be binding upon and benefit the successors and assigns of the Consenting Party, the Borrower, the Collateral Agent, the Secured Parties and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents and that, if required by Section 1(l) hereof, countersigns this Consent). The Consenting Party agrees to confirm such continuing obligation in writing upon the reasonable request of the Borrower, the Collateral Agent, the Secured Parties or any of their respective successors, transferees or assigns. No termination, amendment, variation or waiver of any provisions of this Consent shall be effective unless in writing and signed by the Consenting Party, the Collateral Agent and, in the case of a termination, amendment, variation, or waiver sought prior to a Trigger Event, the Borrower. This Consent shall be governed by the laws of the State of New York, without reference to principles of conflict of laws (other than Section 5-1401 of the New York General Obligations Law). 5. If any term or provision hereof is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the other terms and provisions hereof, which shall remain binding and enforceable, and to the extent possible, all of such other provisions shall remain in full force and effect. 6. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 7. Subject to the following Section 8, this Consent shall be deemed to be terminated and of no further force and effect when the Consenting Party receives written notice from the Borrower and the Collateral Agent stating that no Original Debt is outstanding and all amounts owing to the Secured Parties in respect of the Original Debt (including, without limitation, principal, interest, fees and reimbursement obligations, whether upon maturity, acceleration or otherwise) have been paid in full; provided, however, that the obligations of the Borrower to provide the Consenting Party with copies of the Borrower's financial -15- statements as required under Section 1(n) shall survive the termination of this Consent. 8. If at any time any payment in respect of Original Debt is rescinded or must otherwise be restored or returned by the holder of such Original Debt in connection with any bankruptcy, insolvency or other similar or related proceeding, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of the Borrower's property, the rights and obligations of the holder of such Original Debt under this Consent shall continue to be effective, or be reinstated as of the time such payment in respect of Original Debt is so rescinded or must otherwise be restored, as the case may be, all as though such payment had not been made. -16- IN WITNESS WHEREOF, the parties hereto by their officers thereunto duly authorized, have duly executed this Consent as of the date set forth below. Dated as of: August 1, 1995 S.D. WARREN COMPANY, a Pennsylvania corporation, in its capacity as Paper Mill Owner By: /s/ Name: Trevor L. Larkan Title: Vice President and Chief Financial Officer BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent By: /s/ Name: James H. Stallkamp Title: President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as Borrower By: /s/ Name: Christopher J. Kysar Title: Vice President ACKNOWLEDGED: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President SCHEDULE I Total Debt Service (in thousands) 1995 40,500 1996 40,500 1997 40,000 1998 40,000 1999 39,500 2000 39,000 2001 38,500 2002 38,000 2003 37,500 2004 37,000 2005 36,500 2006 36,000 2007 35,500 2008 35,000 2009 34,500 2010 34,000 2011 33,500 2012 33,000 2013 32,500 2014 32,000 2015 31,500 2016 31,500 2017 35,000 2018 35,000 2019 through January 3, 2020 35,000 thereafter 0 EX-10.45 17 Exhibit 10.45 CONSENT AND AGREEMENT THIS CONSENT AND AGREEMENT (this "Consent"), dated as of August 1, 1995, is executed by SCOTT PAPER COMPANY, a Pennsylvania corporation (the "Consenting Party"), in its capacity as Pulp Mill Owner, MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Borrower")(which is an indirect wholly-owned subsidiary of The Southern Company, a Delaware corporation ("Southern")), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Collateral Agent"). A. The Borrower, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (the "Taxable Indenture"), pursuant to which the Borrower (i) is issuing its First Mortgage Bonds (the "Taxable Bonds"), the proceeds of which will be used to (among other things) repay to Southern a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Master Operating Agreement (as hereinafter defined)) and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. The Borrower, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995A (the "Tax-Exempt Bonds" and, together with the Taxable Bonds, the "Bonds") to be issued for the benefit of the Borrower pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture" and, together with the Taxable Indenture, the "Indentures") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax- Exempt Bonds will be used to refinance the 1984 Tax-Exempt Bonds and to pay for certain other costs. C. The Borrower and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of the Borrower. D. The Consenting Party and Mobile Energy have entered into (i) that certain Amended and Restated Master Operating Agreement dated as of July 13, 1995 and effective as of December 12, 1994 (the "Master Operating Agreement"); (ii) that certain Pulp Mill Energy Services Agreement dated as of December 12, 1994 (as amended by the First Amendment thereto dated as of July 13, 1995); (iii) that certain Pulp Mill Environmental Indemnity Agreement (as amended by the First Amendment thereto dated as of July 13, 1995); (iv) that certain Water Procurement and Effluent Service Agreement dated as of December 12, 1994 (as amended by the First Amendment thereto dated as of July 13, 1995); (v) that certain Boiler Ash Disposal Agreement dated as of December 12, 1995 (as amended by the First Amendment thereto dated as of July 13, 1995); and (vi) those certain Easement Deeds to which the Consenting Party is a party dated as of December 12, 1994 (collectively, as the same may be amended, waived or otherwise modified, the "Contracts"). E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and the Borrower dated as of July 14, 1995, Mobile Energy has assigned to the Borrower, and the Borrower has assumed, all of Mobile Energy's rights and obligations under the Contracts. F. The Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Collateral Agent, the Borrower and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement") and the other Financing Documents (as defined in the Master Operating Agreement). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Consenting Party acknowledges the assignments referred to in Recitals E and F above and hereby irrevocably consents to such assignments, and each of the parties hereto agrees as follows: (a) Definitions; Rules of Interpretation. Unless otherwise defined herein, all terms used in this Consent shall have the meanings given in Exhibit A to the Master Operating Agreement. Except as otherwise expressly provided herein, the rules of interpretation set forth in said Exhibit A shall apply to this Consent. The parties hereto acknowledge that the Collateral Agent, acting on behalf of the Secured Parties, is a "Lender" within the meaning of the Master Operating Agreement, and that, without the consent of the parties hereto, no other Person (other than a secured Lender who executes a counterpart of, or acknowledges to be bound by, this Consent) shall be deemed a Lender under the -2- Contracts. Any such Lenders shall coordinate so as not to give any conflicting instructions or demands to the Consenting Party. (b) Step-In Rights. The Mill Owners shall have the right to exercise the Mill Owner Step-In Rights in accordance with Section 11.4(a)(ii) of the Master Operating Agreement. The Collateral Agent acknowledges that (A) the Mill Owner Step-In Rights give the Mill Owners the right, under the circumstances set forth in Section 11.4(a)(ii) of the Master Operating Agreement, to, among other things, take possession of or obtain entry to the Energy Complex and to assume and exercise operational control of the Energy Complex and (B) in so assuming or exercising operational control of the Energy Complex, the Mill Owners may exclude the Collateral Agent from assuming or exercising operational control of the Energy Complex until such time as the Collateral Agent shall have foreclosed upon the Energy Complex, subject to Section 1(d) hereof. The parties hereto agree that if the Mill Owners continue to exercise the Mill Owner Step-In Rights at the end of the initial term of the Contracts, the Borrower may not exercise the renewal term for the Contracts, provided that, if the Mill Owners desire to continue their Mill Owner Step-in Rights, and if there is any Original Debt (as hereinafter defined) outstanding under the Financing Documents at the end of such initial term, a Master Operating Agreement Renewal Term shall be deemed to be exercised, which such renewal term shall terminate on the earlier of the expiration of such Master Operating Agreement Renewal Term and the date no Original Debt remains outstanding without prejudice to the Mill Owners' rights to terminate the Mill Owner Step-In Rights at any time pursuant to the terms of the Contracts and to terminate or allow the Contracts to expire in accordance with their terms (subject to the provisions of Section 1(e) hereof). If at any time on or after December 16, 2019 the Mill Owners are exercising the Mill Owner Step-In Rights at the time all Original Debt outstanding has been repaid, the Mill Owners may, at the option of the Mill Owners exercised in their sole and absolute discretion, elect to acquire all of the Borrower's right, title and interest in and to the Energy Complex by written notice delivered to the Borrower and the Lender, provided that in the event any of the Mill Owners exercises the foregoing option, the Borrower and the Collateral Agent shall execute and deliver all agreements, instruments and other documents, and shall take or cause to be taken such other actions as required under applicable law, as shall be necessary to assign and transfer all of the Borrower's right, title and interest in and to the Energy Complex to the Consenting Party; and provided, further, that such option shall expire, if not theretofore exercised, immediately upon the cessation of such Mill Owner Step- In Rights. "Original Debt" shall mean all Indebtedness (as defined in Section 1(l) hereof) the aggregate scheduled annual debt service for which in any year does not exceed that set forth on Schedule I hereto. Without limiting the foregoing, "Original Debt" shall include Indebtedness outstanding from time to time under the Working Capital Facility complying with clause (b) of Section 1(l) -3- hereof, provided that the limitations contained in the preceding sentence regarding scheduled annual debt service on Original Debt not exceeding the amount set forth on Schedule I hereto shall be determined without regard to principal payments under the Working Capital Facility. For purposes hereof, "debt service" means payments of principal, interest and other payments, costs, fees and expenses under any Indebtedness. Nothing in this Section 1(b) shall be deemed to limit or restrict any of the other rights and remedies available to the Collateral Agent under the Financing Documents (subject to the other terms and provisions hereof) and no provision of any of the Financing Documents shall be deemed to limit or restrict any of the other rights and remedies of the Consenting Party hereunder (subject to the other terms and provisions hereof). Notwithstanding any provision to the contrary set forth herein, the failure to exercise any Mill Owner Step-In Rights shall not act as a waiver or release of such Mill Owner Step-In Rights and the termination of the exercise of any Mill Owner Step-In Rights shall not act as a waiver or release of any other Mill Owner Step-In Rights that may arise after such termination; provided that no provision in this Consent shall be deemed to permit the Mill Owners, upon termination of Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event, to elect to exercise Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event that was in existence and of which the Mill Owners were aware at the time of such termination, or otherwise to increase the availability or scope of Mill Owner Step-In Rights beyond that specified in the Master Operating Agreement and the other Contracts. (c) Cure Rights and Payments. Subject to Section 1(b) hereof, the Collateral Agent shall be entitled to exercise all rights and to cure any defaults of the Borrower under and strictly in accordance with the terms of the Contracts (or as otherwise expressly provided in this Consent), and the Consenting Party agrees to permit and accept such exercise and cure by the Collateral Agent in accordance with their terms except as expressly provided herein. The Consenting Party agrees to render all payments due by it to the Borrower under the Contracts directly to the Collateral Agent, c/o Bankers Trust Company, for deposit into the Borrower's Account No. 15351 maintained with Bankers Trust Company, or to such other person and/or at such other address as the Collateral Agent may from time to time specify in writing to the Consenting Party. Upon receipt by the Consenting Party of notice from the Collateral Agent that a Trigger Event (as defined in the Intercreditor Agreement as in effect on the date hereof) has occurred, the Consenting Party agrees, subject to Section 1(b) hereof, to render all performance due by it under the Contracts and this Consent to the Collateral Agent for the benefit of the Secured Parties. The Borrower hereby acknowledges and agrees that payments made by the Consenting Party to the Collateral Agent in accordance with the Collateral Agent's directions pursuant to this Section -4- 1(c) and performance to the Collateral Agent shall satisfy the Consenting Party's obligations to make payments or to perform such obligations (as the case may be) to the Borrower in accordance with the Contracts, and shall relieve the Consenting Party of all liability with respect to such payments or performance. During the term of this Consent, the Borrower hereby waives any right it may have to require that payments be made or performance be rendered in any manner other than the manner designated by the Collateral Agent pursuant to this Section 1(c). (d) Foreclosure. (i) The Collateral Agent shall not commence foreclosure proceedings upon the Energy Complex or the Contracts without first providing the Consenting Party with fifteen (15) days advance written notice thereof. Contemporaneously with or immediately following such foreclosure upon the Contracts, the Collateral Agent shall notify the Consenting Party that the Collateral Agent or a purchaser (either such person, in such circumstance, constituting a "New Owner") has succeeded to the Borrower's interest under the Contracts pursuant to documentation satisfactory to the Consenting Party and the New Owner. At the time of foreclosure, the Collateral Agent shall not make an assignment of the Contracts to a third party unless (i) such third party assumes liability for all of the Borrower's and the Collateral Agent's (as the case may be) obligations under the Contracts (including the obligation to continue operation of the Energy Complex in accordance with the terms of the Contracts) (provided that the New Owner need not assume obligations under any Contract with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing) pursuant to documentation satisfactory to the Consenting Party in form and substance and (ii) such third party is a Qualified Purchaser and has substantial expertise (or is controlled or managed by, or has retained as an operator of the Energy Complex, a person with substantial expertise) in operating and managing facilities similar to the Energy Complex and there is a reasonable basis to conclude that the operations at the Energy Complex will be conducted in accordance with Prudent Plant Operating Standards following such assignment. (ii) If the Collateral Agent determines that it wishes to foreclose upon (or accept title in lieu of foreclosure to) the Energy Complex, the Lease, the Supplementary Lease and the Easement Deeds but not to foreclose upon (or accept title in lieu of foreclosure to) all of the other Contracts (other than Contracts as to which a Mill Owner Event of Default has occurred and is continuing), the Collateral Agent shall provide written notice to the Mill Owners of such determination. The Mill Owners may elect by written notice to the Collateral Agent within thirty (30) days of receipt of the foregoing notice (or on the date that the Collateral Agent obtains title to the Energy Complex, if later) to take possession of and operate the Energy Complex: (A) for a period of up to eighteen months, commencing on the date of receipt by the Collateral Agent of -5- the Mill Owners' written notice of election (the "Limited Standstill Period"), provided that, and for so long as, (1) during the Limited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights (or, if the Energy Complex is not operable, the Mill Owners shall use their good faith efforts to restore the Energy Complex to operability) and no Liquidated Damages shall be payable and (2) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties; or (B) for an unlimited period, commencing on the date of receipt by the Collateral Agent of the Mill Owners' written notice of election (the "Unlimited Standstill Period"), provided that, and for so long as, (1) any of (a) the second Demand Anniversary Date has not occurred, (b) the annualized Demand Charge for the then current Demand Period is set at a level equal to or greater than 77% of the Demand Charge during the First Contract Year (the "Minimum Demand Charge") or (c) if the provisions of clause (b) are not satisfied, the Mill Owners commit to pay the Collateral Agent during the then current Demand Period all amounts payable under the Contracts and agree that the Demand Charge for the then current Demand Period shall be deemed to equal the Minimum Demand Charge, (2) during the Unlimited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect, and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights and shall comply with all obligations of the Mill Owners under the Contracts (including, without limitation, the obligation to pay Demand Charges, subject to Demand Charge Reductions), except that (i) all liabilities incurred in connection with the operation of the Energy Complex during the Unlimited Standstill Period (excluding debt service on the Original Debt outstanding, but including, without limitation, rent, real estate taxes and similar impositions that are otherwise payable by the lessee under the Lease and the Supplementary Lease, operation and maintenance expenses and capital expenditures, and all amounts payable to the Mill Owners in reimbursement thereof) shall be expressly subordinated and junior in right of payment to the payment of scheduled debt service on Original Debt outstanding; (ii) except as provided in clause (iv) of Section 1(d)(ii)(B)(2) hereof, no rights of set-off, counterclaim, deduction or defense of any kind shall be exercised or asserted against the Demand Charges and other amounts payable to the Collateral Agent under the Contracts or payment thereof; (iii) no Liquidated Damages shall be payable; and (iv) all amounts payable by the Mill Owners under the Contracts in excess of the sum of (w) scheduled debt service on the Original Debt outstanding, (x) operation and maintenance expenses, (y) capital expenditures and (z) amounts -6- otherwise payable to the Mill Owners pursuant to rights of set-off, counterclaim, deduction or defense, shall be applied to redemption of the Original Debt outstanding, which shall be redeemed in accordance with the terms thereof to the extent of such available funds, and (3) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties. (iii) If at any time none of the conditions specified in Section 1(d)(ii)(B)(1) hereof is satisfied, the Collateral Agent shall have the right to convert the Unlimited Standstill Period into a Limited Standstill Period, in which case the Mill Owners' rights to enter into an Unlimited Standstill Period shall terminate. If at any time any of the other conditions specified in Section 1(d)(ii)(A) or 1(d)(ii)(B) hereof is not satisfied, the Collateral Agent may elect to terminate the Limited Standstill Period or the Unlimited Standstill Period (as the case may be). (iv) Upon termination (or, in the case of the Limited Standstill Period, expiration) of the Limited Standstill Period or the Unlimited Standstill Period (as the case may be), the New Owner may elect either to assume all of the Contracts (other than obligations under any Contracts with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing, which the New Owner may either assume or not assume, at its option) or to terminate all of the Contracts (other than, if the New Owner so elects, the Lease, the Supplemental Lease and the Easement Deeds) and to dispose of the Energy Complex in any manner that it chooses. If the New Owner elects to assume the Contracts, the term of each Contract shall be deemed to be extended by the term of the Limited Standstill Period if, at the end of such Contract's term, any Original Debt is outstanding. (v) The Borrower and the Collateral Agent acknowledge and agree that (A) during the Limited Standstill Period or Unlimited Standstill Period, the Mill Owners shall have the right and option to purchase the Energy Complex for a purchase price equal to all outstanding principal and interest due and owing to the Secured Parties in respect of the Original Debt outstanding and (B) at the end of the initial term of the Lease, the Mill Owners shall have the right and option to purchase the Energy Complex in accordance with Article 15 of the Lease and, in each case, the Mill Owners shall acquire the Energy Complex free and clear of all liens and encumbrances that at any time secured the repayment of the Original Debt outstanding; provided that all Original Debt outstanding and all other amounts payable to the Senior Secured Parties or the New Owner (as the case may be) under the Contracts shall have been paid in full. (vi) Notwithstanding any provision in the Contracts or the arrangements establishing the Mill Owner Maintenance Reserve Account to the contrary, the Borrower agrees that in the event the -7- Mill Owners are operating the Energy Complex during the Limited Standstill Period or the Unlimited Standstill Period, the Mill Owner Maintenance Reserve Account shall be available to the Mill Owners (but not to the Collateral Agent) for the payment of operation, maintenance or capital expenses. (e) Termination/Transfer. (i) The Consenting Party will not, without the prior written consent of the Collateral Agent, (A) cancel or terminate any of the Contracts except as provided in the Contracts and in accordance with Section 1(e)(ii) hereof, or consent to or accept any cancellation or termination thereof by the Borrower, (B) sell, assign or otherwise dispose of (by operation of law or otherwise) any part of its interest in the Contracts, except as set forth in Article 15 of the Master Operating Agreement, or (C) amend or modify the Contracts in any respect that may reasonably be expected to have a material effect on the Borrower's rights or obligations. The Consenting Party agrees to deliver duplicates or copies of all (i) notices of default delivered under or pursuant to any of the Contracts to the Collateral Agent promptly upon delivery thereof to the Borrower (and the Consenting Party agrees that no such notice of default shall be effective until received by Collateral Agent), and (ii) amendments to any of the Contracts that in any respect may reasonably be expected to have a material effect on the Borrower's rights or obligations (and the Consenting Party agrees that no such amendment shall be effective until received by the Collateral Agent), provided, that any failure by the Consenting Party to deliver to the Collateral Agent any such duplicates or copies shall not subject the Consenting Party to any liability whatsoever. (ii) The Consenting Party will not terminate the Contracts or any of its obligations thereunder on account of any default or breach of the Borrower thereunder without (A) in the case of a default by the Borrower that is the failure by the Borrower to pay amounts to the Consenting Party which are due and payable under the Contracts, first providing to the Collateral Agent written notice of such default and ninety (90) days from the date such notice is delivered to the Collateral Agent to pay such amounts and (B) in the case of a default that cannot be cured by the payment of money to the Consenting Party, first providing to the Collateral Agent written notice of such default and a reasonable opportunity (in any event at least ninety (90) days but no more than one hundred eighty (180) days) to cure such breach or default so long as the Collateral Agent or its designee shall have commenced to cure the breach or default within such ninety-day period and thereafter diligently pursues such cure to completion and continues to perform any monetary obligations of the Borrower to the Consenting Party under the Contracts and all other obligations of the Borrower under the Contracts are performed by the Borrower (or the Collateral Agent on behalf of the Borrower) or with respect to any defaults that are not susceptible of being cured by the Collateral Agent, to rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. If possession of the Energy Complex (by way of foreclosure -8- proceedings or otherwise) is necessary to cure such breach or default, the Collateral Agent or its successor, transferee or assignee will be allowed a reasonable period to complete such proceedings or otherwise accomplish such possession, provided, that in no event shall such additional period exceed thirty (30) days. The Collateral Agent acknowledges and agrees that during the foregoing time periods the Consenting Party shall be entitled to exercise any set-off right which the Consenting Party may have against the Borrower under the Contracts. If the Collateral Agent or its successor, transferee or assignee is prohibited by any court order or bankruptcy or insolvency proceedings from curing the default or from commencing or prosecuting foreclosure proceedings, the foregoing time periods shall be extended by the period of such prohibition. Subject to Section 1(d) hereof, the Consenting Party consents to the transfer of the Borrower's interest under the Contracts to the Collateral Agent for the benefit of the Secured Parties or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by the Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale or conveyance, the Consenting Party shall recognize the Collateral Agent or other purchaser or grantee as the applicable party under the transferred Contracts (provided that the Collateral Agent or such purchaser or grantee assumes the obligations of the Borrower under the transferred Contracts as provided in Section 1(d) hereof). (f) Bankruptcy. In the event that any of the Contracts is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, or if any of the Contracts is terminated for any reason other than a default that could have been but was not cured by the Collateral Agent as provided in Section 1(e)(ii) hereof, and if, within sixty (60) days after such rejection or termination, the Collateral Agent or its successor, transferee or assignee shall so request, the Consenting Party will execute and deliver to the Collateral Agent or its successor, transferee or assignee for the benefit of the Secured Parties a new Contract, which Contract shall be on substantially the same terms and conditions as the original Contract for the remaining term of the Contract before giving effect to such rejection or termination (but in no event on less favorable terms and conditions as the original Contract). (g) Liability. (i) None of the Collateral Agent, the Secured Parties or the holders of Bonds shall be liable for any of the obligations or duties of the Borrower (including, without limitation, the obligation to deliver title to the Energy Complex free of any lien upon the exercise of a Repurchase Option (as defined in the Master Operating Agreement) by the Consenting Party), unless and until the Collateral Agent or its successor expressly assumes the Contracts or any or all of such obligations or duties. -9- (ii) In the event the Collateral Agent or its successor elects to perform the Borrower's obligations under the Contracts or to enter into any new Contract as provided in Section 1(d), 1(e)(ii) or 1(f) hereof, the Collateral Agent, the Secured Parties and the holders of Bonds, and their successors, shall have no liability to the Consenting Party for the performance of such obligations, and the sole recourse of the Consenting Party in seeking the enforcement of such obligations shall be to such parties' interest in the Energy Complex. (iii) It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it. (h) Cure Duties; Assignment. In the event the Collateral Agent or its successor, transferee or assignee succeeds to the Borrower's interest under the Contracts, the Collateral Agent or its successor, transferee or assignee shall cure any defaults of the Borrower existing under the Contracts that are reasonably capable of being cured and, with respect to any defaults that are not susceptible of being cured by the Collateral Agent, shall rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. The Collateral Agent shall have the right to assign its interest in this Consent to any person or entity to whom the Original Debt is transferred, provided such transferee assumes the obligations of the Borrower (or the Collateral Agent, as the case may be) under this Consent. Upon such assignment, the Collateral Agent and the Secured Parties (including their agents and employees) shall be released from any further liability under this Consent and the Contracts to the extent of the interest assigned. (i) Insurance Proceeds. The parties hereto acknowledge and agree that the disposition of insurance proceeds with respect to the Energy Complex is subject to the terms and conditions of Section 10.7 of the Master Operating Agreement and this Section 1(i), and the Collateral Agent acknowledges that the independent engineer under the Financing Documents shall be required, if appropriate, to deliver to the Collateral Agent the certificate contemplated by Section 3.10(c) of the Intercreditor Agreement (a copy of which is attached as Exhibit A thereto), such certificate not to be unreasonably withheld. Notwithstanding anything herein or in the Master Operating Agreement to the contrary, the parties hereto acknowledge that until all Original Debt has been paid in full, Casualty Proceeds and Eminent Domain Proceeds (each as defined in the Intercreditor Agreement) will be disposed of pursuant to the terms of Sections 3.10 and 6.2 of the Intercreditor Agreement, which provisions shall not be amended, supplemented or otherwise modified, directly or indirectly, without the prior written consent of the Consenting Party. -10- (j) Borrower Not to Cause Breach. The Borrower hereby irrevocably waives any rights that it may have, including those arising under any of the Contracts, to seek or compel the Consenting Party to act in a manner that is inconsistent with this Consent while this Consent is in effect. (k) Acknowledgment of Lien. The Consenting Party hereby acknowledges that the Energy Complex is subject to the lien of the Financing Documents. The Collateral Agent, the Secured Parties and the holders of the Bonds have no obligation to release such lien until all obligations secured thereby have been paid in full. (l) Approval Rights; Additional Debt. The Borrower and the Collateral Agent agree that they will not amend, modify, supplement or provide waivers under the Financing Documents that would result in (A) the scheduled annual debt service (as "debt service" is defined in Section 1(b) hereof), except for principal payments under the Working Capital Facility, in any year being greater than the scheduled annual debt service for such year as set forth on Schedule I hereto, (B) the Working Capital Facility having terms and conditions (including the maximum aggregate principal amount that can be outstanding thereunder) inconsistent with those described in clause (a)(ii) of the definition of "Permitted Indebtedness" contained in the Indenture (as such definition is in effect as of the date hereof, provided that amendments to such definition shall be permitted to reduce any payments of principal, interest or other amounts that may be scheduled to become due in any month) or (C) any modifications, direct or indirect, to the provisions of Sections 3.10 and 3.11 of the Intercreditor Agreement. This provision is not intended to apply to consensual restructurings of Original Debt due to non-payment of Original Debt that results in an accrual of past due scheduled annual debt service, and is not intended to require the Collateral Agent or the Secured Parties to exercise remedies. The Borrower agrees not to (and the Collateral Agent acknowledges that the Borrower is not permitted to) (i) make, issue or cause to be suffered secured Indebtedness that would result in the scheduled annual debt service in any year, except for principal payments under the Working Capital Facility, being greater than the scheduled annual debt service for such years as set forth on Schedule I hereto, and (ii) issue unsecured Indebtedness that, when taken together with all other Indebtedness, would exceed Original Debt in an amount greater than $5,000,000 (in the aggregate) escalated at the rate of change in the PPI. As a condition to the Borrower's issuance of any additional secured Indebtedness, the Borrower shall cause the holder of any additional secured Indebtedness to execute a counterpart of, or acknowledge to be bound by, this Consent. "Indebtedness" shall mean at any date, without duplication, (a)(i) all obligations of the Borrower for borrowed money, (ii) all obligations of the Borrower evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of the Borrower to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business -11- and that mature not more than 180 days after the date originally incurred, (iv) the aggregate of all guarantee or purchase obligations of the Borrower with respect to capital stock of any person, including any capital stock of a consolidated subsidiary that is required to be shown as a liability on a balance sheet of the Borrower, (v) the aggregate of all redeemable shares of common or preferred stock of the Borrower, (vi) all obligations of the Borrower, whether direct or contingent, matured or unmatured, to reimburse banks in respect of drawings made under letters of credit that are issued to secure or provide for the payment of Indebtedness of the Borrower, (vii) foreign currency exchanges, (viii) currency and interest rate swaps and similar derivatives, and (ix) commodities hedges and (b) in each case to the extent, and only to the extent, such obligations (or the Borrower's liability with respect thereto) are required to be shown as a liability on a consolidated balance sheet of the Borrower prepared as of such date, (i) all obligations of the Borrower as lessee under capital leases, (ii) all Indebtedness of others secured by a lien on any asset of the Borrower, whether or not such Indebtedness is assumed by the Borrower, and (iii) all Indebtedness of others guaranteed by the Borrower. "Indebtedness" shall not include (i) purchase money notes secured by equipment (but otherwise non-recourse to the Borrower's other properties) that is not material to the operations of the Energy Complex, (ii) financial instruments that could not reasonably be expected to have a material adverse effect on the Borrower and (iii) the Borrower's obligations (if any) in respect of the 1994 Bonds, the 1984 Taxable Lease Agreement, the 1973 Tax- Exempt Lease Agreement and the 1976 Tax-Exempt Lease Agreement, except for any refinancing by the Borrower of any such obligation. (m) The Collateral Agent hereby acknowledges that it has no lien on the Mill Owner Maintenance Reserve Account established pursuant to the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among the Borrower, Southern, the Consenting Party (in its capacity as the owner and operator of the Tissue Mill and the Pulp Mill) and S.D. Warren (in its capacity as the owner and operator of the Paper Mill) or any amounts on deposit therein. (n) Mill Owner Payment Default Cure Right. The Mill Owners shall be entitled to cure any payment defaults of the Borrower under and strictly in accordance with the terms of the Borrower's cure rights under the Financing Documents. The Collateral Agent agrees to deliver to the Mill Owners duplicates or copies of all notices of payment default delivered under or pursuant to any of the Financing Documents to the Borrower, and the Collateral Agent agrees that no notice of payment default shall be effective until received by the Mill Owners; provided, that any failure by the Collateral Agent to deliver to the Mill Owners any such duplicates or copies shall not subject the Collateral Agent to any liability whatsoever; and provided, further, that the Mill Owners shall be entitled to reimbursement for any amounts paid thereby to cure any payment default to the extent that such reimbursement is made from funds that otherwise are permitted to be -12- distributed to the equity holders of the Borrower under the Financing Documents. The Borrower agrees to provide each of the Mill Owners with one copy of the Financing Documents (including any amendments or modifications thereto), as well as copies of all notices of default from the Secured Parties, all material notices to bondholders (including notices from the Secured Parties to the bondholders) and copies of all financial statements provided to the Secured Parties. (o) The Borrower hereby acknowledges and agrees to the terms and conditions set forth in this Consent, and agrees that to the extent any of the terms and conditions set forth herein are inconsistent with the terms and conditions of the Project Documents, the terms and conditions of this Consent shall control. 2. The Consenting Party hereby represents and warrants that: (a) The Consenting Party is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. The execution, delivery and performance by the Consenting Party of the Contracts and this Consent have been duly authorized by all necessary corporate action, and do not and will not require any further consents or approvals which have not been obtained, or violate any provision of the corporate charter or by-laws of the Consenting Party or any law, regulation, order, judgment, injunction or similar matters or breach any agreement presently in effect with respect to or binding on the Consenting Party or its properties or result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, charge or encumbrance of any nature that could adversely affect the Consenting Party's ability to perform its obligations under the Contracts or this Consent; (b) This Consent and the Contracts have been duly executed and delivered and are legal, valid and binding obligations of the Consenting Party enforceable against the Consenting Party in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights, and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (c) As of the date hereof, the Contracts are in full force and effect and, except as described in Recital D above, have not been amended, supplemented or otherwise modified, other than such amendments, supplements and modifications as may have been agreed to by the Site Operating Committee that do not materially affect the material obligations of the Consenting Party under the Contracts; and -13- (d) None of senior management of the Consenting Party, the Pulp Mill SOC Representative and the Tissue Mill SOC Representative has actual knowledge of any facts that would allow the Consenting Party to terminate this Consent or the Contracts, and the Consenting Party has no present intention to deliver a notice of default or a notice of termination thereunder; the consummation of any transaction contemplated by this Consent to take place on the date hereof would not allow the Consenting Party to terminate this Consent or the Contracts. (e) The Consenting Party has no actual notice of any assignment of any Contract (other than the assignment referred to in Recital E above and the assignment contemplated by this Consent). (f) The Consenting Party has not assigned, transferred or hypothecated the Contracts or any interest therein. 3. All notices required or permitted hereunder shall be in writing and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by telefacsimile and (c) if otherwise delivered, upon the earlier of receipt or two (2) business days after being sent by registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to the Consenting Party: Attention: Thomas C. Deas, Jr. Scott Paper Company Scott Plaza Philadelphia, Pennsylvania 19113-1585 Telecopy No.: (610) 522-5665 Telephone No.: (610) 522-5560 If to the Collateral Agent: Attention: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Telecopy No.: 212-250-6961 Telephone No.: 212-250-6826 If to the Borrower: Attention: Mobile Energy Services Company, L.L.C. 900 Ashwood Parkway, Suite 300 Atlanta, Georgia 30338 Telecopy No.: 770-673-7781 -14- Telephone No.: 770-392-7644 with a copy to: Mobile Energy Services Company, L.L.C. P.O. Box 2747 200 Bay Bridge Road Mobile, Alabama 36652 Telecopy No.: 334-452-6337 Telephone No.: 334-330-3600 4. This Consent shall be binding upon and benefit the successors and assigns of the Consenting Party, the Borrower, the Collateral Agent, the Secured Parties and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents and that, if required by Section 1(l) hereof, countersigns this Consent). The Consenting Party agrees to confirm such continuing obligation in writing upon the reasonable request of the Borrower, the Collateral Agent, the Secured Parties or any of their respective successors, transferees or assigns. No termination, amendment, variation or waiver of any provisions of this Consent shall be effective unless in writing and signed by the Consenting Party, the Collateral Agent and, in the case of a termination, amendment, variation, or waiver sought prior to a Trigger Event, the Borrower. This Consent shall be governed by the laws of the State of New York, without reference to principles of conflict of laws (other than Section 5-1401 of the New York General Obligations Law). 5. If any term or provision hereof is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the other terms and provisions hereof, which shall remain binding and enforceable, and to the extent possible, all of such other provisions shall remain in full force and effect. 6. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 7. Subject to the following Section 8, this Consent shall be deemed to be terminated and of no further force and effect when the Consenting Party receives written notice from the Borrower and the Collateral Agent stating that no Original Debt is outstanding and all amounts owing to the Secured Parties in respect of the Original Debt (including, without limitation, principal, interest, fees and reimbursement obligations, whether upon maturity, acceleration or otherwise) have been paid in full; provided, however, that the obligations of the Borrower to provide the Consenting Party with copies of the Borrower's financial statements as required under Section 1(n) shall survive the termination of this Consent. -15- 8. If at any time any payment in respect of Original Debt is rescinded or must otherwise be restored or returned by the holder of such Original Debt in connection with any bankruptcy, insolvency or other similar or related proceeding, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of the Borrower's property, the rights and obligations of the holder of such Original Debt under this Consent shall continue to be effective, or be reinstated as of the time such payment in respect of Original Debt is so rescinded or must otherwise be restored, as the case may be, all as though such payment had not been made. -16- IN WITNESS WHEREOF, the parties hereto by their officers thereunto duly authorized, have duly executed this Consent as of the date set forth below. Dated as of: August 1, 1995 SCOTT PAPER COMPANY, a Pennsylvania corporation, in its capacity as Pulp Mill Owner By: /s/ Name: Thomas C. Deas, Jr. Title: Assistant Treasurer BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent By: /s/ Name: James H. Stallkamp Title:President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as Borrower By: /s/ Name: Christopher J. Kysar Title: Vice President ACKNOWLEDGED: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President SCHEDULE I Total Debt Service (in thousands) 1995 40,500 1996 40,500 1997 40,000 1998 40,000 1999 39,500 2000 39,000 2001 38,500 2002 38,000 2003 37,500 2004 37,000 2005 36,500 2006 36,000 2007 35,500 2008 35,000 2009 34,500 2010 34,000 2011 33,500 2012 33,000 2013 32,500 2014 32,000 2015 31,500 2016 31,500 2017 35,000 2018 35,000 2019 through January 3, 2020 35,000 thereafter 0 EX-10.46 18 Exhibit 10.46 CONSENT AND AGREEMENT THIS CONSENT AND AGREEMENT (this "Consent"), dated as of August 1, 1995, is executed by SCOTT PAPER COMPANY, a Pennsylvania corporation (the "Consenting Party"), in its capacity as Tissue Mill Owner, MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Borrower")(which is an indirect wholly-owned subsidiary of The Southern Company, a Delaware corporation ("Southern")), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Collateral Agent"). A. The Borrower, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (the "Taxable Indenture"), pursuant to which the Borrower (i) is issuing its First Mortgage Bonds (the "Taxable Bonds"), the proceeds of which will be used to (among other things) repay to Southern a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Master Operating Agreement (as hereinafter defined)) and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. The Borrower, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995A (the "Tax-Exempt Bonds" and, together with the Taxable Bonds, the "Bonds") to be issued for the benefit of the Borrower pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture" and, together with the Taxable Indenture, the "Indentures") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax- Exempt Bonds will be used to refinance the 1984 Tax-Exempt Bonds and to pay for certain other costs. C. The Borrower and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of the Borrower. D. The Consenting Party and Mobile Energy have entered into (i) that certain Amended and Restated Master Operating Agreement dated as of July 13, 1995 and effective as of December 12, 1994 (the "Master Operating Agreement"); (ii) that certain Tissue Mill Energy Services Agreement dated as of December 12, 1994 (as amended by the First Amendment thereto dated as of July 13, 1995); (iii) that certain Tissue Mill Environmental Indemnity Agreement (as amended by the First Amendment thereto dated as of July 13, 1995); (iv) that certain Water Procurement and Effluent Service Agreement dated as of December 12, 1994 (as amended by the First Amendment thereto dated as of July 13, 1995); and (v) those certain Easement Deeds to which the Consenting Party is a party dated as of December 12, 1994 (collectively, as the same may be amended, waived or otherwise modified, the "Contracts"). E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and the Borrower dated as of July 14, 1995, Mobile Energy has assigned to the Borrower, and the Borrower has assumed, all of Mobile Energy's rights and obligations under the Contracts. F. The Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Collateral Agent, the Borrower and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement") and the other Financing Documents (as defined in the Master Operating Agreement). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Consenting Party acknowledges the assignments referred to in Recitals E and F above and hereby irrevocably consents to such assignments, and each of the parties hereto agrees as follows: (a) Definitions; Rules of Interpretation. Unless otherwise defined herein, all terms used in this Consent shall have the meanings given in Exhibit A to the Master Operating Agreement. Except as otherwise expressly provided herein, the rules of interpretation set forth in said Exhibit A shall apply to this Consent. The parties hereto acknowledge that the Collateral Agent, acting on behalf of the Secured Parties, is a "Lender" within the meaning of the Master Operating Agreement, and that, without the consent of the parties hereto, no other Person (other than a secured Lender who executes a counterpart of, or acknowledges to be bound by, this Consent) shall be deemed a Lender under the Contracts. Any such Lenders shall coordinate so as not to give any conflicting instructions or demands to the Consenting Party. -2- (b) Step-In Rights. The Mill Owners shall have the right to exercise the Mill Owner Step-In Rights in accordance with Section 11.4(a)(ii) of the Master Operating Agreement. The Collateral Agent acknowledges that (A) the Mill Owner Step-In Rights give the Mill Owners the right, under the circumstances set forth in Section 11.4(a)(ii) of the Master Operating Agreement, to, among other things, take possession of or obtain entry to the Energy Complex and to assume and exercise operational control of the Energy Complex and (B) in so assuming or exercising operational control of the Energy Complex, the Mill Owners may exclude the Collateral Agent from assuming or exercising operational control of the Energy Complex until such time as the Collateral Agent shall have foreclosed upon the Energy Complex, subject to Section 1(d) hereof. The parties hereto agree that if the Mill Owners continue to exercise the Mill Owner Step-In Rights at the end of the initial term of the Contracts, the Borrower may not exercise the renewal term for the Contracts; provided that, if the Mill Owners desire to continue their Mill Owner Step-in Rights, and if there is any Original Debt (as hereinafter defined) outstanding under the Financing Documents at the end of such initial term, a Master Operating Agreement Renewal Term shall be deemed to be exercised, which such renewal term shall terminate on the earlier of the expiration of such Master Operating Agreement Renewal Term and the date no Original Debt remains outstanding without prejudice to the Mill Owners' rights to terminate the Mill Owner Step-In Rights at any time pursuant to the terms of the Contracts and to terminate or allow the Contracts to expire in accordance with their terms (subject to the provisions of Section 1(e) hereof). If at any time on or after December 16, 2019 the Mill Owners are exercising the Mill Owner Step-In Rights at the time all Original Debt outstanding has been repaid, the Mill Owners may, at the option of the Mill Owners exercised in their sole and absolute discretion, elect to acquire all of the Borrower's right, title and interest in and to the Energy Complex by written notice delivered to the Borrower and the Lender, provided that in the event any of the Mill Owners exercises the foregoing option, the Borrower and the Collateral Agent shall execute and deliver all agreements, instruments and other documents, and shall take or cause to be taken such other actions as required under applicable law, as shall be necessary to assign and transfer all of the Borrower's right, title and interest in and to the Energy Complex to the Mill Owners that elect to exercise said option; and provided, further, that such option shall expire, if not theretofore exercised, immediately upon the cessation of such Mill Owner Step-In Rights. "Original Debt" shall mean all Indebtedness (as defined in Section 1(l) hereof) the aggregate scheduled annual debt service for which in any year does not exceed that set forth on Schedule I hereto. Without limiting the foregoing, "Original Debt" shall include Indebtedness outstanding from time to time under the Working Capital Facility complying with clause (b) of Section 1(l) hereof, provided that the limitations contained in the preceding sentence regarding scheduled annual debt service on Original Debt not exceeding the amount set -3- forth on Schedule I hereto shall be determined without regard to principal payments under the Working Capital Facility. For purposes hereof, "debt service" means payments of principal, interest and other payments, costs, fees and expenses under any Indebtedness. Nothing in this Section 1(b) shall be deemed to limit or restrict any of the other rights and remedies available to the Collateral Agent under the Financing Documents (subject to the other terms and provisions hereof) and no provision of any of the Financing Documents shall be deemed to limit or restrict any of the other rights and remedies of the Consenting Party hereunder (subject to the other terms and provisions hereof). Notwithstanding any provision to the contrary set forth herein, the failure to exercise any Mill Owner Step-In Rights shall not act as a waiver or release of such Mill Owner Step-In Rights and the termination of the exercise of any Mill Owner Step-In Rights shall not act as a waiver or release of any other Mill Owner Step-In Rights that may arise after such termination; provided that no provision in this Consent shall be deemed to permit the Mill Owners, upon termination of Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event, to elect to exercise Mill Owner Step-In Rights with respect to any Energy Complex Triggering Event that was in existence and of which the Mill Owners were aware at the time of such termination, or otherwise to increase the availability or scope of Mill Owner Step-In Rights beyond that specified in the Master Operating Agreement and the other Contracts. (c) Cure Rights and Payments. Subject to Section 1(b) hereof, the Collateral Agent shall be entitled to exercise all rights and to cure any defaults of the Borrower under and strictly in accordance with the terms of the Contracts (or as otherwise expressly provided in this Consent), and the Consenting Party agrees to permit and accept such exercise and cure by the Collateral Agent in accordance with their terms except as expressly provided herein. The Consenting Party agrees to render all payments due by it to the Borrower under the Contracts directly to the Collateral Agent, c/o Bankers Trust Company, for deposit into the Borrower's Account No. 15351 maintained with Bankers Trust Company, or to such other person and/or at such other address as the Collateral Agent may from time to time specify in writing to the Consenting Party. Upon receipt by the Consenting Party of notice from the Collateral Agent that a Trigger Event (as defined in the Intercreditor Agreement as in effect on the date hereof) has occurred, the Consenting Party agrees, subject to Section 1(b) hereof, to render all performance due by it under the Contracts and this Consent to the Collateral Agent for the benefit of the Secured Parties. The Borrower hereby acknowledges and agrees that payments made by the Consenting Party to the Collateral Agent in accordance with the Collateral Agent's directions pursuant to this Section 1(c) and performance to the Collateral Agent shall satisfy the Consenting Party's obligations to make payments or to perform such -4- obligations (as the case may be) to the Borrower in accordance with the Contracts, and shall relieve the Consenting Party of all liability with respect to such payments or performance. During the term of this Consent, the Borrower hereby waives any right it may have to require that payments be made or performance be rendered in any manner other than the manner designated by the Collateral Agent pursuant to this Section 1(c). (d) Foreclosure. (i) The Collateral Agent shall not commence foreclosure proceedings upon the Energy Complex or the Contracts without first providing the Consenting Party with fifteen (15) days advance written notice thereof. Contemporaneously with or immediately following such foreclosure upon the Contracts, the Collateral Agent shall notify the Consenting Party that the Collateral Agent or a purchaser (either such person, in such circumstance, constituting a "New Owner") has succeeded to the Borrower's interest under the Contracts pursuant to documentation satisfactory to the Consenting Party and the New Owner. At the time of foreclosure, the Collateral Agent shall not make an assignment of the Contracts to a third party unless (i) such third party assumes liability for all of the Borrower's and the Collateral Agent's (as the case may be) obligations under the Contracts (including the obligation to continue operation of the Energy Complex in accordance with the terms of the Contracts) (provided that the New Owner need not assume obligations under any Contract with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing) pursuant to documentation satisfactory to the Consenting Party in form and substance and (ii) such third party is a Qualified Purchaser and has substantial expertise (or is controlled or managed by, or has retained as an operator of the Energy Complex, a person with substantial expertise) in operating and managing facilities similar to the Energy Complex and there is a reasonable basis to conclude that the operations at the Energy Complex will be conducted in accordance with Prudent Plant Operating Standards following such assignment. (ii) If the Collateral Agent determines that it wishes to foreclose upon (or accept title in lieu of foreclosure to) the Energy Complex, the Lease, the Supplementary Lease and the Easement Deeds but not to foreclose upon (or accept title in lieu of foreclosure to) all of the other Contracts (other than Contracts as to which a Mill Owner Event of Default has occurred and is continuing), the Collateral Agent shall provide written notice to the Mill Owners of such determination. The Mill Owners may elect by written notice to the Collateral Agent within thirty (30) days of receipt of the foregoing notice (or on the date that the Collateral Agent obtains title to the Energy Complex, if later) to take possession of and operate the Energy Complex: (A) for a period of up to eighteen months, commencing on the date of receipt by the Collateral Agent of the Mill Owners' written notice of election (the "Limited Standstill Period"), provided that, and for so long as, (1) -5- during the Limited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights (or, if the Energy Complex is not operable, the Mill Owners shall use their good faith efforts to restore the Energy Complex to operability) and no Liquidated Damages shall be payable and (2) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties; or (B) for an unlimited period, commencing on the date of receipt by the Collateral Agent of the Mill Owners' written notice of election (the "Unlimited Standstill Period"), provided that, and for so long as, (1) any of (a) the second Demand Anniversary Date has not occurred, (b) the annualized Demand Charge for the then current Demand Period is set at a level equal to or greater than 77% of the Demand Charge during the First Contract Year (the "Minimum Demand Charge") or (c) if the provisions of clause (b) are not satisfied, the Mill Owners commit to pay the Collateral Agent during the then current Demand Period all amounts payable under the Contracts and agree that the Demand Charge for the then current Demand Period shall be deemed to equal the Minimum Demand Charge, (2) during the Unlimited Standstill Period, the Master Operating Agreement and the other Contracts shall remain in effect, and the Mill Owners shall operate the Energy Complex in compliance with the standards set forth in the Contracts applicable to the Mill Owner Step-In Rights and shall comply with all obligations of the Mill Owners under the Contracts (including, without limitation, the obligation to pay Demand Charges, subject to Demand Charge Reductions), except that (i) all liabilities incurred in connection with the operation of the Energy Complex during the Unlimited Standstill Period (excluding debt service on the Original Debt outstanding, but including, without limitation, rent, real estate taxes and similar impositions that are otherwise payable by the lessee under the Lease and the Supplementary Lease, operation and maintenance expenses and capital expenditures, and all amounts payable to the Mill Owners in reimbursement thereof) shall be expressly subordinated and junior in right of payment to the payment of scheduled debt service on Original Debt outstanding; (ii) except as provided in clause (iv) of Section 1(d)(ii)(B)(2) hereof, no rights of set-off, counterclaim, deduction or defense of any kind shall be exercised or asserted against the Demand Charges and other amounts payable to the Collateral Agent under the Contracts or payment thereof; (iii) no Liquidated Damages shall be payable; and (iv) all amounts payable by the Mill Owners under the Contracts in excess of the sum of (w) scheduled debt service on the Original Debt outstanding, (x) operation and maintenance expenses, (y) capital expenditures and (z) amounts otherwise payable to the Mill Owners pursuant to rights of set-off, counterclaim, deduction or defense, shall be applied -6- to redemption of the Original Debt outstanding, which shall be redeemed in accordance with the terms thereof to the extent of such available funds, and (3) the Mill Owners and the Collateral Agent shall attempt in good faith to negotiate in the interests of all such parties. (iii) If at any time none of the conditions specified in Section 1(d)(ii)(B)(1) hereof is satisfied, the Collateral Agent shall have the right to convert the Unlimited Standstill Period into a Limited Standstill Period, in which case the Mill Owners' rights to enter into an Unlimited Standstill Period shall terminate. If at any time any of the other conditions specified in Section 1(d)(ii)(A) or 1(d)(ii)(B) hereof is not satisfied, the Collateral Agent may elect to terminate the Limited Standstill Period or the Unlimited Standstill Period (as the case may be). (iv) Upon termination (or, in the case of the Limited Standstill Period, expiration) of the Limited Standstill Period or the Unlimited Standstill Period (as the case may be), the New Owner may elect either to assume all of the Contracts (other than obligations under any Contracts with respect to any Mill Owner as to which a Mill Owner Event of Default has occurred and is continuing, which the New Owner may either assume or not assume, at its option) or to terminate all of the Contracts (other than, if the New Owner so elects, the Lease, the Supplemental Lease and the Easement Deeds) and to dispose of the Energy Complex in any manner that it chooses. If the New Owner elects to assume the Contracts, the term of each Contract shall be deemed to be extended by the term of the Limited Standstill Period if, at the end of such Contract's term, any Original Debt is outstanding. (v) The Borrower and the Collateral Agent acknowledge and agree that (A) during the Limited Standstill Period or Unlimited Standstill Period, the Mill Owners shall have the right and option to purchase the Energy Complex for a purchase price equal to all outstanding principal and interest due and owing to the Secured Parties in respect of the Original Debt outstanding and (B) at the end of the initial term of the Lease, the Mill Owners shall have the right and option to purchase the Energy Complex in accordance with Article 15 of the Lease and, in each case, the Mill Owners shall acquire the Energy Complex free and clear of all liens and encumbrances that at any time secured the repayment of the Original Debt outstanding; provided that all Original Debt outstanding and all other amounts payable to the Senior Secured Parties or the New Owner (as the case may be) under the Contracts shall have been paid in full. (vi) Notwithstanding any provision in the Contracts or the arrangements establishing the Mill Owner Maintenance Reserve Account to the contrary, the Borrower agrees that in the event the Mill Owners are operating the Energy Complex during the Limited Standstill Period or the Unlimited Standstill Period, the Mill -7- Owner Maintenance Reserve Account shall be available to the Mill Owners (but not to the Collateral Agent) for the payment of operation, maintenance or capital expenses. (e) Termination/Transfer. (i) The Consenting Party will not, without the prior written consent of the Collateral Agent, (A) cancel or terminate any of the Contracts except as provided in the Contracts and in accordance with Section 1(e)(ii) hereof, or consent to or accept any cancellation or termination thereof by the Borrower, (B) sell, assign or otherwise dispose of (by operation of law or otherwise) any part of its interest in the Contracts, except as set forth in Article 15 of the Master Operating Agreement, or (C) amend or modify the Contracts in any respect that may reasonably be expected to have a material effect on the Borrower's rights or obligations. The Consenting Party agrees to deliver duplicates or copies of all (i) notices of default delivered under or pursuant to any of the Contracts to the Collateral Agent promptly upon delivery thereof to the Borrower (and the Consenting Party agrees that no such notice of default shall be effective until received by Collateral Agent), and (ii) amendments to any of the Contracts that in any respect may reasonably be expected to have a material effect on the Borrower's rights or obligations (and the Consenting Party agrees that no such amendment shall be effective until received by the Collateral Agent); provided, that any failure by the Consenting Party to deliver to the Collateral Agent any such duplicates or copies shall not subject the Consenting Party to any liability whatsoever. (ii) The Consenting Party will not terminate the Contracts or any of its obligations thereunder on account of any default or breach of the Borrower thereunder without (A) in the case of a default by the Borrower that is the failure by the Borrower to pay amounts to the Consenting Party which are due and payable under the Contracts, first providing to the Collateral Agent written notice of such default and ninety (90) days from the date such notice is delivered to the Collateral Agent to pay such amounts and (B) in the case of a default that cannot be cured by the payment of money to the Consenting Party, first providing to the Collateral Agent written notice of such default and a reasonable opportunity (in any event at least ninety (90) days but no more than one hundred eighty (180) days) to cure such breach or default so long as the Collateral Agent or its designee shall have commenced to cure the breach or default within such ninety-day period and thereafter diligently pursues such cure to completion and continues to perform any monetary obligations of the Borrower to the Consenting Party under the Contracts and all other obligations of the Borrower under the Contracts are performed by the Borrower (or the Collateral Agent on behalf of the Borrower) or with respect to any defaults that are not susceptible of being cured by the Collateral Agent, to rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. If possession of the Energy Complex (by way of foreclosure proceedings or otherwise) is necessary to cure such breach or default, the Collateral Agent or its successor, transferee or -8- assignee will be allowed a reasonable period to complete such proceedings or otherwise accomplish such possession; provided, that in no event shall such additional period exceed thirty (30) days. The Collateral Agent acknowledges and agrees that during the foregoing time periods the Consenting Party shall be entitled to exercise any set-off right which the Consenting Party may have against the Borrower under the Contracts. If the Collateral Agent or its successor, transferee or assignee is prohibited by any court order or bankruptcy or insolvency proceedings from curing the default or from commencing or prosecuting foreclosure proceedings, the foregoing time periods shall be extended by the period of such prohibition. Subject to Section 1(d) hereof, the Consenting Party consents to the transfer of the Borrower's interest under the Contracts to the Collateral Agent for the benefit of the Secured Parties or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by the Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale or conveyance, the Consenting Party shall recognize the Collateral Agent or other purchaser or grantee as the applicable party under the transferred Contracts (provided that the Collateral Agent or such purchaser or grantee assumes the obligations of the Borrower under the transferred Contracts as provided in Section 1(d) hereof). (f) Bankruptcy. In the event that any of the Contracts is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, or if any of the Contracts is terminated for any reason other than a default that could have been but was not cured by the Collateral Agent as provided in Section 1(e)(ii) hereof, and if, within sixty (60) days after such rejection or termination, the Collateral Agent or its successor, transferee or assignee shall so request, the Consenting Party will execute and deliver to the Collateral Agent or its successor, transferee or assignee for the benefit of the Secured Parties a new Contract, which Contract shall be on substantially the same terms and conditions as the original Contract for the remaining term of the Contract before giving effect to such rejection or termination (but in no event on less favorable terms and conditions as the original Contract). (g) Liability. (i) None of the Collateral Agent, the Secured Parties or the holders of Bonds shall be liable for any of the obligations or duties of the Borrower (including, without limitation, the obligation to deliver title to the Energy Complex free of any lien upon the exercise of a Repurchase Option (as defined in the Master Operating Agreement) by the Consenting Party), unless and until the Collateral Agent or its successor expressly assumes the Contracts or any or all of such obligations or duties. (ii) In the event the Collateral Agent or its successor elects to perform the Borrower's obligations under the Contracts or -9- to enter into any new Contract as provided in Section 1(d), 1(e)(ii) or 1(f) hereof, the Collateral Agent, the Secured Parties and the holders of Bonds, and their successors, shall have no liability to the Consenting Party for the performance of such obligations, and the sole recourse of the Consenting Party in seeking the enforcement of such obligations shall be to such parties' interest in the Energy Complex. (iii) It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it. (h) Cure Duties; Assignment. In the event the Collateral Agent or its successor, transferee or assignee succeeds to the Borrower's interest under the Contracts, the Collateral Agent or its successor, transferee or assignee shall cure any defaults of the Borrower existing under the Contracts that are reasonably capable of being cured and, with respect to any defaults that are not susceptible of being cured by the Collateral Agent, shall rectify to the Consenting Party's reasonable satisfaction the effect on the Consenting Party of such default within such period. The Collateral Agent shall have the right to assign its interest in this Consent to any person or entity to whom the Original Debt is transferred, provided such transferee assumes the obligations of the Borrower (or the Collateral Agent, as the case may be) under this Consent. Upon such assignment, the Collateral Agent and the Secured Parties (including their agents and employees) shall be released from any further liability under this Consent and the Contracts to the extent of the interest assigned. (i) Insurance Proceeds. The parties hereto acknowledge and agree that the disposition of insurance proceeds with respect to the Energy Complex is subject to the terms and conditions of Section 10.7 of the Master Operating Agreement and this Section 1(i), and the Collateral Agent acknowledges that the independent engineer under the Financing Documents shall be required, if appropriate, to deliver to the Collateral Agent the certificate contemplated by Section 3.10(c) of the Intercreditor Agreement (a copy of which is attached as Exhibit A thereto), such certificate not to be unreasonably withheld. Notwithstanding anything herein or in the Master Operating Agreement to the contrary, the parties hereto acknowledge that until all Original Debt has been paid in full, Casualty Proceeds and Eminent Domain Proceeds (each as defined in the Intercreditor Agreement) will be disposed of pursuant to the terms of Sections 3.10 and 6.2 of the Intercreditor Agreement, which provisions shall not be amended, supplemented or otherwise modified, directly or indirectly, without the prior written consent of the Consenting Party. (j) Borrower Not to Cause Breach. The Borrower hereby irrevocably waives any rights that it may have, including those arising under any of the Contracts, to seek or compel the -10- Consenting Party to act in a manner that is inconsistent with this Consent while this Consent is in effect. (k) Acknowledgment of Lien. The Consenting Party hereby acknowledges that the Energy Complex is subject to the lien of the Financing Documents. The Collateral Agent, the Secured Parties and the holders of the Bonds have no obligation to release such lien until all obligations secured thereby have been paid in full. (l) Approval Rights; Additional Debt. The Borrower and the Collateral Agent agree that they will not amend, modify, supplement or provide waivers under the Financing Documents that would result in (A) the scheduled annual debt service (as "debt service" is defined in Section 1(b) hereof), except for principal payments under the Working Capital Facility, in any year being greater than the scheduled annual debt service for such year as set forth on Schedule I hereto, (B) the Working Capital Facility having terms and conditions (including the maximum aggregate principal amount that can be outstanding thereunder) inconsistent with those described in clause (a)(ii) of the definition of "Permitted Indebtedness" contained in the Indenture (as such definition is in effect as of the date hereof, provided that amendments to such definition shall be permitted to reduce any payments of principal, interest or other amounts that may be scheduled to become due in any month) or (C) any modifications, direct or indirect, to the provisions of Sections 3.10 and 3.11 of the Intercreditor Agreement. This provision is not intended to apply to consensual restructurings of Original Debt due to non-payment of Original Debt that results in an accrual of past due scheduled annual debt service, and is not intended to require the Collateral Agent or the Secured Parties to exercise remedies. The Borrower agrees not to (and the Collateral Agent acknowledges that the Borrower is not permitted to) (i) make, issue or cause to be suffered secured Indebtedness that would result in the scheduled annual debt service in any year, except for principal payments under the Working Capital Facility, being greater than the scheduled annual debt service for such years as set forth on Schedule I hereto, and (ii) issue unsecured Indebtedness that, when taken together with all other Indebtedness, would exceed Original Debt in an amount greater than $5,000,000 (in the aggregate) escalated at the rate of change in the PPI. As a condition to the Borrower's issuance of any additional secured Indebtedness, the Borrower shall cause the holder of any additional secured Indebtedness to execute a counterpart of, or acknowledge to be bound by, this Consent. "Indebtedness" shall mean at any date, without duplication, (a)(i) all obligations of the Borrower for borrowed money, (ii) all obligations of the Borrower evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of the Borrower to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business and that mature not more than 180 days after the date originally incurred, (iv) the aggregate of all guarantee or purchase obligations of the Borrower with respect to capital stock of any -11- person, including any capital stock of a consolidated subsidiary that is required to be shown as a liability on a balance sheet of the Borrower, (v) the aggregate of all redeemable shares of common or preferred stock of the Borrower, (vi) all obligations of the Borrower, whether direct or contingent, matured or unmatured, to reimburse banks in respect of drawings made under letters of credit that are issued to secure or provide for the payment of Indebtedness of the Borrower, (vii) foreign currency exchanges, (viii) currency and interest rate swaps and similar derivatives, and (ix) commodities hedges and (b) in each case to the extent, and only to the extent, such obligations (or the Borrower's liability with respect thereto) are required to be shown as a liability on a consolidated balance sheet of the Borrower prepared as of such date, (i) all obligations of the Borrower as lessee under capital leases, (ii) all Indebtedness of others secured by a lien on any asset of the Borrower, whether or not such Indebtedness is assumed by the Borrower, and (iii) all Indebtedness of others guaranteed by the Borrower. "Indebtedness" shall not include (i) purchase money notes secured by equipment (but otherwise non-recourse to the Borrower's other properties) that is not material to the operations of the Energy Complex, (ii) financial instruments that could not reasonably be expected to have a material adverse effect on the Borrower and (iii) the Borrower's obligations (if any) in respect of the 1994 Bonds, the 1984 Taxable Lease Agreement, the 1973 Tax- Exempt Lease Agreement and the 1976 Tax-Exempt Lease Agreement, except for any refinancing by the Borrower of any such obligation. (m) The Collateral Agent hereby acknowledges that it has no lien on the Mill Owner Maintenance Reserve Account established pursuant to the Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995 among the Borrower, Southern, the Consenting Party (in its capacity as the owner and operator of the Tissue Mill and the Pulp Mill) and S.D. Warren (in its capacity as the owner and operator of the Paper Mill) or any amounts on deposit therein. (n) Mill Owner Payment Default Cure Right. The Mill Owners shall be entitled to cure any payment defaults of the Borrower under and strictly in accordance with the terms of the Borrower's cure rights under the Financing Documents. The Collateral Agent agrees to deliver to the Mill Owners duplicates or copies of all notices of payment default delivered under or pursuant to any of the Financing Documents to the Borrower, and the Collateral Agent agrees that no notice of payment default shall be effective until received by the Mill Owners; provided, that any failure by the Collateral Agent to deliver to the Mill Owners any such duplicates or copies shall not subject the Collateral Agent to any liability whatsoever; and provided, further, that the Mill Owners shall be entitled to reimbursement for any amounts paid thereby to cure any payment default to the extent that such reimbursement is made from funds that otherwise are permitted to be distributed to the equity holders of the Borrower under the Financing Documents. The Borrower agrees to provide each of the Mill Owners with one copy of the Financing Documents (including any -12- amendments or modifications thereto), as well as copies of all notices of default from the Secured Parties, all material notices to bondholders (including notices from the Secured Parties to the bondholders) and copies of all financial statements provided to the Secured Parties. (o) The Borrower hereby acknowledges and agrees to the terms and conditions set forth in this Consent, and agrees that to the extent any of the terms and conditions set forth herein are inconsistent with the terms and conditions of the Project Documents, the terms and conditions of this Consent shall control. 2. The Consenting Party hereby represents and warrants that: (a) The Consenting Party is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. The execution, delivery and performance by the Consenting Party of the Contracts and this Consent have been duly authorized by all necessary corporate action, and do not and will not require any further consents or approvals which have not been obtained, or violate any provision of the corporate charter or by-laws of the Consenting Party or any law, regulation, order, judgment, injunction or similar matters or breach any agreement presently in effect with respect to or binding on the Consenting Party or its properties or result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, charge or encumbrance of any nature that could adversely affect the Consenting Party's ability to perform its obligations under the Contracts or this Consent; (b) This Consent and the Contracts have been duly executed and delivered and are legal, valid and binding obligations of the Consenting Party enforceable against the Consenting Party in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights, and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (c) As of the date hereof, the Contracts are in full force and effect and, except as described in Recital D above, have not been amended, supplemented or otherwise modified, other than such amendments, supplements and modifications as may have been agreed to by the Site Operating Committee that do not materially affect the material obligations of the Consenting Party under the Contracts; and (d) None of senior management of the Consenting Party, the Pulp Mill SOC Representative and the Tissue Mill SOC Representative has actual knowledge of any facts that would allow the Consenting Party to terminate this Consent or the Contracts, -13- and the Consenting Party has no present intention to deliver a notice of default or a notice of termination thereunder; the consummation of any transaction contemplated by this Consent to take place on the date hereof would not allow the Consenting Party to terminate this Consent or the Contracts. (e) The Consenting Party has no actual notice of any assignment of any Contract (other than the assignment referred to in Recital E above and the assignment contemplated by this Consent). (f) The Consenting Party has not assigned, transferred or hypothecated the Contracts or any interest therein. 3. All notices required or permitted hereunder shall be in writing and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by telefacsimile and (c) if otherwise delivered, upon the earlier of receipt or two (2) business days after being sent by registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to the Consenting Party: Attention: Thomas C. Deas, Jr. Scott Paper Company Scott Plaza Philadelphia, Pennsylvania 19113-1585 Telecopy No.: (610) 522-5665 Telephone No.: (610) 522-5560 If to the Collateral Agent: Attention: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Telecopy No.: 212-250-6961 Telephone No.: 212-250-6826 If to the Borrower: Attention: Mobile Energy Services Company, L.L.C. 900 Ashwood Parkway, Suite 300 Atlanta, Georgia 30338 Telecopy No.: 770-673-7781 Telephone No.: 770-392-7644 -14- with a copy to: Mobile Energy Services Company, L.L.C. P.O. Box 2747 200 Bay Bridge Road Mobile, Alabama 36652 Telecopy No.: 334-452-6337 Telephone No.: 334-330-3600 4. This Consent shall be binding upon and benefit the successors and assigns of the Consenting Party, the Borrower, the Collateral Agent, the Secured Parties and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents and that, if required by Section 1(l) hereof, countersigns this Consent). The Consenting Party agrees to confirm such continuing obligation in writing upon the reasonable request of the Borrower, the Collateral Agent, the Secured Parties or any of their respective successors, transferees or assigns. No termination, amendment, variation or waiver of any provisions of this Consent shall be effective unless in writing and signed by the Consenting Party, the Collateral Agent and, in the case of a termination, amendment, variation, or waiver sought prior to a Trigger Event, the Borrower. This Consent shall be governed by the laws of the State of New York, without reference to principles of conflict of laws (other than Section 5-1401 of the New York General Obligations Law). 5. If any term or provision hereof is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the other terms and provisions hereof, which shall remain binding and enforceable, and to the extent possible, all of such other provisions shall remain in full force and effect. 6. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 7. Subject to the following Section 8, this Consent shall be deemed to be terminated and of no further force and effect when the Consenting Party receives written notice from the Borrower and the Collateral Agent stating that no Original Debt is outstanding and all amounts owing to the Secured Parties in respect of the Original Debt (including, without limitation, principal, interest, fees and reimbursement obligations, whether upon maturity, acceleration or otherwise) have been paid in full; provided, however, that the obligations of the Borrower to provide the Consenting Party with copies of the Borrower's financial statements as required under Section 1(n) shall survive the termination of this Consent. -15- 8. If at any time any payment in respect of Original Debt is rescinded or must otherwise be restored or returned by the holder of such Original Debt in connection with any bankruptcy, insolvency or other similar or related proceeding, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of the Borrower's property, the rights and obligations of the holder of such Original Debt under this Consent shall continue to be effective, or be reinstated as of the time such payment in respect of Original Debt is so rescinded or must otherwise be restored, as the case may be, all as though such payment had not been made. -16- IN WITNESS WHEREOF, the parties hereto by their officers thereunto duly authorized, have duly executed this Consent as of the date set forth below. Dated as of: August 1, 1995 SCOTT PAPER COMPANY, a Pennsylvania corporation, in its capacity as Tissue Mill Owner By: /s/ Name: Thomas C. Deas, Jr. Title: Assistant Treasurer BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent By: /s/ Name: James H. Stallkamp Title:President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as Borrower By: /s/ Name: Christopher J. Kysar Title: Vice President ACKNOWLEDGED: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President SCHEDULE I Total Debt Service (in thousands) 1995 40,500 1996 40,500 1997 40,000 1998 40,000 1999 39,500 2000 39,000 2001 38,500 2002 38,000 2003 37,500 2004 37,000 2005 36,500 2006 36,000 2007 35,500 2008 35,000 2009 34,500 2010 34,000 2011 33,500 2012 33,000 2013 32,500 2014 32,000 2015 31,500 2016 31,500 2017 35,000 2018 35,000 2019 through January 3, 2020 35,000 thereafter 0 EX-10.47 19 Exhibit 10.47 CONSENT AND AGREEMENT THIS CONSENT AND AGREEMENT (this "Consent"), dated as of August 1, 1995, is executed by E.J. HODDER & ASSOCIATES, INC., a Tennessee corporation (the "Consenting Party"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Borrower")(which is an indirect wholly-owned subsidiary of The Southern Company, a Delaware corporation ("Southern")), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Collateral Agent"). A. The Borrower, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (the "Taxable Indenture"), pursuant to which the Borrower (i) is issuing its First Mortgage Bonds (the "Taxable Bonds"), the proceeds of which will be used to (among other things) repay to Southern a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Master Operating Agreement (as hereinafter defined)) and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. The Borrower, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995 (the "Tax-Exempt Bonds" and, together with the Taxable Bonds, the "Bonds") to be issued for the benefit of the Borrower pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture" and, together with the Taxable Indenture, the "Indentures") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax- Exempt Bonds will be used to refinance the 1984 Tax-Exempt Bonds and to pay for certain other costs. C. The Borrower and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of the Borrower. D. The Consenting Party and the Borrower (as assignee of Mobile Energy) have entered into that certain Coal Supply Contract, dated as of May 1, 1995 (as the same may be amended, waived or otherwise modified, the "Contract"). E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and the Borrower dated as of July 14, 1995, Mobile Energy has assigned to the Borrower, and the Borrower has assumed, all of Mobile Energy's rights and obligations under the Contracts. F. The Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Collateral Agent, the Borrower and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement") and the other Financing Documents (as defined in the Amended and Restated Master Operating Agreement dated as of July 13, 1995 and effective as of December 12, 1994 (the "Master Operating Agreement"). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Consenting Party acknowledges the assignments referred to in Recitals F, E and F above and hereby irrevocably consents to such assignments, and each of the parties hereto agrees as follows: (a) The Collateral Agent shall be entitled to exercise all rights of the Borrower under the Contract and to cure any defaults of the Borrower under the Contract within the time periods set forth in the Contract or within thirty (30) days of receiving notice of such default, whichever is later. Upon receipt of the foregoing notice from the Collateral Agent, the Consenting Party agrees to accept such exercise and cure by the Collateral Agent, in each case strictly in accordance with the Contract (except as provided above) and to render all performance due by it under the Contract and this Consent to the Collateral Agent. The Consenting Party agrees to make all payments (if any) to be made by it under the Contract directly to the Collateral Agent for the benefit of the Secured Parties upon receipt of the Collateral Agent's written instructions and each of the Consenting Party and the Collateral Agent agree that any payments made by the Consenting Party to the Collateral Agent pursuant to such instructions shall satisfy the Consenting Party's obligations to make such payments to the Borrower in accordance with the Contract and shall relieve the Consenting Party of all liability with respect to such payments. To the extent that the Collateral Agent assumes all of the Borrower's indemnification rights under the Contract, the Borrower shall not be entitled to indemnification thereunder with respect to identical claims. (b) The Consenting Party agrees to deliver duplicates or copies of all notices of default delivered under or pursuant to the Contract to the Collateral Agent promptly upon receipt thereof; provided that any failure by the Consenting Party -2- to deliver to the Collateral Agent any such duplicates or copies shall not subject the Consenting Party to any liability whatsoever. 2. The Consenting Party will not, without the prior written consent of the Collateral Agent, terminate, amend or modify the Contract in any respect that has a material adverse effect on the Borrower's rights or obligations; provided that, subject to Section 1 above, nothing herein shall prohibit termination by the Consenting Party following a default by the Borrower and the expiration of the applicable cure period specified in the Contract. 3. This Consent shall be binding upon and benefit the successors and assigns of the Consenting Party, the Borrower, the Collateral Agent, the Secured Parties and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents (as defined in the Intercreditor Agreement) and that countersigns this Consent). This Consent shall be governed by the laws of the State of New York, without reference to principles of conflict of laws (other than Section 5-1401 of the New York General Obligations Law). 4. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 5. It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it, and nothing contained herein shall be construed as creating any liability on Bankers Trust (Delaware), individually or personally, to perform any covenant, either expressed or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto. -3- IN WITNESS WHEREOF, the parties hereto by their officers thereunto duly authorized, have duly executed this Consent as of the date set forth below. Dated as of: August 1, 1995 E.J. HODDER & ASSOCIATES, INC., a Tennessee corporation By: /s/ Name: Edwin J. Hodder, Jr. Title:President BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent, on behalf of itself and the Secured Parties By: /s/ Name: James H. Stallkamp Title:President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as Borrower By: /s/ Name: Christopher J. Kysar Title: Vice President ACKNOWLEDGED: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President EX-10.48 20 Exhibit 10.48 CONSENT AND AGREEMENT THIS CONSENT AND AGREEMENT (this "Consent"), dated as of August 1, 1995, is executed by AHLSTROM RECOVERY, INC., a corporation (the "Consenting Party"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Borrower")(which is an indirect wholly-owned subsidiary of The Southern Company, a Delaware corporation ("Southern")), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Collateral Agent"). A. The Borrower, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (the "Taxable Indenture"), pursuant to which the Borrower (i) is issuing its First Mortgage Bonds (the "Taxable Bonds"), the proceeds of which will be used to (among other things) repay to Southern a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Master Operating Agreement (as hereinafter defined)) and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. The Borrower, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995 (the "Tax-Exempt Bonds" and, together with the Taxable Bonds, the "Bonds") to be issued for the benefit of the Borrower pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (the "Tax-Exempt Indenture" and, together with the Taxable Indenture, the "Indentures") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax- Exempt Bonds will be used to refinance the 1984 Tax-Exempt Bonds and to pay for certain other costs. C. The Borrower and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of the Borrower. D. The Consenting Party and Scott Paper Company, a Pennsylvania corporation ("Scott") have entered into that certain Purchase Order Number MG-2601, dated December 18, 1991, as heretofore amended (as the same may be amended, waived or otherwise modified, the "Contract"). E. Pursuant to an Asset Purchase Agreement dated as of December 12, 1994, Scott assigned to Mobile Energy, and Mobile Energy assumed, all of Scott's rights and obligations under the Contract. F. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and the Borrower dated as of July 14, 1995, Mobile Energy has assigned to the Borrower, and the Borrower has assumed, all of Mobile Energy's rights and obligations under the Contracts. G. The Collateral Agent has been granted a security interest in the Contracts and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Collateral Agent, the Borrower and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement") and the other Financing Documents (as defined in the Amended and Restated Master Operating Agreement dated as of July 13, 1995 and effective as of December 12, 1994 (the "Master Operating Agreement"). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Consenting Party acknowledges the assignments referred to in Recitals F, E and F above and hereby irrevocably consents to such assignments, and each of the parties hereto agrees as follows: (a) The Collateral Agent shall be entitled to exercise all rights of the Borrower under the Contract and to cure any defaults of the Borrower under the Contract within the time periods set forth in the Contract or within thirty (30) days of receiving notice of such default, whichever is later. Upon receipt of the foregoing notice from the Collateral Agent, the Consenting Party agrees to accept such exercise and cure by the Collateral Agent, in each case strictly in accordance with the Contract (except as provided above) and to render all performance due by it under the Contract and this Consent to the Collateral Agent. The Consenting Party agrees to make all payments (if any) to be made by it under the Contract directly to the Collateral Agent for the benefit of the Secured Parties upon receipt of the Collateral Agent's written instructions and each of the Consenting Party and the Collateral Agent agree that any payments made by the Consenting -2- Party to the Collateral Agent pursuant to such instructions shall satisfy the Consenting Party's obligations to make such payments to the Borrower in accordance with the Contract and shall relieve the Consenting Party of all liability with respect to such payments. To the extent that the Collateral Agent assumes all of the Borrower's indemnification rights under the Contract, the Borrower shall not be entitled to indemnification thereunder with respect to identical claims. (b) The Consenting Party agrees to deliver duplicates or copies of all notices of default delivered under or pursuant to the Contract to the Collateral Agent promptly upon receipt thereof; provided that any failure by the Consenting Party to deliver to the Collateral Agent any such duplicates or copies shall not subject the Consenting Party to any liability whatsoever. 2. The Consenting Party will not, without the prior written consent of the Collateral Agent, terminate, amend or modify the Contract in any respect that has a material adverse effect on the Borrower's rights or obligations. 3. This Consent shall be binding upon and benefit the successors and assigns of the Consenting Party, the Borrower, the Collateral Agent, the Secured Parties and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents (as defined in the Intercreditor Agreement) and that countersigns this Consent). This Consent shall be governed by the laws of the State of New York, without reference to principles of conflict of laws (other than Section 5-1401 of the New York General Obligations Law). 4. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 5. It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it, and nothing contained herein shall be construed as creating any liability on Bankers Trust (Delaware), individually or personally, to perform any covenant, either expressed or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto. -3- IN WITNESS WHEREOF, the parties hereto by their officers thereunto duly authorized, have duly executed this Consent as of the date set forth below. Dated as of: August 1, 1995 AHLSTROM RECOVERY, INC., a corporation By: /s/ Name: Rodger H. Barton Title: Vice President and Treasurer BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent, on behalf of itself and the Secured Parties By: /s/ Name: James H. Stallkamp Title:President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as Borrower By: /s/ Name: Christopher J. Kysar Title: Vice President ACKNOWLEDGED: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President EX-10.49 21 Exhibit 10.49 CONSENT TO ASSIGNMENT THIS CONSENT TO ASSIGNMENT (this "Consent"), dated as of August 1, 1995, is executed by SOUTHERN ELECTRIC INTERNATIONAL, INC., a Delaware corporation (the "Consenting Party"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), and BANKERS TRUST (OF DELAWARE), a Delaware banking corporation, as Collateral Agent for the Senior Secured Parties (as hereinafter defined) (the "Collateral Agent"). W I T N E S S E T H: WHEREAS, the Company, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Indenture Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Indenture"), pursuant to which the Company (i)is issuing its First Mortgage Bonds, the proceeds of which will be used to (among other things) repay to The Southern Company a portion of the amounts advanced to pay certain costs associated with the acquisition of the energy and black liquor recovery complex located at an integrated pulp, paper and tissue manufacturing facility in Mobile, Alabama (together with the related real property rights and other related assets of the Company, the "Energy Complex") and (ii) may, from time to time, issue additional Senior Debt (as defined in the Indenture); WHEREAS, the Company, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "IDB") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to a portion of the Energy Complex relating to the IDB's Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995, to be issued for the benefit of the Company pursuant to an Amended and Restated Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Tax-Exempt Indenture") between the IDB and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax-Exempt Bonds will be used to refinance certain outstanding tax-exempt bonds and to pay for certain other costs. The Company may cause the IDB to issue, from time to time, additional Senior Debt under the Tax-Exempt Indenture; WHEREAS, the Company and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Indenture Trustee and the Tax-Exempt Trustee, the "Senior Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified and, together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used from time to time to finance certain working capital requirements of the Company; WHEREAS, the Consenting Party and Mobile Energy have entered into a Facility Operations and Maintenance Agreement dated as of December 12, 1994 (as the same may be amended, supplemented, waived or otherwise modified, the "Contract"); WHEREAS, pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement dated as of July 14, 1995 between Mobile Energy and the Company, Mobile Energy has assigned to the Company, and the Company has assumed, all of Mobile Energy's rights and obligations under the Contract (the "Omnibus Transfer"); WHEREAS, the Collateral Agent has been granted a security interest in the Contract and the Energy Complex for the benefit of the Senior Secured Parties pursuant to an Assignment and Security Agreement dated as of August 1, 1995 between the Collateral Agent and the Company and a Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits dated as of August 1, 1995 between the Collateral Agent and the Company; and WHEREAS, the Collateral Agent, the Senior Secured Parties, the IDB, the Company and Mobile Energy have entered into a Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows (except as otherwise expressly provided in this Consent to Assignment or unless the context otherwise required, all terms used herein having the meanings set forth in Appendix A to the Intercreditor Agreement). 1. Consent to Assignment. The Consenting Party hereby irrevocably consents to the assignment of the Contract by Mobile Energy to the Company and the Company's assignment of the Contract to the Collateral Agent as security; and the Consenting Party shall, at the Collateral Agent's request in the exercise of its rights as Collateral Agent, continue performance under the -2- Contract in accordance with its terms and the terms of this Consent to Assignment. 2. No Defaults. The Consenting Party represents and warrants to, and agrees with, the Collateral Agent that (a) the Consenting Party shall perform and comply with all material terms and provisions of the Contract applicable to it, (b) the Contract is in full force and effect and there are no amendments, modifications or supplements thereto, either oral or written, (c) other than by entering into subcontracts in the ordinary course of business, the Consenting Party has not assigned, transferred or hypothecated any of its right, title and interest in and to the Contract or any interest therein, (d) the Consenting Party has no knowledge of any default by the Company or Mobile Energy in any respect in the performance of any provision of the Contract or of any existing claims or rights of set-off by the Consenting Party or any of its affiliates against the Company or Mobile Energy, (e) each of the Company and Mobile Energy has fulfilled all of its material obligations under the Contract required to be performed on or prior to the date hereof and there are no material breaches or unsatisfied conditions presently existing (or that, with the giving of notice or the passage of time or both, would exist) or that would result from the consummation of any transaction contemplated by the Contract or this Consent to Assignment to take place on the date hereof that would allow the Consenting Party to terminate this Consent to Assignment or the Contract, (f) to the best knowledge of the Consenting Party, none of the Company's or Mobile Energy's rights under the Contract has been waived, (g) the assignment by Mobile Energy of the Contract to the Company did not, and the security assignment of the Contract by the Company to the Collateral Agent, and the acknowledgment of and consent to such assignments by the Consenting Party, will not, cause or constitute a default under the Contract or an event or condition that, with the giving of notice or the passage of time or both, would constitute a default under the Contract and (h) a foreclosure or other exercise of remedies under the Financing Documents (as defined in the Indenture) or any sale thereunder by the Collateral Agent or any of its designees or assignees, whether by judicial proceedings or under any power of sale contained therein, or any conveyance from the Company or the Collateral Agent or any such designee or assignee, in lieu thereof, shall not cause or constitute a default under the Contract or an event or condition that, with the giving of notice or the passage of time or both, would constitute a default under the Contract. 3. Notice of Termination, Transfer, Etc.. (a) The Consenting Party will not, without the prior written consent of the Collateral Agent, (i) cancel, suspend or terminate the Contract, except as provided in the Contract and in accordance with Section 3(b) hereof, or consent to or accept any cancellation, suspension or termination thereof by the Company (other than upon the stated expiration of the term of the Contract), (ii) sell, assign or otherwise dispose of (by -3- operation of law or otherwise) any part of its interest in the Contract, other than by entering into subcontracts in the ordinary course of business, (iii) amend or modify the Contract in any respect that may reasonably be expected to have a material adverse effect on the Company's rights or obligations or (iv) claim prevention of or interference with performance of its obligations under the Contract, except as otherwise set forth in Section 3(b). The Consenting Party agrees to deliver duplicates or copies of all (i) notices of default delivered by the Consenting Party under or pursuant to the Contract to the Collateral Agent promptly upon delivery thereof to the Company (and the Consenting Party agrees that no such notice of default shall be effective until received by the Collateral Agent) and (ii) amendments to the Contract (and the Consenting Party agrees that no such amendment shall be effective until received by the Collateral Agent). (b) The Consenting Party will not exercise any right it may have under the Contract, at law or in equity, to cancel, suspend or terminate the Contract (other than upon the stated expiration of the term of the Contract or at the option of the Consenting Party on six (6) months notice pursuant to Section 8.2 of the Contract) or any of its obligations thereunder on account of any default, breach or other act or omission of the Company thereunder without (i) in the case of a default by the Company that is the failure by the Company to pay amounts to the Consenting Party that are due and payable under the Contract, first providing to the Collateral Agent written notice of such default, breach or other act or omission and the greater of (A) the cure period specified in such Contract and (B) ninety (90) days from the date such notice is received by the Collateral Agent to pay such amounts (provided that, notwithstanding the foregoing, the Consenting Party may suspend performance under the Contract within thirty (30) days) and (ii) in the case of a default, breach or other act or omission that cannot be cured by the payment of money to the Consenting Party, first providing to the Collateral Agent written notice of such default, breach or other act or omission and the greater of (A) the cure period specified in such Contract and (B) one hundred eighty (180) days from the date such notice is received by the Collateral Agent to cure such breach or default so long as the Collateral Agent or its designee shall have commenced to cure such breach, default or other act or omission within ninety (90) days and thereafter diligently pursues such cure to completion or, with respect to any default, breach or other act or omission that is not susceptible of being cured by the Collateral Agent, to rectify, to the Consenting Party's reasonable satisfaction, the effect on the Consenting Party thereof within one hundred eighty (180) days from the date such notice is received by the Collateral Agent. If possession of the Energy Complex (by way of foreclosure proceedings or otherwise) is necessary to cure such breach, default or other act or omission, the Collateral Agent or its successor, transferee or assignee will be allowed a reasonable additional period to complete such proceedings or otherwise -4- accomplish such possession, provided that in no event shall such additional period exceed ninety (90) days and provided that the Collateral Agent or its successor, transferee or assignee proceeds diligently throughout such additional period to accomplish such possession. If the Collateral Agent or its successor, transferee or assignee is prohibited by any court order or bankruptcy or insolvency proceedings from curing the default, breach or other act or omission or from commencing or prosecuting foreclosure proceedings, the foregoing time periods shall be extended by the period of such prohibition. The Consenting Party consents to the transfer of the Company's interest under the Contract to the Collateral Agent for the benefit of the Senior Secured Parties or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by the Company in lieu of foreclosure and agrees that, upon such foreclosure, sale or conveyance, the Consenting Party shall recognize the Collateral Agent or such other purchaser or grantee as the applicable party under the Contract so transferred, provided that the Collateral Agent or such purchaser or grantee assumes the obligations of the Company under such Contract. The notice specified in this Section 3(b) shall be in writing and shall be addressed to the Collateral Agent as set forth below or to such other address as the Collateral Agent may have specified by written notice delivered in accordance herewith. Such notice shall be effective (a) if by telecopier, when transmitted to the telecopier number specified herein and received at such number, (b) if by registered or certified mail, postage prepaid, return receipt requested, on the third business day after delivered to a United States post office and a receipt therefor is issued thereby or (c) if by any other means, when delivered to the specified address: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attention: Corporate Trust and Agency Group Telecopier No.: 212-250-6961 Failure of the Consenting Party to provide such notice to the Collateral Agent shall not constitute a breach of this Consent to Assignment, and the Collateral Agent agrees that the Consenting Party shall have no liability to the Collateral Agent for such failure whatsoever; provided, however, that no cancellation, suspension or termination (other than upon the stated expiration of the term of the Contract) of the Contract by the Consenting Party, or of any of the Consenting Party's obligations thereunder by the Consenting Party, shall be binding upon the Collateral Agent without such notice and the expiration of the applicable cure period set forth in this Section 3(b). -5- 4. No Previous Assignment. Except for the Omnibus Transfer above and for the assignment contemplated by this Consent to Assignment, the Consenting Party represents and warrants to the Collateral Agent that it has no actual notice of any assignment of the Contract and that it has not previously consented to any assignment, transfer or hypothecation of the Contract or any interest therein by the Company, other than subcontracts entered into in the ordinary course of business. 5. Payments to Revenue Account. The Consenting Party hereby agrees that, until the Collateral Agent has given the Consenting Party written notice that the obligations secured by the Contract have been paid, observed and satisfied in full, all payments to be made by the Consenting Party pursuant to the terms of the Contract shall be made directly to the Collateral Agent, c/o Bankers Trust Company, for deposit into the Revenue Account established and created under the Intercreditor Agreement (Account No. 15351), at Bankers Trust Company, Four Albany Street, New York, New York 10006, or to such other person or at such other address as the Collateral Agent may from time to time specify in writing to the Consenting Party. By executing this Consent to Assignment, the Company hereby directs the Consenting Party to make all payments due to the Company under the Contract directly to the Collateral Agent, c/o Bankers Trust Company, or such other person as provided for above until the Consenting Party has received the notice referred to in the first sentence of this Section 5. 6. Protection of Collateral Agent. In the event that (a) either (i) the Company's interest in the Energy Complex shall be sold, assigned or otherwise transferred pursuant to the exercise of any right, power or remedy by the Collateral Agent or pursuant to judicial proceedings or (ii) the Company rejects the Contract under the Federal Bankruptcy Code, or other similar Federal or state statute, and such rejection is approved by the appropriate bankruptcy court or is otherwise effective pursuant to such statute and (b) in either case (i) all funds payable under the Contract shall be paid to the Consenting Party, (ii) the Collateral Agent shall have cured any material default or breach by the Company under the Contract that is susceptible of being corrected by the Collateral Agent or by a purchaser at any judicial or non-judicial sale, (iii) the Contract shall have been terminated pursuant to the terms thereof by reason of a default or a rejection in bankruptcy under the Federal Bankruptcy Code, or other similar Federal or state statute, and (iv) the effect upon the Consenting Party of any default not susceptible of being corrected shall have been rectified, to the Consenting Party's reasonable satisfaction, then the Consenting Party shall, within fifteen (15) days after receipt of written request therefor, execute and deliver to the Collateral Agent or its nominee, purchaser, assignee or transferee (as the case may be) an agreement containing the same terms (including with respect to termination by the Consenting Party) as the Contract so terminated for the remainder of the term thereof. References in -6- this Consent to Assignment to "Contract" shall be deemed also to refer to such new agreements. 7. Acknowledgment of the Collateral Agent's Obligations and Rights. None of the Collateral Agent, the Senior Secured Parties or the IDB has any obligation hereunder to extend credit to the Consenting Party or any contractor of the Consenting Party at any time for any purpose. None of the Collateral Agent, the Senior Secured Parties or the IDB shall have any obligation to the Consenting Party under the Contract unless and until such time as it succeeds to the interests of the Company under such Contract. It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it, and nothing contained herein shall be construed as creating any liability on Bankers Trust (Delaware), individually or personally, to perform any covenant, either expressed or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto. 8. Exercise of Remedies by the Collateral Agent. Upon delivery of written notice by the Collateral Agent to the Consenting Party that the Collateral Agent or any of its designees or assignees (as the case may be) expressly elects to assume the obligations of the Company under the Contract, the Collateral Agent or any of its designees or assignees shall have the full right and power to enforce directly against the Consenting Party all obligations of the Consenting Party under such Contract and otherwise to exercise all remedies thereunder and to make all demands and give all notices and make all requests required or permitted to be made by the Company under such Contract. 9. The Company Not to Cause Breach. The Company hereby irrevocably waives any rights that it may have, including those arising under the Contract, to seek to compel the Consenting Party to act in a manner inconsistent with this Consent to Assignment while this Consent to Assignment is in effect. 10. Subordination of Certain Claims; Indemnification. (a) Notwithstanding anything herein or in the Contract to the contrary, the Consenting Party hereby agrees that any claims of the Consenting Party for indemnification, reimbursement or otherwise (whether or not based on the Contract), insofar as such claims arise out of, are based upon or relate to (i) the Notice of Charge of Discrimination (Charge No. 130952216) of the Equal Employment Opportunity Commission heretofore delivered to the Consenting Party or (ii) any other losses, claims, damages or liabilities (or actions in respect thereof) of any Person, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, are based upon or -7- relate to conduct that is or is alleged to be part of a pattern of activity similar to that alleged by or in the Notice of Charge of Discrimination referred to above, in each case, whether heretofore or hereafter arising (each of such losses, claims, damages and liabilities specified in clauses (i) and (ii), a "Specified Claim"), shall constitute or shall be deemed to constitute Subordinated Fees under the Financing Documents. (b) Notwithstanding anything herein or in the Contract to the contrary, the Consenting Party hereby agrees to indemnify and hold harmless the Mobile Energy Parties, the Senior Secured Parties and the Collateral Agent against any losses, claims, damages or liabilities, joint or several, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, are based upon or relate to any Specified Claim. 11. Representations. The Consenting Party represents and warrants to the Company and the Collateral Agent as follows: (a) The Consenting Party is duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in the State of Alabama. (b) The Consenting Party has the necessary corporate power and corporate authority to execute, deliver and perform the Contract and this Consent to Assignment; the execution and delivery by the Consenting Party of the Contract and this Consent to Assignment and the performance of its obligations thereunder and hereunder have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Consenting Party's board of directors and shareholders, except for those consents and approvals that have been duly obtained and are in full force and effect, (ii) violate any provision of the certificate of incorporation and by-laws of the Consenting Party or any provision of any law, rule or regulation, or any order, writ, judgment, injunction, decree, determination or award having applicability to the Consenting Party, (iii) result in a breach of or constitute a default under any indenture, loan agreement, credit agreement or any other agreement, lease or instrument to which the Consenting Party is a party or by which it or its properties may be bound or affected or (iv) result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, charge or encumbrance of any nature now owned or hereafter acquired by the Consenting Party; and the Consenting Party is not in violation, breach or default of any provision of the certificate of incorporation and bylaws of the Consenting Party or any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award having applicability to the Consenting Party or any agreement referred to above in clause (iii) of this Section -8- 10(b), which violation could have a material adverse effect on the ability of the Consenting Party to perform its obligations under this Consent to Assignment or the Contract. (c) Each of the Contract and this Consent to Assignment has been duly executed and delivered and constitutes a valid and binding obligation of the Consenting Party, enforceable against the Consenting Party in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or in law). (d) No consent or approval of, or other action by, or any notice or filing with, any court or administrative or governmental body (except those previously obtained and in full force and effect) is required in connection with the execution and delivery of the Contract or this Consent to Assignment or the performance by the Consenting Party of its obligations thereunder or hereunder; and the Consenting Party has obtained all permits, licenses, approvals, consents, authorizations and exemptions with respect to the performance of its obligations under the Contract and this Consent to Assignment required by applicable laws, statutes, rules and regulations in effect as of the date hereof. (e) The Consenting Party is not in default with respect to the Contract and has no knowledge, as of the date hereof, of any claims or, except as otherwise set forth in the Contract, rights of set-off by the Consenting Party or by any of its affiliates against the Company. The Consenting Party will not exercise any right of set-off it may have against the Company or Mobile Energy under the Contract other than with respect to matters arising under such Contract. (f) There are no proceedings pending or, to the best of the Consenting Party's knowledge after due inquiry, threatened against or affecting the Consenting Party in any court or before any governmental authority or arbitration board or tribunal (whether or not purportedly on behalf of the Consenting Party) that may result in a material adverse effect on the property, business, prospects or financial condition of the Consenting Party or on the ability of the Consenting Party to perform its obligations under, or that purports to affect the legality, validity or enforceability of, the Contract or this Consent to Assignment; and the Consenting Party is not in default with respect to any order of any court, governmental authority or arbitration board or tribunal that may result in a material adverse effect on the -9- Consenting Party's ability to perform its obligations under this Consent to Assignment or the Contract. 12. Binding Upon Successors. All agreements, covenants, conditions, representations and warranties in this Consent to Assignment shall be binding upon and inure to the benefit of and be enforceable by the successors and assigns of each of the parties hereto. 13. Captions. The captions or headings at the beginning of each Section hereof are for convenience only and shall not affect the construction hereof. 14. Governing Law. THE RIGHTS AND DUTIES OF THE PARTIES UNDER THIS CONSENT TO ASSIGNMENT SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5-1401). 15. Amendment. This Consent to Assignment may be modified, amended or rescinded only by a writing expressly referring to this Consent to Assignment and signed by all of the parties hereto. 16. Severability. Any provision of this Consent to Assignment that may be determined by competent authority to be invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable any remaining terms and provisions hereof, and such invalidity or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. 17. Termination. This Consent to Assignment shall be deemed to be terminated and of no further force and effect at the earlier of (a) payment in full of all Secured Obligations (as defined in the Intercreditor Agreement) and (b) termination of the Contract in accordance with the provisions of Section 3(b). 18. Counterparts. This Consent to Assignment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -10- IN WITNESS WHEREOF, each of the Consenting Party, the Collateral Agent and the Company have duly executed this Consent to Assignment as of the date first above written. SOUTHERN ELECTRIC INTERNATIONAL, INC. a Delaware corporation, as the Consenting Party By: /s/ Name: S. Marce Fuller Title:Vice President BANKERS TRUST (DELAWARE), a Delaware banking corporation, as the Collateral Agent By: /s/ Name:James H. Stallkamp Title:President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as the Company By: /s/ Name: Christopher J. Kysar Title: Vice President Acknowledged and Agreed: MOBILE ENERGY SERVICES HOLDINGS, INC., an Alabama corporation By: /s/ Name: Christopher J. Kysar Title: Vice President EX-10.50 22 Exhibit 10.50 CONSENT TO ASSIGNMENT THIS CONSENT TO ASSIGNMENT (this "Consent"), dated as of August 1, 1995, is executed by SOUTHERN COMPANY SERVICES, INC., an Alabama corporation (the "Consenting Party"), MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company (the "Company"), and BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Senior Secured Parties (as hereinafter defined) (the "Collateral Agent"). W I T N E S S E T H: WHEREAS, the Company, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Indenture Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Indenture"), pursuant to which the Company (i)is issuing its First Mortgage Bonds, the proceeds of which will be used to (among other things) repay to The Southern Company a portion of the amounts advanced to pay certain costs associated with the acquisition of the energy and black liquor recovery complex located at an integrated pulp, paper and tissue manufacturing facility in Mobile, Alabama (together with the related real property rights and other related assets of the Company, the "Energy Complex") and (ii) may, from time to time, issue additional Senior Debt (as defined in the Indenture); WHEREAS, the Company, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "IDB") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to a portion of the Energy Complex relating to the IDB's Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995, to be issued for the benefit of the Company pursuant to an Amended and Restated Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Tax-Exempt Indenture") between the IDB and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax-Exempt Bonds will be used to refinance certain outstanding tax-exempt bonds and to pay for certain other costs. The Company may cause the IDB to issue, from time to time, additional Senior Debt under the Tax-Exempt Indenture; WHEREAS, the Company and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Indenture Trustee and the Tax-Exempt Trustee, the "Senior Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified and, together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used from time to time to finance certain working capital requirements of the Company; WHEREAS, the Consenting Party and the Company have entered into a Services Agreement dated as of July 14, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Contract"); WHEREAS, the Collateral Agent has been granted a security interest in the Contract and the Energy Complex for the benefit of the Senior Secured Parties pursuant to an Assignment and Security Agreement dated as of August 1, 1995 between the Collateral Agent and the Company and a Leasehold Mortgage, Assignment of Leases, Rents, Issues and Profits dated as of August 1, 1995 between the Collateral Agent and the Company; and WHEREAS, the Collateral Agent, the Senior Secured Parties, the IDB, the Company and Mobile Energy have entered into an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows. 1. Consent to Assignment. The Consenting Party hereby irrevocably consents to the Company's assignment of the Contract to the Collateral Agent as security; and the Consenting Party shall, at the Collateral Agent's request in the exercise of its rights as Collateral Agent, continue performance under the Contract in accordance with its terms and the terms of this Consent to Assignment; provided, however, that any such assignment shall be subject to the receipt by the Consenting Party of any necessary regulatory approvals, for which the Consenting Party shall diligently apply and use best efforts to obtain; and provided, further, that the Contract shall be subject to termination by the Consenting Party upon six (6) months notice at any time following any such assignment. 2. No Defaults. The Consenting Party represents and warrants to, and agrees with, the Collateral Agent that (a) the Consenting Party shall perform and comply with all material terms -2- and provisions of the Contract applicable to it, (b) the Contract is in full force and effect and there are no amendments, modifications or supplements thereto, either oral or written, (c) the Consenting Party has not assigned, transferred or hypothecated any of its right, title and interest in and to the Contract or any interest therein, (d) the Consenting Party has no knowledge of any default by the Company in any respect in the performance of any provision of the Contract or of any existing claims or rights of set-off by the Consenting Party or any of its affiliates against the Company, (e) the Company has fulfilled all of its material obligations under the Contract required to be performed on or prior to the date hereof and there are no material breaches or unsatisfied conditions presently existing (or that, with the giving of notice or the passage of time or both, would exist) or that would result from the consummation of any transaction contemplated by the Contract or this Consent to Assignment to take place on the date hereof that would allow the Consenting Party to terminate this Consent to Assignment or the Contract, (f) to the best knowledge of the Consenting Party, none of the Company's rights under the Contract has been waived, (g) the security assignment of the Contract by the Company to the Collateral Agent, and the acknowledgment of and consent to such assignment by the Consenting Party, will not, cause or constitute a default under the Contract or an event or condition that, with the giving of notice or the passage of time or both, would constitute a default under the Contract and (h) a foreclosure or other exercise of remedies under the Financing Documents (as defined in the Indenture) or any sale thereunder by the Collateral Agent or any of its designees or assignees, whether by judicial proceedings or under any power of sale contained therein, or any conveyance from the Company or the Collateral Agent or any such designee or assignee, in lieu thereof, shall not cause or constitute a default under the Contract or an event or condition that, with the giving of notice or the passage of time or both, would constitute a default under the Contract. 3. Notice of Termination, Transfer, Etc.. (a) The Consenting Party will not, without the prior written consent of the Collateral Agent, (i) cancel, suspend or terminate the Contract, except as provided in the Contract and in accordance with Section 3(b) hereof, or consent to or accept any cancellation, suspension or termination thereof by the Company (other than upon the stated expiration of the term of the Contract), (ii) sell, assign or otherwise dispose of (by operation of law or otherwise) any part of its interest in the Contract, (iii) amend or modify the Contract in any respect that may reasonably be expected to have a material adverse effect on the Company's rights or obligations or (iv) claim prevention of or interference with performance of its obligations under the Contract, except as otherwise provided in Section 3(b) hereof. The Consenting Party agrees to deliver duplicates or copies of all (i) notices of default delivered by the Consenting Party under or pursuant to the Contract to the Collateral Agent promptly upon delivery thereof to the Company (and the Consenting Party agrees that no such notice of default shall be effective until received by the Collateral Agent) and (ii) amendments to the -3- Contract (and the Consenting Party agrees that no such amendment shall be effective until received by the Collateral Agent). (b) The Consenting Party will not exercise any right it may have under the Contract, at law or in equity, to cancel, suspend or terminate the Contract (other than upon the stated expiration of the term of the Contract or at the option of the Consenting Party on six (6) months notice as contemplated by Section 1 hereof) or any of its obligations thereunder on account of any default, breach or other act or omission of the Company thereunder without (i) in the case of a default by the Company that is the failure by the Company to pay amounts to the Consenting Party that are due and payable under the Contract, first providing to the Collateral Agent written notice of such default, breach or other act or omission and the greater of (A) the cure period specified in such Contract and (B) ninety (90) days from the date such notice is received by the Collateral Agent to pay such amounts (provided that the Consenting Party may suspend performance under the Contract within thirty (30) days), notwithstanding the foregoing, and (ii) in the case of a default, breach or other act or omission that cannot be cured by the payment of money to the Consenting Party, first providing to the Collateral Agent written notice of such default, breach or other act or omission and the greater of (A) the cure period specified in such Contract and (B) one hundred eighty (180) days from the date such notice is received by the Collateral Agent to cure such breach or default so long as the Collateral Agent or its designee shall have commenced to cure such breach, default or other act or omission within ninety (90) days and thereafter diligently pursues such cure to completion or, with respect to any default, breach or other act or omission that is not susceptible of being cured by the Collateral Agent, to rectify, to the Consenting Party's reasonable satisfaction, the effect on the Consenting Party thereof within one hundred eighty (180) days from the date such notice is received by the Collateral Agent. If possession of the Energy Complex (by way of foreclosure proceedings or otherwise) is necessary to cure such breach, default or other act or omission, the Collateral Agent or its successor, transferee or assignee will be allowed a reasonable additional period to complete such proceedings or otherwise accomplish such possession, provided that in no event shall such additional period exceed ninety (90) days and provided that the Collateral Agent or its successor, transferee or assignee proceeds diligently throughout such additional period to accomplish such possession. If the Collateral Agent or its successor, transferee or assignee is prohibited by any court order or bankruptcy or insolvency proceedings from curing the default, breach or other act or omission or from commencing or prosecuting foreclosure proceedings, the foregoing time periods shall be extended by the period of such prohibition. The Consenting Party consents to the transfer of the Company's interest under the Contract to the Collateral Agent for the benefit of the Senior Secured Parties or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by the Company -4- in lieu of foreclosure and agrees that, upon such foreclosure, sale or conveyance, the Consenting Party shall recognize the Collateral Agent or such other purchaser or grantee as the applicable party under the Contract so transferred, provided that the Collateral Agent or such purchaser or grantee assumes the obligations of the Company under such Contract. The notice specified in this Section 3(b) shall be in writing and shall be addressed to the Collateral Agent as set forth below or to such other address as the Collateral Agent may have specified by written notice delivered in accordance herewith. Such notice shall be effective (a) if by telecopier, when transmitted to the telecopier number specified herein and received at such number, (b) if by registered or certified mail, postage prepaid, return receipt requested, on the third business day after delivered to a United States post office and a receipt therefor is issued thereby or (c) if by any other means, when delivered to the specified address: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attention: Corporate Trust and Agency Group Telecopier No.: 212-250-6961 Failure of the Consenting Party to provide such notice to the Collateral Agent shall not constitute a breach of this Consent to Assignment, and the Collateral Agent agrees that the Consenting Party shall have no liability to the Collateral Agent for such failure whatsoever; provided, however, that no cancellation, suspension or termination (other than upon the stated expiration of the term of the Contract) of the Contract by the Consenting Party, or of any of the Consenting Party's obligations thereunder by the Consenting Party, shall be binding upon the Collateral Agent without such notice and the expiration of the applicable cure period set forth in this Section 3(b). 4. No Previous Assignment. Except for the assignment contemplated by this Consent to Assignment, the Consenting Party represents and warrants to the Collateral Agent that it has no actual notice of any assignment of the Contract and that it has not previously consented to any assignment, transfer or hypothecation of the Contract or any interest therein by the Company, other than subcontracts entered into in the ordinary course of business. 5. Payments to Revenue Account. The Consenting Party hereby agrees that, until the Collateral Agent has given the Consenting Party written notice that the obligations secured by the Contract have been paid, observed and satisfied in full, all payments to be made by the Consenting Party pursuant to the terms of the Contract shall be made directly to the Collateral Agent, c/o Bankers Trust Company, for deposit into the Revenue Account -5- established and created under the Intercreditor Agreement (Account No. 15351), at Bankers Trust Company, Four Albany Street, New York, New York 10006, or to such other person or at such other address as the Collateral Agent may from time to time specify in writing to the Consenting Party. By executing this Consent to Assignment, the Company hereby directs the Consenting Party to make all payments due to the Company under the Contract directly to the Collateral Agent, c/o Bankers Trust Company, or such other person as provided for above until the Consenting Party has received the notice referred to in the first sentence of this Section 5. 6. Protection of Collateral Agent. In the event that (a) either (i) the Company's interest in the Energy Complex shall be sold, assigned or otherwise transferred pursuant to the exercise of any right, power or remedy by the Collateral Agent or pursuant to judicial proceedings or (ii) the Company rejects the Contract under the Federal Bankruptcy Code, or other similar Federal or state statute, and such rejection is approved by the appropriate bankruptcy court or is otherwise effective pursuant to such statute and (b) in either case (i) all funds payable under the Contract shall be paid, (ii) the Collateral Agent shall have cured any material default or breach by the Company under the Contract that is susceptible of being corrected by the Collateral Agent or by a purchaser at any judicial or non-judicial sale, (iii) the Contract shall have been terminated pursuant to the terms thereof by reason of a default or a rejection in bankruptcy under the Federal Bankruptcy Code, or other similar Federal or state statute, and (iv) the effect upon the Consenting Party of any default not susceptible of being corrected shall have been rectified, to the Consenting Party's reasonable satisfaction, then the Consenting Party shall, within fifteen (15) days after receipt of written request therefor, execute and deliver to the Collateral Agent or its nominee, purchaser, assignee or transferee (as the case may be) an agreement containing the same terms as the Contract so terminated for the remainder of the term thereof. References in this Consent to Assignment to "Contract" shall be deemed also to refer to such new agreements. 7. Acknowledgment of the Collateral Agent's Obligations and Rights. None of the Collateral Agent, the Senior Secured Parties or the IDB has any obligation hereunder to extend credit to the Consenting Party or any contractor of the Consenting Party at any time for any purpose. None of the Collateral Agent, the Senior Secured Parties or the IDB shall have any obligation to the Consenting Party under the Contract unless and until such time as it succeeds to the interests of the Company under such Contract. It is expressly understood and agreed by the parties hereto that this Consent has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent hereunder in the exercise of the power and authority conferred and vested in it, and nothing contained herein shall be construed as creating any liability on Bankers Trust (Delaware), individually or personally, to perform any covenant, either expressed or implied, contained -6- herein, all such liability, if any, being expressly waived by the parties hereto. 8. Exercise of Remedies by the Collateral Agent. Upon delivery of written notice by the Collateral Agent to the Consenting Party that the Collateral Agent or any of its designees or assignees (as the case may be) expressly elects to assume the obligations of the Company under the Contract, the Collateral Agent or any of its designees or assignees shall have the full right and power to enforce directly against the Consenting Party all obligations of the Consenting Party under such Contract and otherwise to exercise all remedies thereunder and to make all demands and give all notices and make all requests required or permitted to be made by the Company under such Contract. 9. The Company Not to Cause Breach. The Company hereby irrevocably waives any rights that it may have, including those arising under the Contract, to seek to compel the Consenting Party to act in a manner inconsistent with this Consent to Assignment while this Consent to Assignment is in effect. 10. Representations. The Consenting Party represents and warrants to the Company and the Collateral Agent as follows: (a) The Consenting Party is duly organized, validly existing and in good standing under the laws of the State of Alabama. (b) The Consenting Party has the necessary corporate power and corporate authority to execute, deliver and perform the Contract and this Consent to Assignment; the execution and delivery by the Consenting Party of the Contract and this Consent to Assignment and the performance of its obligations thereunder and hereunder have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Consenting Party's board of directors and shareholders, except for those consents and approvals that have been duly obtained and are in full force and effect, (ii) violate any provision of the articles of incorporation and by-laws of the Consenting Party or any provision of any law, rule or regulation, or any order, writ, judgment, injunction, decree, determination or award having applicability to the Consenting Party, (iii) result in a breach of or constitute a default under any indenture, loan agreement, credit agreement or any other agreement, lease or instrument to which the Consenting Party is a party or by which it or its properties may be bound or affected or (iv) result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, charge or encumbrance of any nature now owned or hereafter acquired by the Consenting Party; and the Consenting Party is not in violation, breach or default of any provision of the articles of incorporation and bylaws of the Consenting Party or any provision of any law, rule, regulation, order, writ, -7- judgment, injunction, decree, determination or award having applicability to the Consenting Party or any agreement referred to above in clause (iii) of this Section 10(b), which violation could have a material adverse effect on the ability of the Consenting Party to perform its obligations under this Consent to Assignment or the Contract. (c) Each of the Contract and this Consent to Assignment has been duly executed and delivered and constitutes a valid and binding obligation of the Consenting Party, enforceable against the Consenting Party in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or in law). (d) Except as set forth in Section 1 hereof no consent or approval of, or other action by, or any notice or filing with, any court or administrative or governmental body (except those previously obtained and in full force and effect) is required in connection with the execution and delivery of the Contract or this Consent to Assignment or the performance by the Consenting Party of its obligations thereunder or hereunder, and the Consenting Party has obtained all permits, licenses, approvals, consents, authorizations and exemptions with respect to the performance of its obligations under the Contract and this Consent to Assignment required by applicable laws, statutes, rules and regulations in effect as of the date hereof. (e) The Consenting Party is not in default with respect to the Contract and has no knowledge, as of the date hereof, of any claims or, except as otherwise set forth in the Contract, rights of set-off by the Consenting Party or by any of its affiliates against the Company. The Consenting Party will not exercise any right of set-off it may have against the Company under the Contract other than with respect to matters arising under such Contract. (f) There are no proceedings pending or, to the best of the Consenting Party's knowledge after due inquiry, threatened against or affecting the Consenting Party in any court or before any governmental authority or arbitration board or tribunal (whether or not purportedly on behalf of the Consenting Party) that may result in a material adverse effect on the property, business, prospects or financial condition of the Consenting Party or on the ability of the Consenting Party to perform its obligations under, or that purports to affect the legality, validity or enforceability of, the Contract or this Consent to Assignment; and the Consenting Party is not in default with respect to any order of any court, governmental authority or arbitration board or tribunal that may result in -8- a material adverse effect on the Consenting Party's ability to perform its obligations under this Consent to Assignment or the Contract. 11. Binding Upon Successors. All agreements, covenants, conditions, representations and warranties in this Consent to Assignment shall be binding upon and inure to the benefit of and be enforceable by the successors and assigns of each of the parties hereto. 12. Captions. The captions or headings at the beginning of each Section hereof are for convenience only and shall not affect the construction hereof. 13. Governing Law. THE CONSENTING PARTY AND THE COMPANY ACKNOWLEDGE AND AGREE THAT THE CONTRACT SHALL BE GOVERNED BY THE LAW OF THE STATE OF GEORGIA. THE RIGHTS AND DUTIES OF THE PARTIES UNDER THIS CONSENT TO ASSIGNMENT SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5-1401). 14. Amendment. This Consent to Assignment may be modified, amended or rescinded only by a writing expressly referring to this Consent to Assignment and signed by all of the parties hereto. 15. Severability. Any provision of this Consent to Assignment that may be determined by competent authority to be invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable any remaining terms and provisions hereof, and such invalidity or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. 16. Termination. This Consent to Assignment shall be deemed to be terminated and of no further force and effect at the earlier of (a) payment in full of all Secured Obligations (as defined in the Intercreditor Agreement) and (b) termination of the Contract in accordance with the provisions of Section 3(b) hereof. 17. Counterparts. This Consent to Assignment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -9- IN WITNESS WHEREOF, each of the Consenting Party, the Collateral Agent and the Company have duly executed this Consent to Assignment as of the date first above written. SOUTHERN COMPANY SERVICES, INC., an Alabama corporation, as the Consenting Party By: /s/ Name: W.L. Westbrook Title:Executive Vice President and Treasurer BANKERS TRUST (DELAWARE), a Delaware banking corporation, as the Collateral Agent By: /s/ Name: James H. Stallkamp Title:President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company, as the Company By: /s/ Name: Christopher J. Kysar Title:Vice President EX-10.51 23 Exhibit 10.51 ESTOPPEL, CONSENT AND RECOGNITION AGREEMENT This ESTOPPEL, CONSENT AND RECOGNITION AGREEMENT (this "Estoppel Agreement"), dated as of August 1, 1995, is executed by SCOTT PAPER COMPANY, a Pennsylvania corporation ("Scott"), and MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company ("MESC"), for the benefit of BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Lender"). A. MESC, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Taxable Indenture"), pursuant to which MESC (i) is issuing its First Mortgage Bonds, the proceeds of which will be used to (among other things) repay to The Southern Company a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Amended and Restated Master Operating Agreement dated as of July 13, 1995 among Scott, Mobile Energy and the other parties thereto), and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. MESC, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995, to be issued for the benefit of MESC pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the Tax- Exempt Indenture") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax-Exempt Bonds will be used to refinance certain outstanding tax-exempt bonds and to pay for certain other costs. MESC may cause the Board to issue, from time to time, additional debt under such Amended and Restated Indenture. C. MESC and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of MESC. D. Scott and Mobile Energy have entered into that certain Lease Agreement dated as of December 12, 1994 (as amended by the First Amendment to Lease Agreement dated as of July 13, 1995, and as it may be further amended, restated, renewed, modified or supplemented from time to time with the Lender's written consent, the "Lease"), whereby, inter alia, Scott has leased to Mobile Energy certain real property owned by Scott and described in Exhibit A attached hereto and incorporated herein by this reference (the "Facility Site"); E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and MESC dated as of July 14, 1995, Mobile Energy has assigned to MESC, and MESC has assumed, all of Mobile Energy's rights and obligations under the Lease; and F. The Lender has been granted a security interest in the Lease and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Lender, MESC and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement"), the Leasehold Mortgage, Assignment of Leases, Rents, Issues, Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Mortgage"), the Assignment of Security Agreement dated as of August 1, 1995 between MESC and the Lender, and the other Financing Documents. NOW, THEREFORE, with the understanding that the Lender and the Secured Parties will be relying on each of the statements contained in this Estoppel Agreement and that the Lender and the Secured Parties would not enter into the Intercreditor Agreement and the other Financing Documents without this Estoppel Agreement, Scott hereby states, certifies, represents and warrants (in each case, as of the date hereof) and agrees as follows (capitalized terms not otherwise defined herein having the meanings ascribed thereto in the Intercreditor Agreement as in effect on the date hereof): 1. The Lease has not been supplemented or amended (orally or in writing), except as described in Recital D above. Attached hereto as Exhibit B is a true and correct copy of the Lease. 2. The Lease is valid and in full force and effect, in accordance with its terms, and is the valid and binding -2- obligation of Scott as lessor. The Lease has not been surrendered, canceled, terminated or abandoned, whether in writing or pursuant to a purported oral surrender, cancellation, termination or abandonment. 3. The Lease constitutes the only written agreement between Scott and MESC with respect to the interests described therein. 4. Scott has not commenced any pending action or sent any presently effective notice to MESC (or received any presently effective notice from MESC) for the purpose of terminating the Lease. Scott is not presently entitled to terminate the Lease. 5. Scott has not received any notice delivered for the purpose of terminating the Lease. 6. To the best of Scott's knowledge, MESC is not in default in the performance of the Lease and no event has occurred which with the passage of time or the giving of notice, or both, would constitute a default by MESC under the Lease. 7. Scott is not in default in the performance of the Lease and no event has occurred which with the passage of time or the giving of notice, or both, would constitute a default by Scott under the Lease. 8. Rent under the Lease is One Dollar ($1.00) per year, payable in advance, and the first installment thereof was due on December 16, 1994. 9. All rent has been paid under the Lease through and including the rent payable for each rent payment period that includes the date hereof. As of the date hereof, no rent or any other payments are presently due under the Lease. 10. The "Effective Date" of the Lease, on which date the term of the Lease commenced, is December 16, 1994. 11. Scott has not assigned, sublet, hypothecated, or otherwise transferred its interests, or any portion thereof, under the Lease or in its estate underlying the Lease. Except as described in Recital D above and as contemplated by this Estoppel Agreement, Scott has not received notice of any assignment of the Lease by MESC. 12. Scott acknowledges and agrees that MESC has the right to and will encumber its interests under the Lease with the Mortgage and other security documents. Scott consents to the assignment pursuant to the Mortgage and other Financing Documents and agrees with the Lender for the benefit of the Secured Parties that Scott has received notice that the Lender, for the benefit of the Secured Parties, holds a leasehold mortgage on the leasehold estate of MESC and is entitled to all rights, -3- privileges and protections that apply to the holder of such a leasehold mortgage under the Lease, subject in each case to the terms and conditions of the Consents to Assignment between the Lender and each of Scott and the Mill Owners (the "Consents"), and that Scott has been provided with the Lender's address herein. 13. Scott agrees that notwithstanding anything in the Lease to the contrary, it will not create any lien, charge, interest, or encumbrance in or on the Facility Site that is superior to the Lease and/or the lien of the Mortgage. 14. Scott agrees that the Lender and the Secured Parties shall have the right to enter, possess and use the Facility Site at such reasonable times and manner as are necessary or desirable to effectuate the remedies and enforce the rights of Lender and the Secured Parties under the Financing Documents; provided, however, that such entry, possession or use shall be strictly in accordance with the terms and conditions of the Consents. 15. None of senior management of Scott, the Pulp Mill SOC Representative (as defined in the Master Operating Agreement) and the Tissue Mill SOC Representative (as defined in the Master Operating Agreement) has received notice of any other holder of a leasehold mortgage on or holder of any other security interest in the leasehold estate of MESC under the Lease other than the Mortgage. 16. Scott hereby represents and warrants that: (a) The execution, delivery and performance by Scott of the Lease and this Estoppel Agreement have been duly authorized by all necessary corporate action, and do not require any further consents or approvals which have not been obtained, or violate any provision of any law, regulation, order, judgment, injunction or similar matters or breach any agreement presently in effect with respect to or binding on Scott; (b) This Estoppel Agreement is the legal, valid and binding obligation of Scott, and this Estoppel Agreement and the Lease are enforceable against Scott in accordance with their terms, except as such enforcement may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights generally, and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (c) All government approvals necessary for the execution and delivery of and performance by Scott of its -4- obligations under the Lease have been obtained and are in full force and effect. 17. All notices required or permitted hereunder shall be in writing and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by telefacsimile and (c) if otherwise delivered, upon the earlier of receipt or two (2) business days after being sent registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to Scott: Scott Paper Company Scott Plaza Philadelphia, Pennsylvania 19113-1585 Attn: Thomas C. Deas, Jr. FAX: (215) 522-5665 with copy to: Skadden, Arps, Slate, Meagher & Flom 1440 New York Avenue, N.W. Washington, D.C. 20005 Attn: Martin Klepper, Esq. FAX: (202) 393-5760 If to the Lender: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attn: Corporate Trust and Agency Group FAX: 212-250-6961 with copy to: Seward & Kissel One Battery Park Plaza New York, New York 10004 Attn: Kalyan Das FAX:212-480-8421 Each party may change its address to another address within the United States by notice in accordance with this paragraph. 18. This Estoppel Agreement shall be binding upon and benefit the successors and assigns of Scott, MESC, the Lender, the Secured Parties, and their respective successors, transferees and assigns (including, without limitation, any entity that -5- refinances all or any portion of the obligations under the Financing Documents). Scott agrees to confirm such continuing obligation in writing upon the reasonable request of MESC, the Lender, the Secured Parties, or any of their respective successors, transferees and assigns. No termination, amendment, variation or waiver of any provisions of this Estoppel Agreement shall be effective unless in writing and signed by Scott, the Lender and MESC. To the extent this Estoppel Agreement conflicts in any way with the Lease, this Estoppel Agreement is intended to modify and supersede the Lease. Any such conflict shall be resolved in favor of this Estoppel Agreement. If all or any portion of any provision of this Estoppel Agreement is held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality, or unenforceability shall not affect any other provision of this Estoppel Agreement. This Estoppel Agreement shall be governed by the laws of the State of New York, without reference to principles of conflicts of laws (other than Section 5-1401 of the New York General Obligations Law). 19. Notwithstanding anything in the Lease to the contrary, the parties hereto agree that the effectiveness of this Estoppel Agreement, and the rights of the Lender as a leasehold mortgagee under the Lease and hereunder, shall in no way be conditioned on the recording of this Estoppel Agreement. 20. This Estoppel Agreement may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 21. It is expressly understood and agreed by the parties hereto that this Estoppel Agreement has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent for the Secured Parties in the exercise of the power and authority conferred and vested in it. -6- IN WITNESS WHEREOF, Scott, by its officer thereunto duly authorized, has duly executed this Estoppel Agreement as of the date first set forth above. SCOTT PAPER COMPANY, a Pennsylvania corporation By: /s/ Name: Thomas C. Deas, Jr. Title: Assistant Treasurer Accepted and agreed to: BANKERS TRUST (DELAWARE), as the Lender By: /s/ Name: James H. Stallkamp Title: President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company By: /s/ Name: Christopher J. Kysar Title: Vice President STATE OF PENNSYLVANIA ) ) ss.: COUNTY OF DELAWARE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Thomas C. Deas, Jr. whose name as Assistant Treasurer of Scott Paper Company, a Pennsylvania corporation, is signed to the foregoing Estoppel, Consent and Recognition Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and seal this the 18th day of August, 1995. /s/ (seal) Notary Public STATE OF DELAWARE ) ) ss.: COUNTY OF NEW CASTLE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that James H. Stallkamp whose name as President of Bankers Trust (Delaware), a Delaware banking corporation, is signed to the foregoing Estoppel, Consent and Recognition Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said Delaware banking Corporation. Given under my hand and seal this the 21st day of August, 1995. /s/ (seal) Notary Public -8- STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Chris Kysar whose name as Vice President of Mobile Energy Services Company, L.L.C., an Alabama limited liability companyon, is signed to the foregoing Estoppel, Consent and Recognition Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as said corporation. Given under my hand and seal this the 23rd day of August, 1995. /s/ (seal) Notary Public EXHIBIT "A" Parcel A: Lots 7 and 9 of Scott Paper Company Subdivision as shown on the plat thereof as recorded in Map Book 64, Page 39, in the records appearing in the Office of the Judge of Probate of Mobile County, Alabama. -10- EX-10.52 24 Exhibit 10.52 ESTOPPEL, CONSENT AND RECOGNITION AGREEMENT This ESTOPPEL, CONSENT AND RECOGNITION AGREEMENT (this "Estoppel Agreement"), dated as of August 1, 1995, is executed by SCOTT PAPER COMPANY, a Pennsylvania corporation ("Scott"), and MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company ("MESC"), for the benefit of BANKERS TRUST (DELAWARE), a Delaware banking corporation, as Collateral Agent for the Secured Parties (as hereinafter defined) (the "Lender"). A. MESC, Mobile Energy Services Holdings, Inc. (formerly known as Mobile Energy Services Company, Inc.), an Alabama corporation ("Mobile Energy"), and First Union National Bank of Georgia, as trustee (in such capacity, the "Taxable Trustee"), have entered into a Trust Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Taxable Indenture"), pursuant to which MESC (i) is issuing its First Mortgage Bonds, the proceeds of which will be used to (among other things) repay to The Southern Company a portion of the amounts advanced to pay certain costs associated with the acquisition of the Energy Complex (as defined in the Amended and Restated Master Operating Agreement dated as of July 13, 1995 among Scott, Mobile Energy and the other parties thereto), and (ii) may, from time to time, issue additional Senior Debt (as defined in the Taxable Indenture). B. MESC, Mobile Energy and The Industrial Development Board of the City of Mobile, Alabama (the "Board") have entered into an Amended and Restated Lease and Agreement dated as of August 1, 1995 with respect to part of the Energy Complex, relating to The Industrial Development Board of the City of Mobile, Alabama Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C. Project), Series 1995, to be issued for the benefit of MESC pursuant to an Amended and Restated Indenture dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the Tax- Exempt Indenture") between the Board and First Union National Bank of Georgia, as trustee (in such capacity, the "Tax-Exempt Trustee"). The proceeds of the Tax-Exempt Bonds will be used to refinance certain outstanding tax-exempt bonds and to pay for certain other costs. MESC may cause the Board to issue, from time to time, additional debt under such Amended and Restated Indenture. C. MESC and Banque Paribas (together with any lender that is or becomes a provider of the Working Capital Facility (as hereinafter defined), the "Working Capital Facility Provider" and, together with the Taxable Trustee and the Tax-Exempt Trustee, the "Secured Parties") have entered into a Revolving Credit Facility dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, and together with any replacement working capital facility, the "Working Capital Facility"), borrowings under which will be used to finance certain working capital requirements of MESC. D. Scott and Mobile Energy have entered into that certain Supplementary Lease Agreement dated as of December 12, 1994 (as amended pursuant to the First Amendment to Supplementary Lease Agreement dated as of July 13, 1995, and pursuant to the Second Amendment to Supplementary Lease Agreement dated as of August 1, 1995 (to be recorded) and as it may be further amended, restated, renewed, modified or supplemented from time to time with the Lender's written consent, the "Lease"), whereby, inter alia, Scott has leased to Mobile Energy certain real property owned by Scott and described in Exhibit A attached hereto and incorporated herein by this reference (the "Facility Site"); E. Pursuant to an Omnibus Deed, Bill of Sale, General Assignment and Conveyance Agreement between Mobile Energy and MESC dated as of July 14, 1995, Mobile Energy has assigned to MESC, and MESC has assumed, all of Mobile Energy's rights and obligations under the Lease; and F. The Lender has been granted a security interest in the Lease and the Energy Complex for the benefit of the Secured Parties pursuant to an Intercreditor and Collateral Agency Agreement dated as of August 1, 1995 by and among the Secured Parties, the Board, the Lender, MESC and Mobile Energy (as the same may be amended, supplemented, waived or otherwise modified, the "Intercreditor Agreement"), the Leasehold Mortgage, Assignment of Leases, Rents, Issues, Profits and Security Agreement and Fixture Filing dated as of August 1, 1995 (as the same may be amended, supplemented, waived or otherwise modified, the "Mortgage"), the Assignment of Security Agreement dated as of August 1, 1995 between MESC and the Lender, and the other Financing Documents. NOW, THEREFORE, with the understanding that the Lender and the Secured Parties will be relying on each of the statements contained in this Estoppel Agreement and that the Lender and the Secured Parties would not enter into the Intercreditor Agreement and the other Financing Documents without this Estoppel Agreement, Scott hereby states, certifies, represents, and warrants (in each case, as of the date hereof) and agrees as follows (capitalized terms not otherwise defined herein having the meanings ascribed thereto in the Intercreditor Agreement as in effect on the date hereof): 1. The Lease has not been supplemented or amended (orally or in writing), except as described in Recital D above. Attached hereto as Exhibit B is a true and correct copy of the Lease. -2- 2. The Lease is valid and in full force and effect, in accordance with its terms, and is the valid and binding obligation of Scott as lessor. The Lease has not been surrendered, canceled, terminated or abandoned, whether in writing or pursuant to a purported oral surrender, cancellation, termination or abandonment. 3. The Lease constitutes the only written agreement between Scott and MESC with respect to the interests described therein. 4. Scott has not commenced any pending action or sent any presently effective notice to MESC (or received any presently effective notice from MESC) for the purpose of terminating the Lease. Scott is not presently entitled to terminate the Lease. 5. Scott has not received any notice delivered for the purpose of terminating the Lease. 6. To the best of Scott's knowledge, MESC is not in default in the performance of the Lease and no event has occurred which with the passage of time or the giving of notice, or both, would constitute a default by MESC under the Lease. 7. Scott is not in default in the performance of the Lease and no event has occurred which with the passage of time or the giving of notice, or both, would constitute a default by Scott under the Lease. 8. Rent under the Lease is One Dollar ($1.00) per year, payable in advance, and the first installment thereof was due on December 16, 1994. 9. All rent has been paid under the Lease through and including the rent payable for each rent payment period that includes the date hereof. As of the date hereof, no rent or any other payments are presently due under the Lease. 10. The "Effective Date" of the Lease, on which date the term of the Lease commenced, is December 16, 1994. 11. Scott has not assigned, sublet, hypothecated, or otherwise transferred its interests, or any portion thereof, under the Lease or in its estate underlying the Lease. Except as described in Recital D above and as contemplated by this Estoppel Agreement, Scott has not received notice of any assignment of the Lease by MESC. 12. Scott acknowledges and agrees that MESC has the right to and will encumber its interests under the Lease with the Mortgage and other security documents. Scott consents to the assignment pursuant to the Mortgage and other Financing Documents and agrees with the Lender for the benefit of the Secured Parties that Scott has received notice that the Lender, for the benefit -3- of the Secured Parties, holds a leasehold mortgage on the leasehold estate of MESC and is entitled to all rights, privileges and protections that apply to the holder of such a leasehold mortgage under the Lease, subject in each case to the terms and conditions of the Consents to Assignment between the Lender and each of Scott and the Mill Owners (the "Consents"), and that Scott has been provided with the Lender's address herein. 13. Scott agrees that notwithstanding anything in the Lease to the contrary, it will not create any lien, charge, interest, or encumbrance in or on the Facility Site that is superior to the Lease and/or the lien of the Mortgage. 14. Scott agrees that the Lender and the Secured Parties shall have the right to enter, possess and use the Facility Site at such reasonable times and manner as are necessary or desirable to effectuate the remedies and enforce the rights of Lender and the Secured Parties under the Financing Documents; provided, however, that such entry, possession or use shall be strictly in accordance with the terms and conditions of the Consents. 15. None of the senior management of Scott, the Pulp Mill SOC Representative (as defined in the Master Operating Agreement) and the Tissue Mill SOC Representative (as defined in the Master Operating Agreement) has received notice of any other holder of a leasehold mortgage on or holder of any other security interest in the leasehold estate of MESC under the Lease other than the Mortgage. 16. Scott hereby represents and warrants that: (a) The execution, delivery and performance by Scott of the Lease and this Estoppel Agreement have been duly authorized by all necessary corporate action, and do not require any further consents or approvals which have not been obtained, or violate any provision of any law, regulation, order, judgment, injunction or similar matters or breach any agreement presently in effect with respect to or binding on Scott; (b) This Estoppel Agreement is the legal, valid and binding obligation of Scott, and this Estoppel Agreement and the Lease are enforceable against Scott in accordance with their terms, except as such enforcement may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights generally and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and -4- (c) All government approvals necessary for the execution and delivery of and performance by Scott of its obligations under the Lease have been obtained and are in full force and effect. 17. All notices required or permitted hereunder shall be in writing and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by telefacsimile and (c) if otherwise delivered, upon the earlier of receipt or two (2) business days after being sent registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to Scott: Scott Paper Company Scott Plaza Philadelphia, Pennsylvania 19113-1585 Attn: Thomas C. Deas, Jr. FAX: (215) 522-5665 with copy to: Skadden, Arps, Slate, Meagher & Flom 1440 New York Avenue, N.W. Washington, D.C. 20005 Attn: Martin Klepper, Esq. FAX: (202) 393-5760 If to the Lender: Bankers Trust (Delaware) c/o Bankers Trust Company Four Albany Street, 4th Floor New York, New York 10006 Attn: Corporate Trust and Agency Group FAX: 212-250-6961 with copy to: Seward & Kissel One Battery Park Plaza New York, New York 10004 Attn: Kalyan Das FAX:212-480-8421 Each party may change its address to another address within the United States by notice in accordance with this paragraph. 18. This Estoppel Agreement shall be binding upon and benefit the successors and assigns of Scott, MESC, the Lender, -5- the Secured Parties, and their respective successors, transferees and assigns (including, without limitation, any entity that refinances all or any portion of the obligations under the Financing Documents). Scott agrees to confirm such continuing obligation in writing upon the reasonable request of MESC, the Lender, the Secured Parties, or any of their respective successors, transferees and assigns. No termination, amendment, variation or waiver of any provisions of this Estoppel Agreement shall be effective unless in writing and signed by Scott, the Lender and MESC. To the extent this Estoppel Agreement conflicts in any way with the Lease, this Estoppel Agreement is intended to modify and supersede the Lease. Any such conflict shall be resolved in favor of this Estoppel Agreement. If all or any portion of any provision of this Estoppel Agreement is held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality, or unenforceability shall not affect any other provision of this Estoppel Agreement. This Estoppel Agreement shall be governed by the laws of the State of New York, without reference to principles of conflicts of laws (other than Section 5-1401 of the New York General Obligations Law). 19. Notwithstanding anything in the Lease to the contrary, the parties hereto agree that the effectiveness of this Estoppel Agreement, and the rights of the Lender as a leasehold mortgagee under the Lease and hereunder, shall in no way be conditional on the recording of this Estoppel Agreement. 20. This Estoppel Agreement may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 21. It is expressly understood and agreed by the parties hereto that this Estoppel Agreement has been executed by Bankers Trust (Delaware), not in its individual capacity, but solely as Collateral Agent for the Secured Parties in the exercise of the power and authority conferred and vested in it. -6- IN WITNESS WHEREOF, Scott, by its officer thereunto duly authorized, has duly executed this Estoppel Agreement as of the date first set forth above. SCOTT PAPER COMPANY, a Pennsylvania corporation By: /s/ Name: Thomas C. Deas, Jr. Title: Assistant Treasurer Accepted and agreed to: BANKERS TRUST (DELAWARE), as the Lender By: /s/ Name: James H. Stallkamp Title: President MOBILE ENERGY SERVICES COMPANY, L.L.C., an Alabama limited liability company By: /s/ Name: Christopher J. Kysar Title: Vice President STATE OF PENNSYLVANIA ) ) ss.: COUNTY OF DELAWARE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Thomas C. Deas, Jr. whose name as Assistant Treasurer of Scott Paper Company, a Pennsylvania corporation, is signed to the foregoing Estoppel, Consent and Recognition Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and seal this the 18th day of August, 1995. /s/ (seal) Notary Public STATE OF DELAWARE ) ) ss.: COUNTY OF NEW CASTLE ) I, the undersigned Notary Public in and for said County in said State, hereby certify that James H. Stallkamp whose name as President of Bankers Trust (Delaware), a Delaware banking corporation, is signed to the foregoing Estoppel, Consent and Recognition Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said Delaware banking Corporation. Given under my hand and seal this the 21st day of August, 1995. /s/ (seal) Notary Public -8- STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, the undersigned Notary Public in and for said County in said State, hereby certify that Chris Kysar whose name as Vice President of Mobile Energy Services Company, L.L.C., an Alabama limited liability companyon, is signed to the foregoing Estoppel, Consent and Recognition Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer and with full authority, executed the same voluntarily for and as said corporation. Given under my hand and seal this the 23rd day of August, 1995. /s/ (seal) Notary Public EXHIBIT "A" Property Description of Leased Premises ALL that certain plot, piece or parcel of land, situate, lying and being in the City of Mobile, County of Mobile, and State of Alabama, bounded and described as follows: Parcel I Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the Office of the Judge of Probate of Mobile County, Alabama, said point being 3570.10 feet North and 431.54 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270056.327 and East 326422.733; Thence N-10-53'-56"-W for 356.22 ft.; Thence S-89-01'-08"-E for 105.36 ft.; Thence S-68-5 2'-49"-E for 194.97 ft.; Thence S-15-17'-38"-E for 241.11 ft.; Thence S-80-56'-54"-W for 287.04 ft. to the Point of Beginning. Said Parcel (the "East Fuel Tank Parcel") lying and being in Lot 11 of the Scott Paper Company Subdivision and containing 1.968 acres, more or less. LESS AND EXCEPT: Beginning at a point 38.85 feet South and 7.65 feet West of the North East corner of the Parcel described above, said point being at Alabama State Plane Coordinate, (West Zone, NAD 1927), North 270295.212 and East 326634.957; Thence S-42-00'-44"-W for 42.00 ft.; Thence N-47-59'-16"-W for 50.00 ft.; Thence N-42-00'-44"-E for 42.00 ft.; Thence S-47-59'-16"-E for 50 ft. to the Point of Beginning. Said Parcel (the "Excluded Parcel") lying entirely within the East Fuel Tank Parcel described above and containing 2100.00 square feet, more or less. Parcel II Beginning at a point in Lot 11 of the Scott Paper Company Subdivision as recorded in Map Book 64, Page 39, in the office of the judge of Probate of Mobile County, Alabama: Said point being 2027.703 feet North and 2186.144 feet East of the Site of the Great Magnolia, and at Alabama State Plane Coordinate, West Zone, NAD 1927, North 268513.927, East 328177.335: Thence N-41(degree)-44'-09"-E for 195.20 feet; Thence S-26(degree)-32'-42"-E for 119.38 feet; Thence S-34(degree)-20'-56"-E for 102.00 feet; Thence S-41(degree)-44'-09"-W for 144.25 feet; Thence Northwesterly, around a curve to the left having a radius of 438.67 feet and a Delta angle of 27(degree)-48'-23", the Chord of which bears N-43(degree)-25'-40"-W for 210.66 feet, for an arc distance of 212.74 feet to the Point of Beginning. Said Parcel lying and being entirely within -10- the boundaries of Lot 11 of the aforesaid Scott Paper Company Subdivision, and containing 0.759 acres, more or less. -11- EX-10.53 25 Exhibit 10.53 Executed Copy $255,210,000 MOBILE ENERGY SERVICES COMPANY, L.L.C. 8.665% First Mortgage Bonds due 2017 unconditionally guaranteed by MOBILE ENERGY SERVICES HOLDINGS, INC. Underwriting Agreement August 15, 1995 Goldman, Sachs & Co. Bear, Stearns & Co. Inc. Lehman Brothers Inc. c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: Mobile Energy Services Company, L.L.C., an Alabama limited liability company (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to you severally (the "Underwriters") an aggregate of $255,210,000 principal amount of its First Mortgage Bonds set forth above (the "Securities") to be issued pursuant to the provisions of the Trust Indenture dated as of August 1, 1995 (the "Indenture") among the Company, Mobile Energy Services Holdings, Inc., an Alabama corporation ("Mobile Energy" and, together with the Company, the "Mobile Energy Parties"), and First Union National Bank of Georgia, a national banking association organized and existing under the laws of the United States of America ("First Union"), as trustee (the "Trustee"). The Company's obligations with respect to the Securities will be guaranteed by Mobile Energy. Terms used but not otherwise defined herein shall have the respective meanings assigned to them in the Indenture. 1. Each of the Mobile Energy Parties jointly and severally represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-1 (File No. 33- 92776) in respect of the Securities has been filed with the Securities and Exchange Commission (the "Commission"); such registration statement and any post-effective amendment thereto, each in the form heretofore delivered to the Underwriters, have been declared effective by the Commission in such form; no other document with respect to such registration statement has heretofore been filed with the Commission (other than the Application for Confidential Treatment of specified provisions of certain Project Contracts filed as exhibits to such registration statement); and no stop order suspending the effectiveness of such registration statement has been issued and no proceeding for that purpose has been initiated or, to the knowledge of either of the Mobile Energy Parties after due inquiry, threatened by the Commission; any preliminary prospectus included in such registration statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act of 1933, as amended (the "Act"), is hereinafter called a "Preliminary Prospectus"; the various parts of such registration statement, including all exhibits (other than Form T-1) thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of such registration statement at the time it was declared effective, each as amended at the time such part of such registration statement became effective, are hereinafter collectively called the "Registration Statement"; and such form of final prospectus, in the form first filed pursuant to Rule 424(b) under the Act and including all appendices thereto, is hereinafter called the "Prospectus." (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission; each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the Commission thereunder; and the Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder. (c) The Registration Statement does not and will not, as of the applicable effective date of the Registration Statement and any amendment thereto, contain an untrue statement of a material fact or omit to state a material fact required to be 2 stated therein or necessary to make the statements therein not misleading; the Preliminary Prospectus, Subject to Completion, dated July 20, 1995 (the "Circulated Preliminary Prospectus") did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Prospectus does not and will not, as of the applicable filing date of the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions (i) made in reliance upon and in conformity with information furnished in writing to the Mobile Energy Parties by the Underwriters expressly for use therein or (ii) in Appendices B and C to the Circulated Preliminary Prospectus or to the Prospectus. (d) Neither of the Mobile Energy Parties has sustained, since the date of the latest audited financial statements included in the Prospectus, any material loss or interference with its business from fire, explosion, flood, hurricane or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock or long-term debt of either of the Mobile Energy Parties or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, properties, financial position, business prospects, shareholders' or other equity, results of operations or otherwise of either of the Mobile Energy Parties otherwise than as set forth or contemplated in the Prospectus. (e) Each of the Mobile Energy Parties has good and marketable title in fee simple to all real property and good and marketable title to all personal property described in the Prospectus as being owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Mobile Energy Parties; any real property and buildings described in the Prospectus as being held under lease by the Company are held by the Company under valid and subsisting leases, enforceable against the Company, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company; the easements, licenses and other rights granted or to be granted to either of the Mobile Energy Parties pursuant 3 to the terms of the Project Contracts provide or will provide the Company with all rights and property interests required to enable the Company to obtain all material services, materials or rights (including rights of access) required for the operation and maintenance of the Energy Complex, as contemplated by the Prospectus, other than those services, materials or rights that reasonably can be expected to be obtainable in the ordinary course of business; and Mobile Energy's only material assets consist of its ownership interest in the Company and its rights in respect of the Southern Master Tax Sharing Agreement. (f) The Company has been duly formed and is validly existing as a limited liability company in good standing under the laws of the State of Alabama, with requisite limited liability company power and authority to own its properties and conduct its business as described in the Prospectus and to execute, deliver and perform its obligations under this Agreement and each other Project Document to which it is, or as of the Time of Delivery (as defined in Section 4(a) hereof) will be, a party and to consummate the transactions contemplated hereby and thereby, including the issuance and sale of the Securities as provided herein, and has been duly qualified as a foreign limited liability company for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases property or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction. (g) Mobile Energy has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Alabama, with requisite corporate power and authority to own its properties and conduct its business as described in the Prospectus, and to execute, deliver and perform its obligations under this Agreement and each other Project Document to which it is, or as of the Time of Delivery will be, a party and to consummate the transactions contemplated hereby and thereby, including the issuance of the Guaranty as provided in the Indenture, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction. (h) The Company is, and as of the Time of Delivery will be, wholly-owned by Mobile Energy and Southern Electric International, Inc., a Delaware corporation ("Southern Electric"); each of Mobile Energy and Southern Electric is, and as of the Time of Delivery will be, wholly-owned by The Southern Company, a Delaware corporation ("Southern"); each of the Mobile Energy Parties has an authorized capitalization as 4 set forth in the Prospectus, and all of the outstanding equity interests of each of the Mobile Energy Parties have been duly and validly authorized and issued, are fully paid, nonassessable and not subject to any preemptive or similar rights and have been issued in accordance with applicable federal and state securities laws; as of the Time of Delivery, the equity interests of each of the Mobile Energy Parties will be free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or adverse interest of any nature; and neither of the Mobile Energy Parties has outstanding any securities convertible into or exchangeable for any of its equity interests or any rights to subscribe for or to purchase, or any warrants or options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any such equity interests. (i) Neither of the Mobile Energy Parties has engaged in any business or activity other than in connection with the acquisition, development, ownership, operation and financing of the Energy Complex as contemplated by the Project Documents to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party. (j) The Securities have been duly authorized and, when authenticated by the Trustee in accordance with the Indenture and purchased by the Underwriters pursuant to this Agreement, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of each of the Mobile Energy Parties entitled to the benefits provided by the Indenture, which will be substantially in the form filed as an exhibit to the Registration Statement; the Indenture has been duly authorized by each of the Mobile Energy Parties and duly qualified under the Trust Indenture Act and, when executed and delivered, will constitute a valid and legally binding instrument, enforceable against each of the Mobile Energy Parties in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether enforcement is considered in a proceeding in equity or law, to the discretion of the court before which any proceeding therefor may be brought and to public policy that may limit rights to indemnification; and the Securities and the Indenture will conform in all material respects to the descriptions thereof in the Prospectus. (k) This Agreement has been duly authorized, executed and delivered by each of the Mobile Energy Parties and constitutes a valid and legally binding obligation of each of the Mobile Energy Parties, enforceable against each of the Mobile Energy Parties in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, 5 reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether enforcement is considered in a proceeding in equity or law, to the discretion of the court before which any proceeding therefor may be brought and to public policy or federal or state securities law that may limit rights to indemnification. (l) Each of the Financing Documents (other than the Securities, the Indenture and this Agreement), which, if the form thereof was filed as an exhibit to the Registration Statement, will be substantially in such form, to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party has been duly authorized by such Mobile Energy Party and, when executed and delivered by the parties thereto, will constitute a valid and legally binding obligation of such Mobile Energy Party, enforceable against such Mobile Energy Party in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether enforcement is considered in a proceeding in equity or law, to the discretion of the court before which any proceeding therefor may be brought and to public policy that may limit rights to indemnification; and the Financing Documents will conform in all material respects to the descriptions thereof in the Prospectus. (m) Each of the Project Contracts to which either of the Mobile Energy Parties is a party has been duly authorized, executed and delivered by such Mobile Energy Party, and constitutes a valid and legally binding obligation of such Mobile Energy Party, enforceable against such Mobile Energy Party in accordance with its terms (other than with respect to (i) liquidated damages, (ii) Step-In Rights (as defined in the Master Operating Agreement), (iii) arbitration and (iv) agreements to agree at future dates, as to which no representation or warranty is made), subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether considered in a proceeding in equity or law, to the discretion of the court before which any proceeding therefor may be brought and to public policy that may limit rights to indemnification; the Project Contracts conform in all material respects to the descriptions thereof in the Prospectus; neither of the Mobile Energy Parties nor, to the knowledge of either of the Mobile Energy Parties, any other party to any Project Contract is in default (and, to the knowledge after due inquiry of either of the Mobile Energy Parties, no event has occurred that with lapse of time or notice or action by a 6 third party would result in a default) in any material respect in the performance of or compliance with any term or provision in any Project Contract; and no material force majeure event has occurred and is continuing under any Project Contract. (n) The issue and sale of the Securities by Company, the issue of the Guaranty by Mobile Energy, the execution, delivery and performance by each of the Mobile Energy Parties of the Securities, the Indenture, this Agreement and the other Financing Documents to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party and the consummation of the transactions contemplated hereby and thereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which either of the Mobile Energy Parties is a party or by which either of the Mobile Energy Parties is bound or to which any of the property or assets of either of the Mobile Energy Parties is subject, nor will such action result in any violation of the provisions of the Articles of Organization of the Company or the Operating Agreement or the Certificate of Incorporation or By-laws of Mobile Energy or any law or statute or any order, rule or regulation, judgment or decree of any Governmental Authority having jurisdiction over either of the Mobile Energy Parties or any of their properties; and no Governmental Approval of any Governmental Authority having jurisdiction over either of the Mobile Energy Parties or any of their properties is required for the issue and sale of the Securities by the Company, the issue of the Guaranty by Mobile Energy, the execution, delivery and performance by each of the Mobile Energy Parties of the Securities, the Indenture, this Agreement and the other Financing Documents to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party, or the consummation by each of the Mobile Energy Parties of the transactions contemplated hereby and thereby, except for the registration of the Securities and the Guaranty under the Act, the qualification of the Indenture under the Trust Indenture Act and the approval of the Commission under the Public Utility Holding Company Act of 1935, as amended (the "PUHCA"), and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or blue sky laws in connection with the purchase and distribution of the Securities by the Underwriters. (o) The execution, delivery and performance by each of the Mobile Energy Parties of the Project Contracts to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party and the consummation of the transactions contemplated thereby will not conflict with or result in a breach or violation of any of the material terms or provisions of, or constitute a default under, any material 7 indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which either of the Mobile Energy Parties is a party or by which either of the Mobile Energy Parties is bound or to which any of the property or assets of either of the Mobile Energy Parties is subject, nor will such action result in any violation of the provisions of the Articles of Organization of the Company or the Operating Agreement or the Certificate of Incorporation or By-laws of Mobile Energy or any material law or statute or any material order, rule or regulation, judgment or decree of any Governmental Authority having jurisdiction over either of the Mobile Energy Parties or any of their properties; and no Governmental Approval (including any Environmental Requirement) of any Governmental Authority having jurisdiction over either of the Mobile Energy Parties or any of their properties is required for the execution, delivery and performance by each of the Mobile Energy Parties of the Project Contracts to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party, or the consummation by each of the Mobile Energy Parties of the transactions contemplated thereby, except for such Governmental Approvals as have been, or (in the ordinary course of business without substantial delay in, or material impairment to, the consummation by the Mobile Energy Parties of such transactions) will be, obtained. (p) The issue and sale of the Securities by the Company, the issue of the Guaranty by Mobile Energy, the execution, delivery and performance by each of the Mobile Energy Parties of the Securities, the Indenture, this Agreement and the other Project Documents to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party, and the consummation of any of the other transactions contemplated hereby or thereby, do not and will not result in the creation or imposition of any Liens (other than Permitted Liens) on any of the Indenture Securities Collateral. (q) When the Securities are authenticated by the Trustee in accordance with the Indenture and purchased by the Underwriters pursuant to this Agreement, (i) the Securities will rank pari passu without any preference among themselves, (ii) the Liens granted under the Security Documents will constitute valid Liens on the Indenture Securities Collateral, (iii) the Liens on such of the Indenture Securities Collateral (A) in which a Lien may be perfected by the filing of a financing statement under the Uniform Commercial Code, upon the filing of the necessary financing statements in all appropriate jurisdictions, (B) possession of which is required to perfect the Lien thereon, upon the possession by, in the case of the Shared Collateral, the Collateral Agent and, in the case of the other Indenture Securities Collateral, the Trustee and (C) in which a Lien may otherwise be perfected under the Uniform Commercial Code, will be, in the case of 8 clauses (A), (B) (C) above, perfected and, subject to the priority of payment of proceeds of Receivables and Fuel Inventory to the Working Capital Facility Provider as provided in the Intercreditor Agreement and except for Permitted Liens, superior and prior to the rights of all other Persons now existing or hereafter arising, (iv) the Lien of the Mortgage will constitute, except for exceptions that are set forth on Schedule B--Section 2 of the Title Policy (to the extent that such exceptions have not been released or subordinated prior to the Time of Delivery), a valid first priority Lien of record on all of the Mortgaged Property (as defined in the Mortgage) and (v) the Underwriters will have good and marketable title to the Securities, subject to no defenses by either of the Mobile Energy Parties (all of which are hereby waived). (r) The Company is not in violation of its Articles of Organization or the Operating Agreement and Mobile Energy is not in violation of its Certificate of Incorporation or Bylaws; and neither of the Mobile Energy Parties is in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is, or as of the Time of Delivery will be, a party or by which it or any of its properties may be bound, which default would reasonably be expected to have a material adverse effect on either of the Mobile Energy Parties. (s) The statements set forth in the Prospectus, insofar as they purport to constitute summaries of the terms of the Securities, the provisions of the Project Documents and Debt of the Company referred to therein and the provisions of the laws and the other regulatory and environmental matters referred to therein, are accurate and fair. (t) There are no legal or governmental proceedings pending to which either of the Mobile Energy Parties is a party or to which any of the properties of either of the Mobile Energy Parties is subject that (i) if determined adversely to either of the Mobile Energy Parties would individually or in the aggregate have a material adverse effect on the business (financial or otherwise), properties or business prospects of either of the Mobile Energy Parties or materially and adversely affect the ability of either of the Mobile Energy Parties to perform its obligations hereunder or under any other Project Document or materially and adversely affect the ownership, use, possession, operations or maintenance of the Energy Complex or any part thereof or the transactions contemplated hereunder or under any other Project Document or (ii) questions the validity, enforceability or performance of this Agreement or any other Project Document to which either of the Mobile Energy Parties is, or as of the Time of Delivery will be, a party and, to the knowledge of either of the Mobile Energy Parties after due inquiry, no such 9 proceedings are threatened or contemplated by any Governmental Authority or threatened by others. (u) The assumptions described by Stone & Webster Engineering Corporation (the "Independent Engineer") as assumptions underlying the financial projections of annual revenues and expenses of the Company during the term of the Securities, including debt service coverage ratios (the "Projections"), and contained in the report with respect to certain technical, environmental and economic aspects of the Energy Complex prepared by the Independent Engineer, which is included in the Prospectus as Appendix B thereto (the "Independent Engineer's Report"), are, in the opinion of each of the Mobile Energy Parties, reasonable; the information provided by each of the Mobile Energy Parties to the Independent Engineer as the basis for the Projections has been prepared in good faith by the Mobile Energy Parties; neither of the Mobile Energy Parties knows of any facts or circumstances relating to its present or proposed business that should be set forth in the Prospectus as assumptions for purposes of consideration of the Projections, taken as a whole, and are not so set forth; the Projections have been reviewed by, and accepted as having a reasonable basis and included in the Prospectus in good faith by, each of the Mobile Energy Parties. (v) Neither of the Mobile Energy Parties believes that the assumptions described by Jaakko Poyry Consulting, Inc. (the "Paper Consultant") as part of the assessment of the long-term business viability of and the risk of production curtailment at the Mills (the "Mill Assessment") contained in the report with respect to the Mills prepared by the Paper Consultant, which is included in the Prospectus as Appendix C thereto (the "Paper Consultant's Report"), are not reasonable; the information provided by each of the Mobile Energy Parties to the Paper Consultant in connection with the Mill Assessment has been prepared in good faith by the Mobile Energy Parties; neither of the Mobile Energy Parties knows of any facts or circumstances relating to its present or proposed business that should be set forth in the Prospectus as assumptions for purposes of consideration of the Mill Assessment, taken as a whole, and are not so set forth; the Mill Assessment has been reviewed by, and accepted as having a reasonable basis and included in the Prospectus in good faith by, each of the Mobile Energy Parties. (w) The statements made in the Prospectus (other than the Projections and the Mill Assessment) within the coverage of Rule 175(b) under the Act were made by each of the Mobile Energy Parties with a reasonable basis and in good faith. (x) Except as disclosed in the Prospectus, (i) each of the Mobile Energy Parties, Southern and Southern Electric and, to the knowledge of either of the Mobile Energy Parties, 10 Southern Company Services, Inc., an Alabama corporation ("SCS"), Scott Paper Company, a Pennsylvania corporation ("Scott"), S.D. Warren Company, a Pennsylvania corporation ("S.D. Warren"), and the other parties to the Project Contracts (each of the Mobile Energy Parties, Southern, Southern Electric, SCS, Scott, S.D. Warren and such other parties, a "Project Participant" and, collectively, the "Project Participants") has complied and is complying in all material respects with all applicable environmental laws pertaining to the Energy Complex and the Site, (ii) there are no circumstances that would prevent or interfere in any material respect with the abilities of (A) to the knowledge of either of the Mobile Energy Parties after due inquiry, the Mobile Energy Parties and Southern Electric to operate and maintain the Energy Complex or (B) to the knowledge of either of the Mobile Energy Parties, Scott and S.D. Warren to operate and maintain the Mills as contemplated by the Project Documents in material compliance with all applicable environmental laws, (iii) all material Governmental Approvals required under applicable environmental laws to operate the Energy Complex are identified in the Prospectus, (iv) there is no governmental claim pending or, to the knowledge of either of the Mobile Energy Parties after due inquiry, threatened against either of the Mobile Energy Parties, Southern or Southern Electric or, to the knowledge of either of the Mobile Energy Parties, pending or threatened against Scott, S.D. Warren or any other Project Participant or their respective properties that would be material to the business (financial or otherwise), properties or business prospects of either of the Mobile Energy Parties, (v) to the knowledge of either of the Mobile Energy Parties after due inquiry, there is no environmental law proposed or expected to be proposed that would be material to the business (financial or otherwise), properties or business prospects of either of the Mobile Energy Parties, (vi) to the knowledge of either of the Mobile Energy Parties after due inquiry, the Site does not contain or have deposited thereon any hazardous material in excess of permitted levels, concentrations, standards or other limitations under applicable environmental laws, (vii) to the knowledge of either of the Mobile Energy Parties after due inquiry, there are no present or past actions, activities, circumstances and conditions, events or incidents, including the release, emission, discharge, presence or disposal of hazardous materials, for which applicable environmental laws could provide the basis to incur any material obligation, liability, loss, claim, judgment, discharge, penalty, fee or other cost arising from (A) the presence or release into the environment of any hazardous material or (B) any violation of any applicable environmental law and (viii) to the knowledge of either of the Mobile Energy Parties after due inquiry, (A) no underground storage tanks are located on the Site, (B) there is no asbestos contained in, forming part of or contaminating any part of the Site, (C) no poly chlorinated biphenyls are used or stored at or contaminate any part of the 11 Site and (D) no nuclear material has been brought onto the Site that, in the case of each of clause (A) through (D) above, would be material to the business (financial or otherwise), properties or business prospects of either of the Mobile Energy Parties; and, except as so disclosed in the Prospectus, none of such environmental matters, either individually or in the aggregate, has resulted in or will result in a material adverse change in the business (financial or otherwise) of the Mobile Energy Parties. For purposes hereof, the term "applicable environmental laws" means those federal, state or local environmental laws, ordinances and regulations duly adopted, promulgated, effective and applicable to the Energy Complex as of the date hereof or the Time of Delivery (as the case may be). (y) Neither of the Mobile Energy Parties is, or at the Time of Delivery will be, an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). (z) Neither First Union, in its capacity as the Trustee and the Tax-Exempt Indenture Trustee, or Bankers Trust (Delaware), a Delaware banking corporation ("Bankers Trust"), in its capacity as the Collateral Agent, nor any holder of the Securities will be as of the Time of Delivery (under applicable law as in effect as of the Time of Delivery and solely as a result of the ownership, maintenance and operation of the Energy Complex by the Mobile Energy Parties as described in the Prospectus, the purchase and ownership of the Securities or any other transaction contemplated by the Financing Documents (other than the exercise of remedies thereunder)) subject to regulation under the Federal Power Act of 1920, as amended (the "FPA"), or by the State of Alabama Public Service Commission or otherwise be subject to rate regulation under federal, state or local law; neither of the Mobile Energy Parties is, or at the Time of Delivery will be, subject to rate regulation under federal, state or local law; and neither the execution, delivery and performance by each of the Mobile Energy Parties of all the provisions of the Project Documents to which either of the Mobile Energy Parties is, or at the Time of Delivery will be, a party nor the consummation of the transactions contemplated thereby will violate Chapter 14 of Title 37 of the Code of Alabama (1975): Service Territories for Electric Suppliers (the "Alabama Territorial Law"). (aa) Each of the Mobile Energy Parties has filed, or caused to be filed, all tax and information returns that are required to have been filed by it in any jurisdiction and has paid (prior to their delinquency dates) all taxes shown to be due and payable on such returns and all other taxes and assessments payable by it, to the extent the same have become 12 due and payable, except to the extent there is a Good Faith Contest thereof by the Mobile Energy Parties. (bb) Neither of the Mobile Energy Parties, nor any other Person who is a member of a controlled group of corporations or a group of trades or businesses under common control with the Mobile Energy Parties (within the meaning of Section 414 of the Code), has (i) failed to fulfill its obligations under or to comply in any material respect with the requirements of ERISA or the Code with respect to any employee benefit plans, (ii) sought a waiver of the minimum funding standard of Section 412 of the Code, (iii) failed to make any contribution or payment to or in respect of any employee benefit plan required to be made by law or by the terms of such plan, (iv) made any amendment to any employee benefit plan that has resulted or could result in the imposition of a lien or the posting of a bond or other security under ERISA or the Code or (v) incurred any liability under Title IV of ERISA other than a liability to the Pension Benefit Guaranty Corporation for premiums under Section 4007 of ERISA, if, as a result of any such event or condition set forth in clauses (i) through (v) above, together with all such other events or conditions, either of the Mobile Energy Parties has incurred or is reasonably likely to incur, or any other member of such controlled group has incurred or is reasonably likely to incur a liability for which such Mobile Energy Party would be subject to, a liability that is material in relation to the financial position of such Mobile Energy Party. (cc) There are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not so described or filed. (dd) Neither the Mobile Energy Parties nor their respective affiliates does business with the government of Cuba within the meaning of Section 517.075, Florida Statutes. (ee) Arthur Andersen LLP, who have certified certain consolidated financial statements of Mobile Energy, are independent public accountants with respect to the Mobile Energy Parties as required by the Act and the rules and regulations of the Commission thereunder. 2. Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each of the Underwriters, and the Underwriters agree, severally and not jointly, to purchase from the Company, at a purchase price of 99.125% of the principal amount thereof, the principal amount of Securities set forth opposite the name of such Underwriter in Schedule I hereto. 3. Upon the authorization by the Underwriters of the release of the Securities, the several Underwriters propose to offer the 13 Securities for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Securities to be purchased by each Underwriter hereunder will be represented by one or more definitive global Securities in book-entry form that will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian. The Company will deliver the Securities to Goldman, Sachs & Co., for the account of each Underwriter, against payment by or on behalf of such Underwriters of the purchase price therefor by, at the option of the Company, certified official bank check or checks, payable to the order of the Company in federal (same day) funds, or wire transfer of federal (same day) funds to an account designated by the Company, by causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at DTC. The Company will cause the certificates representing the Securities to be made available to Goldman, Sachs & Co. for checking at least twenty-four hours prior to the Time of Delivery at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be 10:00 a.m., New York City time, on August 24, 1995 or such other time and date as the Underwriters and the Mobile Energy Parties may agree upon in writing. Such time and date are herein called the "Time of Delivery." (b) The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Securities and any additional documents requested by the Underwriters pursuant to Section 7(aa) hereof, will be delivered at the offices of Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York (the "Closing Location"), and the Securities will be delivered at the Designated Office, all at the Time of Delivery. A meeting will be held at the Closing Location at 9:30 a.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close. 5. Each of the Mobile Energy Parties agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by the Underwriters and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus that shall be 14 reasonably disapproved by Goldman, Sachs & Co., on behalf of the Underwriters, promptly after reasonable notice thereof; to advise the Underwriters, promptly after it receives notice thereof, of the time when the Registration Statement, or any amendment thereto, has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Underwriters with copies thereof; to advise the Underwriters, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus relating to the Securities, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus relating to the Securities or suspending any such qualification, to promptly use its best efforts to obtain the withdrawal of such order. (b) Promptly from time to time to take such action as the Underwriters may reasonably request to qualify the Securities for offering and sale under the securities laws of such United States jurisdictions as the Underwriters may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities, provided that in connection therewith neither of the Mobile Energy Parties shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction. (c) To furnish the Underwriters with copies of the Prospectus in such quantities as the Underwriters may from time to time reasonably request, and, if the delivery of a prospectus relating to the Securities is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Securities and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus in order to comply with the Act or the Trust Indenture Act, to notify the Underwriters and upon the request of the Underwriters to prepare and furnish without charge to the Underwriters and to any dealer in securities as many copies as the Underwriters may from time to time 15 reasonably request of an amended Prospectus or a supplement to the Prospectus that will correct such statement or omission or effect such compliance; and, in case the Underwriters are required to deliver a prospectus in connection with sales of any of the Securities at any time nine months or more after the time of issue of the Prospectus, upon request of the Underwriters but at the expense of the Underwriters, to prepare and deliver to the Underwriters as many copies as the Underwriters may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act. (d) To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earning statement of the Mobile Energy Parties (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Mobile Energy Parties, Rule 158 under the Act). (e) During the period beginning from the date hereof and continuing to and including the Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, any securities of either of the Mobile Energy Parties (other than obligations in respect of the Tax- Exempt Bonds) that are substantially similar to the Securities. (f) To furnish to the Trustee and the holders of the Securities (or any beneficial interest therein requesting the same in writing) the documents specified in, and otherwise in accordance with the provisions of, Section 5.3 of the Indenture as in effect at the Time of Delivery. (g) During a period of three years from the effective date of the Registration Statement, to (i) furnish to the Underwriters copies of all reports or other communications (financial or other) furnished generally to securityholders (in their capacities as such and not in their capacities as directors, officers or managers (as the case may be) of either of the Mobile Energy Parties) of either of the Mobile Energy Parties and (ii) deliver to the Underwriters as soon as they are available, (A) copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which the Securities or any class of securities of either of the Mobile Energy Parties may be listed and (B) the documents specified in Sections 5.3 and 10.4 of the Indenture as in effect at the Time of Delivery. (h) To use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds." 16 (i) To file with the Commission such reports on Form SR as may be required by Rule 463 under the Act. 6. Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, each of the Mobile Energy Parties covenant and agree with the several Underwriters that, as between the Underwriters and the Mobile Energy Parties, the Mobile Energy Parties will pay or cause to be paid, and will hold the Underwriters harmless against, the following: (a) the fees, disbursements and expenses of counsel and accountants for each of the Mobile Energy Parties in connection with the registration of the Securities under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (b) the cost of printing or producing this Agreement, the other Financing Documents, the blue sky survey and any legal investment memoranda relating to the qualification of the Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (c) all expenses in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the blue sky survey and any legal investment memoranda relating thereto; (d) any fees charged by securities rating services for rating the Securities; (e) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Securities; (f) the cost of preparing the Securities; (g) the fees, disbursements and expenses of each of the Trustee, the Tax-Exempt Indenture Trustee and the Collateral Agent and any agents thereof (or any agent of either of the Mobile Energy Parties appointed under the Financing Documents) and the fees and disbursements of their respective counsel; (h) the fees, disbursements and expenses of counsel for the Underwriters and all other expenses incurred by the Underwriters in connection with the offering of the Securities, including, without limitation, advertising, marketing and other out-of-pocket expenses; (i) the fees, disbursements and expenses of the Independent Engineer, the Paper Consultant, the Environmental Consultant (as defined in Section 7(s) hereof), the Independent Insurance Consultant (as defined in Section 7(t) hereof) and the Engineering Consultant (as defined in Section 7(u) hereof); (j) the fees and expenses relating to the issuance of the Title Policy (as defined in Section 7(n) hereof), the preparation of any surveys relating to the Site or the site of the Mobile Facility and the filing and/or recordation of certain of the Financing Documents; and (k) all other costs and expenses incident to the performance of the obligations of either 17 of the Mobile Energy Parties hereunder that are not otherwise specifically provided for in this Section 6. 7. The obligations of the Underwriters hereunder shall be subject to the condition that all representations and warranties and other statements of each of the Mobile Energy Parties herein are, at and as of the Time of Delivery, true and correct, to the condition that each of the Mobile Energy Parties shall have performed all of their respective obligations hereunder theretofore to be performed and to the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to the reasonable satisfaction of the Underwriters. (b) Winthrop, Stimson, Putnam & Roberts, counsel for the Underwriters, shall have furnished to the Underwriters their written opinion, dated the Time of Delivery, with respect to such matters as the Underwriters may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. (c) Each of Balch & Bingham, Latham & Watkins and Troutman Sanders LLP (as the case may be), counsel for the Mobile Energy Parties, shall have furnished to the Underwriters their written opinion or opinions, dated the Time of Delivery, substantially to the effect, together with such changes as to legal matters as may be acceptable to counsel for the Underwriters, that: (i) the Company has been duly formed and is validly existing as a limited liability company in good standing under the laws of the State of Alabama, with requisite limited liability company power and authority to own its properties and conduct its business as described in the Prospectus, to execute, deliver and perform its obligations under this Agreement and each other Project Document to which it is a party and to consummate the transactions contemplated hereby and thereby, including the issuance and sale of the Securities as provided herein; (ii) Mobile Energy has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Alabama, with requisite 18 corporate power and authority to own its properties and conduct its business as described in the Prospectus, to execute, deliver and perform its obligations under this Agreement and each other Project Document to which it is a party and to consummate the transactions contemplated hereby and thereby, including the issuance of the Guaranty as provided in the Indenture; (iii) under the laws of each other jurisdiction in which either of the Mobile Energy Parties, to the knowledge of such counsel, owns or leases properties or conducts any business so as to require qualification as a foreign corporation for the transaction of business, each such Mobile Energy Party has been, based solely upon certificates of public officials, duly qualified as a foreign corporation and is in good standing or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; (iv) the Company is wholly-owned by Mobile Energy and Southern Electric, and Mobile Energy is wholly-owned by Southern; each of the Mobile Energy Parties has an authorized capitalization as set forth in the Prospectus; all of the outstanding equity interests of each of the Mobile Energy Parties have been duly authorized and validly issued, are fully paid and non-assessable and are not subject to any preemptive or similar rights; to the knowledge of such counsel, the outstanding equity interests of each of the Mobile Energy Parties are free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or adverse interest of any nature; and, to the knowledge of such counsel, neither of the Mobile Energy Parties has outstanding any securities convertible into or exchangeable for any of its equity interests or any rights to subscribe for or to purchase, or any warrants or options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any such equity interests; (v) to the knowledge of such counsel based solely upon a review of the public docket records of the state and federal courts located in New York County, New York and Mobile County, Alabama, the state courts located in DeKalb County, Georgia and the federal courts located in Fulton County, Georgia, and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending or threatened to which either of the Mobile Energy Parties is a party, or of which any property of either of the Mobile Energy Parties is the subject, that (A) could reasonably be expected to have a material adverse effect on either of the Mobile Energy 19 Parties or any of their respective properties or materially and adversely affect the ownership, use, possession, operation or maintenance of the Energy Complex or any part thereof or the transactions contemplated hereunder or under any other Project Document or (B) questions the validity, enforceability or performance of this Agreement or any other Project Document to which either of the Mobile Energy Parties is a party; (vi) this Agreement has been duly authorized, executed and delivered by each of the Mobile Energy Parties; (vii) the Securities have been duly authorized, executed and delivered by the Company and (with respect to the Guaranty) Mobile Energy and, when issued and authenticated by the Trustee in accordance with the Indenture and purchased by the Underwriters pursuant to this Agreement, will be valid and binding obligations of the Mobile Energy Parties, enforceable against such Mobile Energy Party in accordance with their terms, and are entitled to the benefits provided by the Indenture; (viii) the Indenture has been duly authorized, executed and delivered by each of the Mobile Energy Parties and is the valid and binding agreement of such Mobile Energy Party, enforceable against such Mobile Energy Party in accordance with its terms; and the Indenture has been duly qualified under the Trust Indenture Act; (ix) each of the Financing Documents (other than the Securities, this Agreement and the Indenture) to which either of the Mobile Energy Parties is a party has been duly authorized, executed and delivered by such Mobile Energy Party and (assuming due authorization, execution and delivery by the other parties thereto) is the valid and binding obligation of such Mobile Energy Party, enforceable against such Mobile Energy Party in accordance with its terms; (x) each of the Project Contracts to which either of the Mobile Energy Parties is a party has been duly authorized, executed and delivered by such Mobile Energy Party and is the valid and binding obligation of such Mobile Energy Party, enforceable against such Mobile Energy Party in accordance with its terms; (xi) the issue and sale of the Securities by the Company, the issue of the Guaranty by Mobile Energy and the execution and delivery by each of the Mobile Energy Parties of the Securities, the Indenture, this Agreement and the other Financing Documents and the Project Contracts to which either of the Mobile Energy Parties 20 is a party and the performance of the obligations of the Mobile Energy Parties thereunder (including the grant by the Company of the Liens upon the Collateral pursuant to the Security Documents), do not and will not (A) violate any federal, New York, Alabama or Georgia statute, rule or regulation applicable to either of the Mobile Energy Parties or any of their respective properties (including, without limitation, Regulation U or X of the Board of Governors of the Federal Reserve System), (B) violate the provisions of the Articles of Organization of the Company or the Operating Agreement or the Certificate of Incorporation or By-laws of Mobile Energy, (C) result in the breach or violation of or a default under any of the Project Documents filed as an exhibit to the Registration Statement, (D) to the knowledge of such counsel, require any Governmental Approval of any Governmental Authority having jurisdiction over either of the Mobile Energy Parties or any of their respective properties, except for (1) such Governmental Approvals as may be required under state securities or blue sky laws in connection with the purchase and distribution of the Securities by the Underwriters (as to which such counsel need express no opinion) and (2) the registration of the Securities and the Guaranty under the Act, the qualification of the Indenture under the Trust Indenture Act, the approval of the Commission under the PUHCA and such other Governmental Approvals that shall have been obtained on or prior to the Time of Delivery or, in the case of the Project Contracts, are expected to be obtained on or prior to the date any such other Governmental Approval is required in the ordinary course of business without undue burden or delay or (E) result in the imposition of any Liens (other than Permitted Liens) on any of the Indenture Securities Collateral; (xii) neither First Union, in its capacity as the Trustee and the Tax-Exempt Indenture Trustee, or Bankers Trust, in its capacity as the Collateral Agent, nor any Holder of the Securities will be as of the Time of Delivery (under applicable law as in effect as of the Time of Delivery and solely as a result of the ownership, maintenance and operation of the Energy Complex by the Mobile Energy Parties as described in the Prospectus, the purchase and ownership of the Securities or any other transaction contemplated by the Financing Documents (other than the exercise of remedies thereunder)) subject to regulation under the FPA or by the State of Alabama Public Service Commission; neither of the Mobile Energy Parties is subject to rate regulation under federal law or the laws of the State of Alabama; and none of the execution, delivery and performance by each of the Mobile Energy Parties of all the provisions of the Project Documents to which such 21 Mobile Energy Party is a party will violate the Alabama Territorial Law; (xiii) an Alabama state court or federal court sitting in the State of Alabama will recognize and give effect to the governing law provisions of any Financing Document that provides for the application of the law of a jurisdiction other than the State of Alabama if such provision is reasonable, if the parties and transaction bear a reasonable relationship to the state whose law is being applied and if there are no Alabama public policy reasons not to enforce such provision. (xiv) the provisions of the Security Agreement are effective to create valid security interests in favor of the Collateral Agent, for the ratable benefit of the Senior Secured Parties (subject to the priority of payment of proceeds of Receivables and Fuel Inventory to the Working Capital Facility Provider as provided in the Intercreditor Agreement), in the Shared Collateral; the provisions of the Indenture are effective to create valid security interests in favor of the Trustee, for the ratable benefit of the Holders of the Securities, in the Indenture Securities Collateral other than the Shared Collateral; and the Liens of the Security Agreement and the Indenture on such of the Indenture Securities Collateral in which a Lien may be perfected by the filing of a financing statement under the Uniform Commercial Code, upon the filing of the necessary financing statements in all appropriate jurisdictions, will be perfected. (xv) the Security Documents to be recorded with the appropriate filing offices in the State of Alabama and the county of Mobile, Alabama and in the State of Georgia and the county of DeKalb, Georgia are in appropriate form for filing under the laws of the States of Alabama and Georgia, as applicable; the Mortgage, upon such recording, will constitute a valid mortgage Lien on all of the Mortgaged Property that can be mortgaged under the laws of the State of Alabama; the foreclosure of the Mortgage will not in any manner restrict, affect or impair the liability of either of the Mobile Energy Parties with respect to any of the Senior Debt or the rights and remedies of the Senior Secured Parties with respect to the foreclosure or enforcement of any other security interests or liens securing such Senior Debt (to the extent any of such Senior Debt remains unpaid after application of the proceeds of such foreclosure of the Mortgage); and, other than fees specified in such opinion, no taxes or recording or filing fees will be incurred by either of the Mobile Energy Parties, the Trustee or the Collateral Agent as a result of the execution, recordation or 22 filing in such offices of any of the Security Documents, including any Financing Statements; (xvi) the Company will be treated as a partnership for federal income tax purposes and will not be liable for any federal, state or local income tax; (xvii) neither of the Mobile Energy Parties is an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act; (xviii) each of the Mobile Energy Parties is a "subsidiary company" of a "holding company," as such terms are defined in the PUHCA; (xix) the statements set forth under (A) "Summary--The Company," "--The Offering," "--Additional Financing Arrangements," "--Intercreditor Arrangements" and --Flow of Funds," (B) "Business--Status of Governmental Approvals," "--The Cluster Rule and the Combustion Rule," "--Environmental Conditions," "--Environmental Indemnification" and "--Legal Proceedings," (C) "Summary of Principal Project Contracts," (D) "Role of the Independent Engineer," (E) "Description of the First Mortgage Bonds," (F) "Description of Principal Financing Documents" and (G) "Description of Other Debt and Certain Lease Arrangements" in the Prospectus, insofar as such statements constitute summaries of the terms of the Securities, legal matters, documents or proceedings, are accurate in all material respects; and (xx) the Registration Statement and the Prospectus and any further amendments and supplements thereto made by either of the Mobile Energy Parties prior to the Time of Delivery (other than the financial statements and related schedules and other financial data included therein and any statistical data included in the Independent Engineer's Report or otherwise attributable to the Independent Engineer and in the Paper Consultant's Report or otherwise attributable to the Paper Consultant, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder; although they do not pass upon, or assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus or any such amendment or supplement, except for those referred to in the opinion in paragraph (xix) of this Section 7(c) (relying as to materiality to a large extent upon the statements of officers and other representatives of the Mobile Energy Parties), nothing has come to such counsel's attention 23 that causes such counsel to believe that (other than with respect to the financial statements and related schedules and other financial data included therein and any statistical data included in the Independent Engineer's Report or otherwise attributable to the Independent Engineer and in the Paper Consultant's Report or otherwise attributable to the Paper Consultant, as to which such counsel need express no belief) the Registration Statement or any further amendment thereto made by either of the Mobile Energy Parties prior to the Time of Delivery, at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any further amendment or supplement thereto made by either of the Mobile Energy Parties prior to the Time of Delivery, as of its date and the Time of Delivery, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and they do not know of any amendment to the Registration Statement (other than any amendment thereto filed solely to remove from registration any of securities registered thereunder that remain unsold at the termination of the offering of the Securities) required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement or the Prospectus that are not so filed or described. For purposes of this Section 7(c), "Financing Documents" means the Securities, this Agreement, the Security Documents (to the extent relating to or securing the Securities), the Working Capital Facility and any Note thereunder (as defined therein) and the Continuing Disclosure Agreement. In rendering such opinion or opinions, counsel for the Mobile Energy Parties may (A) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Mobile Energy Parties and the Trustee and of public officials, (B) with respect to paragraphs (vii) through (x) of this Section 7(c), subject the enforceability of the matters set forth therein to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equitable principles, whether enforcement is considered in a proceeding in equity or law, and to the discretion of the court before which any proceeding therefor may be brought, (C) with respect to paragraph (x) of this Section 7(c), exclude from the enforceability of the matters set forth therein provisions relating to liquidated damages, Step-In Rights, arbitration 24 and agreements to agree at future dates, (D) include such further exceptions, qualifications, limitations and assumptions with respect to the matters set forth therein as may be acceptable to counsel for the Underwriters, (E) rely upon the opinion of any other counsel as to matters involving the application of laws other than the laws of the States of Alabama, Georgia and New York, provided that such other counsel and its opinion must be satisfactory to the Underwriters and that such opinion must be addressed and delivered to the Underwriters at or prior to the Time of Delivery, (F) with respect to paragraph (xvi) of this Section 7(c), provide a reasoned analysis as the basis for the matters set forth therein and (G) with respect to paragraph (xx) of this Section 7(c), state that the statements set forth therein are based upon such counsel's participation in conferences with officers and other representatives of, and other counsel for, the Mobile Energy Parties, representatives of the independent public accountants for the Mobile Energy Parties and representatives of and counsel for the Underwriters and in the preparation of the Registration Statement and the Prospectus and any amendments or supplements thereto and their review and discussion of the contents thereof, but are without independent check or verification except as specified. Such opinion or opinions shall be rendered to the Underwriters at the request of each of the Mobile Energy Parties and shall so state therein. Any legal opinion delivered on or prior to the Time of Delivery to any party other than the Underwriters by counsel for the Mobile Energy Parties in connection with the satisfaction of conditions to any of the other Financing Documents shall be accompanied by a letter from such counsel stating that the Underwriters may rely upon such opinion as if it were also addressed to them. (d) Troutman Sanders LLP, counsel for Southern, and, insofar as such opinion or opinions relate to matters governed by the laws of the State of New York, Latham & Watkins, special New York counsel for Southern, shall have furnished to the Underwriters their written opinion or opinions, dated the Time of Delivery, substantially to the effect, together with such changes as to legal matters as may be acceptable to counsel for the Underwriters, that: (i) Southern has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business, to execute, deliver and perform its obligations under each of the Southern Guaranties provided at the Time of Delivery and the Mill Owner Maintenance Reserve Account Agreement (the "Southern Credit Support Documents") and to consummate the transactions contemplated thereby; 25 (ii) each of such Southern Guaranties has been duly authorized, executed and delivered by Southern and (assuming due authorization, execution and delivery by each other party thereto) is the valid and binding obligation of Southern, enforceable against Southern in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally as such laws would apply in the event of the bankruptcy, insolvency or reorganization of, or other similar occurrence with respect to, Southern, to general equity principles, whether considered in a proceeding in equity or law, and to the discretion of the court before which any proceeding therefor may be brought; (iii) the Mill Owner Maintenance Reserve Account Agreement has been duly authorized, executed and delivered by Southern and (assuming due authorization, execution and delivery by each other party thereto) is the valid and binding obligation of Southern, enforceable against Southern in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether considered in a proceeding in equity or law, and to the discretion of the court before which any proceeding therefor may be brought; (iv) the execution, delivery and performance by Southern of each of the Southern Credit Support Documents and the consummation of the transactions contemplated thereby do not and will not conflict with or result in a breach or violation of any of the terms of provisions of, or constitute a default under, any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which Southern is bound or to which any of the property or assets of Southern is subject, nor does or will any such action result in any violation of the provisions of the organizational documents of Southern or any law or statute or any order, rule or regulation, judgment or decree of any Governmental Authority having jurisdiction over Southern or any of its properties; and no consent, approval, authorization, order, registration or qualification with any such Governmental Authority is required for the consummation by Southern of the transactions contemplated by any of the Southern Credit Support Documents, except for such consents, approvals, authorizations, orders, 26 registrations and qualifications that have been obtained; and (v) to the knowledge of such counsel, except as otherwise disclosed in Southern's Annual Report on Form 10-K for the year ended December 31, 1994 and in Southern's Quarterly Report on Form 10-Q for each of the quarterly periods ended March 31, 1995 and June 30, 1995, there are no legal or governmental proceedings pending to which Southern or any of its subsidiaries is a party, or to which any of their respective properties is subject, that (A) if determined adversely to Southern or such subsidiary would individually or in the aggregate have a material adverse effect on the business (financial or otherwise), properties or business prospects of Southern or materially and adversely affect the ability of Southern to perform its obligations under any of the Southern Credit Support Documents, or any part thereof, or the transactions contemplated by any of the Southern Credit Support Documents or (B) questions the validity, enforceability or performance of any Project Document to which it is party. In rendering such opinion or opinions, counsel for Southern may (A) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of Southern and its subsidiaries and of public officials and (B) rely upon the opinion of any other counsel as to matters involving the application of laws other than the laws of the States of Alabama, Georgia and New York, provided that such other counsel and its opinion must be satisfactory to the Underwriters and that such opinion must be addressed and delivered to the Underwriters at or prior to the Time of Delivery. Such opinion or opinions shall be rendered to the Underwriters at the request of each of the Mobile Energy Parties and shall so state therein. Any legal opinion delivered on or prior to the Time of Delivery to any party other than the Underwriters by counsel for Southern in connection with the satisfaction of conditions to any of the other Financing Documents to the extent relating to, or securing, the Securities shall be accompanied by a letter from such counsel stating that the Underwriters may rely upon such opinion as if it were also addressed to them. (e) Counsel for each of Southern Electric, SCS, the IDB, Scott and S.D. Warren (each, a "Consenting Party"), which shall be acceptable to the Underwriters, shall have furnished to the Underwriters their written opinion or opinions, dated the Time of Delivery, substantially to the effect, together with such changes as to legal matters as may be acceptable to counsel for the Underwriters, that: (i) such Consenting Party has been duly formed and is validly existing and in good standing under the laws 27 of its jurisdiction of organization, with power and authority (corporate and other) to own its properties and conduct its business, to execute, deliver and perform its obligations under its Consent to Assignment and each of the Project Contracts to which it is a party and to consummate the transactions contemplated thereby; (ii) each of the Project Contracts to which such Consenting Party is a party and such Consenting Party's Consent to Assignment has been duly authorized, executed and delivered by such Consenting Party and constitutes a valid and binding obligation of such Consenting Party, enforceable against such Consenting Party in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether considered in a proceeding in equity or law, to the discretion of the court before which any proceeding therefor may be brought and to public policy that may limit rights to indemnification and except that, with respect to such opinions of counsel for each of the Mill Owners, no opinion need be given as to the enforceability of provisions of the Project Contracts relating to (A) liquidated damages, (B) Step-In Rights, (C) arbitration and (D) agreements to agree at future dates; and (iii) the execution, delivery and performance by such Consenting Party of the Project Contracts to which it is a party and its Consent to Assignment and the consummation of the transactions contemplated thereby do not in any material respect and will not in any material respect conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other material agreement or instrument to which such Consenting Party is bound or to which any of the property or assets of the Consenting Party is subject, nor did or will such action result in any violation of the provisions of the organizational documents of such Consenting Party; and no consent, approval, authorization, order, registration or qualification of any Governmental Authority is required for the consummation by such Consenting Party of the transactions contemplated by the Project Contracts to which it is a party and its Consent to Assignment. For purposes of this Section 7(e) with respect to such opinions of counsel for each of the Mill Owners, "Project Contracts" shall mean the Master Operating Agreement, the Energy Services Agreements, the Water Agreement, the Boiler Ash Disposal Agreement, the Environmental Indemnity 28 Agreements, the Lease and the Supplementary Lease. In rendering such opinion or opinions, counsel for such Consenting Party may (A) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of such Consenting Party and of public officials and (B) rely upon the opinion of any other counsel, provided that such other counsel and its opinion must be satisfactory to the Underwriters and that such opinion must be addressed and delivered to the Underwriters at or prior to the Time of Delivery. Such opinion or opinions shall be rendered to the Underwriters at the request of each of the Mobile Energy Parties and shall so state therein. Any legal opinion delivered to any party other than the Underwriters by counsel for such Consenting Party in connection with the satisfaction of the conditions precedent to the effectiveness of any of the other Financing Documents to the extent relating to, or securing, the Securities shall be accompanied by a letter from such counsel stating that the Underwriters may rely upon such opinion as if it were also addressed to them. (f) Counsel for First Union, which shall be acceptable to the Underwriters, shall have furnished to the Underwriters their written opinion or opinions, dated the Time of Delivery, substantially to the effect, together with such changes as to legal matters as may be acceptable to counsel for the Underwriters, that: (i) First Union has been duly formed and is validly existing as a national banking association, with power and authority (corporate and other) to own its properties and conduct its business, to execute, deliver and perform its obligations under the Financing Documents to which it is a party and to consummate the transactions contemplated thereby; (ii) each of the Financing Documents to which First Union is a party has been duly authorized, executed and delivered by First Union, in its capacity as the Trustee or the Tax-Exempt Indenture Trustee, as the case may be, and constitutes a valid and binding obligation of First Union, in such capacity, enforceable against First Union in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether considered in a proceeding in equity or law, and to the discretion of the court before which any proceeding therefor may be brought; (iii) the execution, delivery and performance by First Union, in its capacity as the Trustee and the Tax- Exempt Indenture Trustee, as the case may be, of the 29 Financing Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not result in any violation of the provisions of the organizational documents of First Union or any law or statute or, to the knowledge of such counsel, any order, rule or regulation, judgment or decree of any Governmental Authority having jurisdiction over First Union; and, to the knowledge of such counsel, no consent, approval, authorization, order, registration or qualification of any such Governmental Authority is required for the consummation by First Union, in such capacity, of the transactions contemplated by the Financing Documents to which it is a party; and (iv) First Union has authorized the acceptance of the trusts contemplated by the Indenture and the Tax- Exempt Indenture to be accepted by the Trustee and the Tax-Exempt Indenture Trustee, respectively, thereunder and by the Intercreditor Agreement to be accepted by the Trustee and the Tax-Exempt Indenture Trustee thereunder. In rendering such opinion or opinions, counsel for First Union may (A) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of First Union and of public officials and (B) rely upon the opinion of any other counsel, provided that such other counsel and its opinion must be satisfactory to the Underwriters and that such opinion must be addressed and delivered to the Underwriters at or prior to the Time of Delivery. Such opinion or opinions shall be rendered to the Underwriters at the request of each of the Mobile Energy Parties and shall so state therein. (g) Counsel for Bankers Trust, which shall be acceptable to the Underwriters, shall have furnished to the Underwriters their written opinion or opinions, dated the Time of Delivery, substantially to the effect, together with such changes as to legal matters as may be acceptable to counsel for the Underwriters, that: (i) Bankers Trust is validly existing and in good standing under the laws of its jurisdiction of organization, with power and authority (corporate and other) to own its properties and conduct its business, to execute, deliver and perform its obligations under the Financing Documents to which it is a party and to consummate the transactions contemplated thereby; and Bankers Trust is duly authorized and empowered to exercise trust powers under the laws of the States of Alabama, Delaware and New York; (ii) each of the Financing Documents to which Bankers Trust is a party has been duly authorized, executed and delivered by Bankers Trust, in its capacity as the Collateral Agent, and constitutes a valid and 30 binding obligation of Bankers Trust, in such capacity, enforceable against Bankers Trust in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether considered in a proceeding in equity or law, and to the discretion of the court before which any proceeding therefor may be brought; and (iii) no consent, approval, authorization, order, registration or qualification of any Governmental Authority of the State of Alabama, Delaware or New York is required for the consummation by Bankers Trust, in such capacity, of the transactions contemplated by the Financing Documents to which it is a party (other than, under the laws of the State of Alabama, the exercise of certain remedies thereunder, but including the foreclosure of the Liens of the Mortgage and the Security Agreement). In rendering such opinion or opinions, counsel for Bankers Trust may (A) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of Bankers Trust and of public officials and (B) rely upon the opinion of any other counsel, provided that such other counsel and its opinion must be satisfactory to the Underwriters and that such opinion must be addressed and delivered to the Underwriters at or prior to the Time of Delivery. Such opinion or opinions shall be rendered to the Underwriters at the request of each of the Mobile Energy Parties and shall so state therein. (h) French counsel for Banque Paribas (the "Bank"), which shall be acceptable to the Underwriters, shall have furnished to the Underwriters their written opinion or opinions, dated the Time of Delivery, substantially to the effect, together with such changes as to legal matters as may be acceptable to counsel for the Underwriters, that: (i) the Bank is a banking corporation duly organized and validly existing and in good standing under the laws of its jurisdiction of organization, with power and authority (corporate and other) to own its properties and conduct its business, to execute, deliver and perform its obligations under the Financing Documents to which it is a party; (ii) the Tax-Exempt Debt Service Reserve Account Letter of Credit deposited in the Tax-Exempt Debt Service Reserve Account at or prior to the Time of Delivery (the "Letter of Credit") has been duly authorized, executed and delivered by the Bank and constitutes, under the laws 31 of France, a valid and binding obligation of the Bank, ranking pari passu with the Bank's other deposit obligations and unsecured debt except for the obligations given preference under applicable law, enforceable against the Bank in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally as such laws would apply in the event of the bankruptcy, insolvency or reorganization of, or other similar occurrence with respect to, the Bank, to general equity principles, whether considered in a proceeding in equity or law, and to the discretion of the court before which any proceeding therefor may be brought; (iii) each of the Financing Documents (other than the Letter of Credit) to which the Bank is a party has been duly authorized by the Bank and constitutes, under the laws of France, a valid and binding obligation of the Bank, ranking pari passu with the Bank's other deposit obligations and unsecured debt except for the obligations given preference under applicable law, enforceable against the Bank in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether considered in a proceeding in equity or law, and to the discretion of the court before which any proceeding therefor may be brought; (iv) the execution, delivery and performance by the Bank, acting through the New York Branch, of the Financing Documents to which it is a party and the consummation of the transactions contemplated thereby do not result in any violation of the provisions of the organizational documents of the Bank or any law or statute of France or any rule or regulation of any Governmental Authority of France having jurisdiction over the Bank or, to the knowledge of such counsel, any order, judgment or decree of any court of France or any such Governmental Authority; and no consent, approval, authorization, order, registration or qualification of any such Governmental Authority is required for the consummation by the Bank of the transactions contemplated by the Financing Documents to which it is a party; (v) a final and conclusive judgment obtained in the United States, which is not subject to appeal and is enforceable in the United States, with respect to payment obligations of the Bank under the Financing Documents to which it is a party, would be enforced upon request by 32 the competent courts of France without a review of the merits, provided that the applicable requirements of the French Code of Civil Procedure are satisfied, including, in particular, that service of complaints filed with courts of competent jurisdiction in the United States was properly effected on the Bank, that fundamental procedural rights of the parties are observed and that such final and conclusive judgment of a court of competent jurisdiction of the United States is not contrary to public order or good morals in France (provided that such counsel shall not have any reason to believe that the transactions contemplated by such Financing Documents are contrary to public order or good morals in France); (vi) in the event that the Bank fails to honor its obligations under any of the Financing Documents to which it is a party, other than as a result of compliance with then applicable laws, regulations, directives or orders of appropriate Governmental Authorities of the United States, upon proper demand to the New York Branch in compliance with the requirements of such Financing Documents, the Bank would have a direct and general obligation to make payments in accordance with such Financing Documents; (vii) the choice of law provisions of the Financing Documents to which the Bank is a party are valid under the laws of France and a court in France would uphold such choice of law in a suit brought in a court of competent jurisdiction in France; (viii) the Bank is subject to commercial law in France and is generally subject to suit and neither it nor any of its property or revenues enjoys any right of immunity from any judicial proceeding in France; and (ix) there is no fee, tax or duty or similar impost of the government of France or any Governmental Authority thereof on account of which any amount is required to be withheld or deducted from payments to be made by the Bank under the Financing Documents to which it is a party. In rendering such opinion or opinions, such counsel for the Bank may rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Bank and of public officials. Such opinion or opinions shall be rendered to the Underwriters at the request of each of the Mobile Energy Parties and shall so state therein. (i) Simpson Thacher & Bartlett, counsel for the New York Branch of the Bank (the "New York Branch"), shall have furnished to the Underwriters their written opinion or opinions, dated the Time of Delivery, substantially to the 33 effect, together with such changes as to legal matters as may be acceptable to counsel for the Underwriters, that: (i) the New York Branch is licensed by the Superintendent of Banks of the State of New York and qualified to do business as a New York branch of the Bank in accordance with the provisions of Article V of the Banking Law of the State of New York; the New York Branch has the power and authority under such Article V to execute, deliver and perform its obligations under the Financing Documents to which it is a party; (ii) the Letter of Credit has been duly authorized, executed and delivered by the Bank and constitutes a valid and binding obligation of the Bank, enforceable against the Bank in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally as such laws would apply in the event of the bankruptcy, insolvency or reorganization of, or other similar occurrence with respect to, the Bank, to general equity principles, whether considered in a proceeding in equity or law, to the discretion of the court before which any proceeding therefor may be brought and to possible judicial application of foreign laws or foreign governmental or judicial action affecting creditors' rights; (iii) each of the Financing Documents (other than the Letter of Credit) to which the New York Bank is a party has been duly authorized, executed and delivered by the Bank and constitutes a valid and binding obligation of the Bank, enforceable against the Bank in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and remedies generally, to general equity principles, whether considered in a proceeding in equity or law, to the discretion of the court before which any proceeding therefor may be brought and to possible judicial application of foreign laws or foreign governmental or judicial action affecting creditors' rights; and (iv) the execution, delivery and performance by the Bank of the Financing Documents to which it is a party do not require any consent, approval, authorization, order, registration or qualification of any Governmental Authority of the State of New York or of the United States and do not violate any laws of the State of New York or of the United States. 34 In rendering such opinion or opinions, such counsel for the Bank may rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Bank and of public officials. Such opinion or opinions shall be rendered to the Underwriters at the request of each of the Mobile Energy Parties and shall so state therein. (j) The Underwriters shall have received, on each of the date hereof and at the Time of Delivery, a letter dated the date hereof or the Time of Delivery, as the case may be, and in form and substance satisfactory to the Underwriters, from Arthur Andersen LLP, independent public accountants for the Mobile Energy Parties, substantially in the form attached hereto as Exhibit A. (k) (i) Neither of the Mobile Energy Parties nor Southern, Southern Electric, Scott, S.D. Warren or any other Project Participant shall have sustained, since the date of the latest audited financial statements included in the Prospectus, any loss or interference with its business from fire, explosion, flood, hurricane or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus and (ii) since the respective dates as of which information is given in the Prospectus, there shall not have been any change in the capital stock or long-term debt of either of the Mobile Energy Parties or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, shareholders' or other equity or results of operations of either of the Mobile Energy Parties, Southern, Southern Electric, Scott, S.D. Warren or any other Project Participant, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii) above, is in the judgment of the Underwriters so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in the Prospectus. (l) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or other national securities exchange; or (ii) a general moratorium on commercial banking activities declared by federal authorities or authorities of the State of Alabama, Georgia or New York; or (iii) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iii) in the judgment of the Underwriters makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in the Prospectus. 35 (m) Each of the Mobile Energy Parties shall have furnished, or caused to be furnished, to the Underwriters a certificate of such Mobile Energy Party, dated the Time of Delivery and in form and substance satisfactory to the Underwriters, as to the accuracy of the representations and warranties of such Mobile Energy Party herein at and as of the Time of Delivery, as to the performance by such Mobile Energy Party of all of its obligations hereunder to be performed at or prior to the Time of Delivery and as to such other matters as the Underwriters may reasonably request; and Southern shall have furnished, or caused to be furnished, to the Underwriters a certificate of an officer of Southern, dated the Time of Delivery and in form and substance satisfactory to the Underwriters, as to the due incorporation and valid existence of Southern at the Time of Delivery and the due authorization, execution and delivery by Southern of, and the valid, binding and enforceable nature at the Time of Delivery of, each of the Southern Guaranties and the capital infusion arrangements with respect to the Mill Owner Maintenance Reserve Account. (n) On or prior to the Time of Delivery, the Underwriters shall have received executed copies, in the form previously approved by the Underwriters, of the Project Documents. (o) On or prior to the Time of Delivery, the Mobile Energy Parties shall have delivered to the Underwriters evidence reasonably satisfactory to the Underwriters and their counsel that a title policy or title policies in favor of the Collateral Agent, in an aggregate amount equal to or greater than the maximum aggregate principal amount of Senior Debt to be outstanding immediately after the Time of Delivery, insuring the validity of the Mortgage and the priority of the Lien of the Mortgage have been obtained (the "Title Policy"); and the Title Policy shall be satisfactory in form and substance to the Underwriters and their counsel. (p) On or prior to the Time of Delivery, (i) the monies to be deposited into the Intercreditor Agreement Accounts and the Indenture Accounts shall been delivered to the Trustee and the Collateral Agent in accordance with the Intercreditor Agreement and the Indenture and all other Indenture Securities Collateral existing as of the Time of Delivery possession of which is required to perfect a Lien thereon shall have been delivered to, in the case of the Shared Collateral, the Collateral Agent and, in the case of all other Indenture Securities Collateral, the Trustee, (ii) the Mortgage shall have been delivered to a title company for due recordation as a mortgage of real estate, and any required filings with respect to personal property and fixtures subject to the Lien of the Mortgage or any other Security Document shall have been delivered to a title company for filing, in each place in which such recording or filing is required to protect, preserve and perfect the Lien of the Mortgage as a valid, 36 direct first Lien on the real estate and as a valid, first Lien on the personal property and fixtures covered or purported to be covered by the Mortgage, in each case subject only to Permitted Liens, and except for such recordation or filing no further action shall be required to create, preserve or protect such Liens and security interests, (iii) all financing statements shall have been delivered for filing, recordation and/or registration in each office and in each jurisdiction where required to create and perfect a valid, direct first Lien on the Indenture Securities Collateral and (iv) all taxes and recording and filing fees required to be paid with respect to the execution, recording or filing of the Mortgage and such financing statements shall have been paid or provided for. (q) The Underwriters shall have received (i) a certified copy of, or binder for, each of the insurance policies required by Section 5.2 of the Indenture, together with evidence satisfactory to the Underwriters that such insurance complies with the provisions thereof and the provisions of each of the other Project Documents and that all premiums then due with respect to such insurance have been paid, (ii) a written report of Sedgwick James (the "Independent Insurance Consultant") describing the insurance obtained by the Mobile Energy Parties as of the Time of Delivery with respect to the Energy Complex and stating that the insurance required to be obtained as of the Time of Delivery pursuant to the Project Documents is in full force and effect and provides reasonable and adequate coverage for the Energy Complex (the "Independent Insurance Consultant's Report") and (iii) a certificate of the Independent Insurance Consultant, signed by an authorized officer thereof, dated the Time of Delivery and in form and substance satisfactory to the Underwriters, confirming that (A) the Independent Insurance Consultant's Report was prepared in accordance with generally accepted insurance and consulting services practices, (B) the conclusions and opinions of the Independent Insurance Consultant contained in the Independent Insurance Consultant's Report are true and correct in all material respects as of the date of the Prospectus and as of the Time of Delivery and (C) attached to such certificate is a complete and executed copy of the Independent Insurance Consultant's Report. (r) The Underwriters shall have received a certificate of the Independent Engineer, signed by an authorized officer thereof, dated the Time of Delivery and in form and substance satisfactory to the Underwriters, confirming that (i) the Independent Engineer's Report was prepared in accordance with generally accepted engineering and consulting services practices; (ii) the conclusions and opinions of the Independent Engineer contained in the Independent Engineer's Report are fair and reasonable and made in good faith based upon information provided by the Mobile Energy Parties that the Independent Engineer believes is true and correct in all 37 material respects as of the date of the Prospectus and as of the Time of Delivery; (iii) the Independent Engineer consents to the references in the Prospectus to its authority as an expert in the design, development and operation of power projects and other industrial facilities and the use of the Independent Engineer's Report prepared by the Independent Engineer in and included as Appendix B to the Prospectus; (iv) the description of the Independent Engineer's Report contained under "Summary--The Independent Engineer's Report" in the Prospectus conforms to, and constitutes a fair and accurate summary of, the material provisions thereof; (v) nothing has come to the attention of the Independent Engineer in relation to the preparation of the Independent Engineer's Report, including its review of the Environmental Consultant's Reports, that causes it to believe that the Independent Engineer's Report or the Environmental Consultant's Reports, as of the date of the Prospectus or as of the Time of Delivery, or any of the statements in the Prospectus specifically attributed to the Independent Engineer or the Environmental Consultant, as of the date of the Prospectus or as of the Time of Delivery, contained or contains any untrue statement of a material fact or omitted or omits a material fact necessary in order to make the statements made therein with respect to any of such matters, in the light of the circumstances under which they were made, not misleading; and (vi) attached to such certificate is a complete and executed copy of the Independent Engineer's Report. (s) The Underwriters shall have received a certificate of the Paper Consultant, signed by an authorized officer thereof, dated the Time of Delivery and in form and substance satisfactory to the Underwriters, confirming that (i) the Paper Consultant's Report was prepared in accordance with generally accepted economics research and consulting services practices; (ii) the conclusions and opinions of the Paper Consultant contained in the Paper Consultant's Report are true and correct in all material respects as of the date of the Prospectus and as of the Time of Delivery; (iii) the Paper Consultant consents to the references in the Prospectus to its authority as an expert in the review of the pulp, paper and tissue industries and its experience in the design, development and undertaking of studies similar to the Paper Consultant's Report and knowledge of the United States and international paper industry and the use of the Paper Consultant's Report prepared by the Paper Consultant in and included as Appendix C to the Prospectus; (iv) the assumptions attributed to the Paper Consultant's Report contained in the Independent Engineer's Report are reasonable; (v) the description of the Paper Consultant's Report contained under "Summary--The Paper Consultant's Report" in the Prospectus conforms to, and constitutes a fair and accurate summary of, the material provisions thereof; (vi) nothing has come to the attention of the Paper Consultant in relation to the preparation of the Paper Consultant's Report that causes it to 38 believe that the Paper Consultant's Report, as of the date of the Prospectus or as of the Time of Delivery, or any of the statements in the Prospectus specifically attributed to the Paper Consultant, as of the date of the Prospectus or as of the Time of Delivery, contained or contains any untrue statement of a material fact or omitted or omits a material fact necessary in order to make the statements made therein with respect to any of such matters, in the light of the circumstances under which they were made, not misleading; and (vii) attached to such certificate is a complete and executed copy of the Paper Consultant's Report. (t) The Underwriters shall have received a certificate of Dames & Moore (the "Environmental Consultant"), signed by an authorized officer thereof, dated the Time of Delivery and in form and substance satisfactory to the Underwriters, confirming that (i) the report prepared by the Environmental Consultant with respect to the environmental site assessment of the Energy Complex (the "Environmental Consultant's Reports") was prepared in accordance with generally accepted engineering and consulting services practices; (ii) the conclusions and opinions of the Environmental Consultant contained in the Environmental Consultant's Reports were true and correct in all material respects as of the respective dates of the Environmental Consultant's Reports; (iii) the assumptions attributed to the Environmental Consultant's Reports contained in the Independent Engineer's Report are reasonable; (iv) the descriptions of the Environmental Consultant's Reports contained under "Summary--The Independent Engineer's Report" and "Business--Environmental Conditions--Environmental Reports" and in the Independent Engineer's Report under "The Project--Site" and "Permits" in the Prospectus conform to, and constitute a fair and accurate summary of, the material provisions thereof; and (v) attached to such certificate are complete and executed copies of the Environmental Consultant's Reports. (u) The Underwriters shall have received a certificate of Rust Engineering Company (the "Engineering Consultant"), signed by an authorized officer thereof, dated the Time of Delivery and in form and substance satisfactory to the Underwriters, confirming that (i) the report prepared by the Engineering Consultant with respect to the assessment of the Energy Complex (the "Engineering Consultant's Report") was prepared in accordance with generally accepted engineering and consulting services practices; (ii) the conclusions and opinions of the Engineering Consultant contained in the Engineering Consultant's Report were true and correct in all material respects as of the date of the Engineering Consultant's Report; (iii) the description of the Engineering Consultant's Report contained under "Summary--The Independent Engineer's Report" in the Prospectus conforms to, and constitutes a fair and accurate summary of, the material provisions thereof; and (iv) attached to such certificate is 39 a complete and executed copy of the Engineering Consultant's Report. (v) Each of the Mobile Energy Parties shall have entered into each of the Project Documents and the Consents to Assignment to which it is a party, in such forms as shall be reasonably satisfactory to the Underwriters and their counsel, each of which shall have been fully executed and shall be in full force and effect at the Time of Delivery. (w) The Tax-Exempt Bonds shall have been issued; and the conditions precedent to the effectiveness of the Working Capital Facility, as specified in Article III thereof, shall have been satisfied or waived with the consent of the Underwriters; and the Underwriters shall have received a certificate of the Working Capital Facility Provider, dated the Time of Delivery, to such effect. (x) The Underwriters shall have received evidence of the appointment of the Independent Engineer, and the acceptance by the Independent Engineer of such appointment, pursuant to the Intercreditor Agreement. (y) The Underwriters shall have received evidence that there are in effect ratings on the Securities of "BBB-" by Standard & Poor's Ratings Group, "BBB-" by Fitch Investors Service, L.P. and "Baa3" by Moody's Investors Service, Inc., and no notice shall have been given of (i) any intended or potential downgrading of any of such ratings or (ii) any review or possible change that does not indicate the direction of a possible change in any of such ratings. (z) Goldman, Sachs & Co. shall have received its fee for financial advisory services rendered in respect of the offering of the Bonds and the First Mortgage Bonds in accordance with Section 6(b)(xii)(B) of the Bond Purchase Agreement dated August 17, 1995 between Goldman, Sachs & Co. and The Industrial Development Board of the City of Mobile, Alabama. (aa) The Underwriters shall have received such additional legal opinions, certificates, instruments and other documents as the Underwriters may reasonably request. If any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, then this Agreement may be terminated by the Underwriters by notice to the Company at or prior to the Time of Delivery, without liability on the part of any Underwriter or either of the Mobile Energy Parties, except for the expenses to be borne by the Mobile Energy Parties as provided in Section 6 hereof and the indemnity agreements in Section 8 hereof. If, at the Time of Delivery, such conditions shall not have been fulfilled, and the Company shall not have issued and sold to the Underwriters, and the Underwriters 40 shall not have purchased from the Company, the Securities in accordance with Section 2, then this Agreement shall, unless the Time of Delivery shall be extended as contemplated by Section 4(a), terminate without liability on the part of any Underwriter or either of the Mobile Energy Parties, except for the expenses to be borne by the Mobile Energy Parties as provided in Section 6 hereof and the indemnity agreements in Section 8 hereof. 8. (a) Each of the Mobile Energy Parties, jointly and severally, will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that (i) neither of the Mobile Energy Parties shall be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Mobile Energy Parties by any Underwriter through Goldman, Sachs & Co. expressly for use therein or (ii) the right of any of the Underwriters to be indemnified and held harmless under this Section 8 with respect to the Circulated Preliminary Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such loss, claim, damage or liability purchased Securities (or any person who controls such Underwriter within the meaning of the Act) if (A) the Prospectus (as then amended or supplemented if either of the Mobile Energy Parties shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person (if required by law so to have been delivered) at or prior to the written confirmation of the sale of Securities to such person and (B) the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability, provided that the application of this clause (ii) shall be conditioned upon proof, sustained by the Mobile Energy Parties, that the Prospectus (as so amended or supplemented) was not so sent or given by or on behalf of such Underwriter. Notwithstanding anything to the contrary contained in this Agreement, the satisfaction of any obligation of Mobile Energy under this Section 8 shall be non-recourse to any monies or other assets of Mobile Energy acquired through or on account of its interests in the Southern Master Tax Sharing Agreement, so long as, 41 and to the extent that, such assets are not commingled with any of Mobile Energy's other monies or assets or with any monies or assets of the Company. (b) Each Underwriter will indemnify and hold harmless each of the Mobile Energy Parties against any losses, claims, damages or liabilities to which such Mobile Energy Party may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Mobile Energy Parties by such Underwriter through Goldman, Sachs & Co. expressly for use therein, and will reimburse the Mobile Energy Parties for any legal or other expenses reasonably incurred by the Mobile Energy Parties in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under Section 8(a) or 8(b) hereof of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such Section 8(a) or 8(b), notify such indemnifying party in writing of the commencement thereof, but the omission so to notify such indemnifying party shall not relieve it from any liability that it may have to any indemnified party otherwise than under such Section 8(a) or 8(b). In case any such action shall be brought against any indemnified party and it shall notify any indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party. Upon the assumption by such indemnifying party of the defense of any such action, such indemnified party shall have the right to participate in such action and to retain its own counsel, but such indemnifying party shall not be liable for any legal expenses of other counsel subsequently incurred by such indemnified party in connection with the defense thereof unless (i) such indemnifying party has agreed to pay such fees and expenses, (ii) such indemnifying party shall have failed to employ counsel reasonably satisfactory to such indemnified party in a timely manner or (iii) such indemnified party shall have been advised by counsel that there are actual or potential conflicting interests between such indemnified party and any other party represented by counsel that is proposed by such indemnifying party to represent 42 such indemnified party, including any such conflicting interests arising from situations in which there are one or more legal defenses available to such indemnified party that are different from or additional to those available to such indemnifying party. No indemnifying party shall, without the written consent of the indemnified party hereunder, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not such indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of such indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of such indemnified party. No indemnifying party shall be liable for any settlement or compromise of any action effected without its written consent, unless the indemnified party hereunder shall have requested such indemnifying party to reimburse it for any legal expenses of counsel or any other expenses in connection with the defense thereof in accordance with this Section 8(c), in which case such indemnifying party agrees that it shall be liable for any such settlement or compromise effected more than 30 days after its receipt of such request if such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement or compromise. (d) The obligations of each of the Mobile Energy Parties under this Section 8 shall be in addition to any liability that either of the Mobile Energy Parties may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability that the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of either of the Mobile Energy Parties (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of either of the Mobile Energy Parties) and to each person, if any, who controls either of the Mobile Energy Parties within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Securities that it has agreed to purchase hereunder, the non-defaulting Underwriters may in their discretion arrange for such non-defaulting Underwriters or another party or other parties to purchase such Securities on the terms contained herein. If within twenty-four hours after such default by any Underwriter such non-defaulting Underwriters do not arrange for the purchase of such Securities, then the Company shall be entitled to a further period of twenty-four hours within which to, but shall not be required to, procure another party or other parties satisfactory to such non-defaulting Underwriters to purchase such Securities on such terms. In the event that, within the respective 43 periods prescribed above, such non-defaulting Underwriters notify the Company that they have so arranged for the purchase of such Securities, or the Company notifies the Underwriters that it has so arranged for the purchase of such Securities, then such non-defaulting Underwriters or the Company shall have the right to postpone the Time of Delivery, for a period of not more than five days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus that in the opinion of such non-defaulting Underwriters may thereby be made necessary. The term "Underwriters" as used in this Agreement shall include any party substituted under this Section 9(a) with like effect as if such party had originally been a party to this Agreement with respect to such Securities. (b) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Underwriter or Underwriters by the non-defaulting Underwriter or Underwriters and the Company as provided in Section 9(a) hereof, the aggregate principal amount of such Securities that remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the Securities to be purchased hereunder, then the Company shall have the right to require each non-defaulting Underwriter to purchase the principal amount of Securities that such Underwriter agreed to purchase hereunder and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the principal amount of Securities that such Underwriter agreed to purchase hereunder) of the Securities of such defaulting Underwriter or Underwriters for which such arrangements have not been made, but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Underwriter or Underwriters by the non-defaulting Underwriter or Underwriters and the Company as provided in Section 9(a) hereof, the aggregate principal amount of Securities that remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Securities to be purchased hereunder, or if the Company shall not exercise the right provided in Section 9(b) hereof to require such non-defaulting Underwriters to purchase Securities of a defaulting Underwriter or Underwriters, then this Agreement shall thereupon terminate, without liability on the part of any such non-defaulting Underwriter or either of the Mobile Energy Parties, except for the expenses to be borne by the Mobile Energy Parties as provided in Section 6 hereof and the indemnity agreements in Section 8 hereof, but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of each of the Mobile Energy Parties and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant 44 to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of the Underwriters or any controlling person of any Underwriter, either of the Mobile Energy Parties, or any officer or director or controlling person of either of the Mobile Energy Parties, and shall survive delivery of and payment for the Securities. 11. If this Agreement shall be terminated (whether pursuant to Section 7 or 9 hereof or for any other reason), neither of the Mobile Energy Parties shall then be under any liability (including on account of loss of anticipated profits) to any Underwriter except as provided in Sections 6 and 8 hereof. 12. All statements, requests, notices, and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Underwriters in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Mobile Energy Parties shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: President; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address, which will be supplied to the Company by Goldman, Sachs & Co. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Mobile Energy Parties and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of either of the Mobile Energy Parties and each person who controls either of the Mobile Energy Parties or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Securities from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 45 If the foregoing is in accordance with your understanding, please sign and return to us the counterpart hereof, and upon the acceptance hereof by the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between the Underwriters and the Mobile Energy Parties. Very truly yours, Mobile Energy Services Company, L.L.C. By: /s/ Name: Raymond D. Hill Title: Vice President & CFO Mobile Energy Services Holdings, Inc. By: /s/ Name: Raymond D. Hill Title: Vice President & CFO Accepted as of the date hereof: Goldman, Sachs & Co. Bear, Stearns & Co. Inc. Lehman Brothers Inc. By: /s/ (Goldman, Sachs & Co.) SCHEDULE I Principal Amount of Securities to be Underwriters to be Purchased Goldman, Sachs & Co. $191,410,000 Bear, Stearns & Co. Inc. 51,040,000 Lehman Brothers Inc. 12,760,000 Total $255,210,000 Exhibit A Pursuant to Section 7(i) of the Underwriting Agreement, Arthur Andersen LLP, independent public accountants for the Company and for Mobile Energy and its subsidiary, shall furnish letters to the Underwriters, as well as to the Manager of the Company and the Board of Directors of Mobile Energy, to the effect that: (i) they are independent certified public accountants with respect to the Company and Mobile Energy and its subsidiary within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) in their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts or pro forma financial information other than the Projections and the Mill Assessment) examined by them and included in the Prospectus or the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations thereunder; and, if applicable, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited consolidated interim financial statements, selected financial data, pro forma financial information, financial forecasts and/or condensed financial statements derived from audited financial statements of the Mobile Energy Parties for the periods specified in such letter, as indicated in their reports thereon, copies of which have been furnished to the representatives of the Underwriters (the "Representatives") and are attached hereto; (iii) they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus as indicated in their reports thereon, copies of which are attached hereto, and on the basis of specified procedures including inquiries of officials of the Mobile Energy Parties who have responsibility for financial and accounting matters regarding whether or not the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations, nothing came to their attention that causes them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable A-1 accounting requirements of the Act and the related published rules and regulations; (iv) the unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company and Mobile Energy and its subsidiary for the three (3)-month period ended March 31, 1995 and for the period from inception to December 31, 1994 and included in the Prospectus agrees with the corresponding amounts (after restatements where applicable) in the audited consolidated financial statements for such period that are included in the Prospectus; (v) they have compared the information in the Prospectus under selected captions with the disclosure requirements of Regulation S-K and on the basis of limited procedures specified in such letter nothing came to their attention as a result of the foregoing procedures that caused them to believe that this information does not conform in all material respects with the disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K; (vi) on the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and Mobile Energy and its subsidiary, inspection of the minute books of the Company and Mobile Energy and its subsidiary since the date of the latest audited financial statements included in the Prospectus, inquiries of officials of the Mobile Energy Parties responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus for them to be in conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and A-2 items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included in the Prospectus; (C) the unaudited financial statements that were not included in the Prospectus but from which were derived any unaudited condensed financial statements referred to in clause (A) above and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in clause (B) above were not determined on a basis substantially consistent with the basis for the audited consolidated financial statements included in the Prospectus; (D) any unaudited pro forma consolidated condensed financial statements included in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case that were outstanding on the date of the latest financial statements included in the Prospectus) or any increase in the consolidated long-term debt of Mobile Energy and its subsidiary, or any decreases in consolidated net current assets or stockholders' equity of Mobile Energy and its subsidiary or other items specified by the Underwriters, or any increases in any items specified by the Underwriters, in each case as compared with amounts shown in the most recent balance sheet included in the Prospectus, except in each case for changes, increases or decreases that the Prospectus discloses have occurred or may occur or that are described in such letter; and (F) for the period from the date of the most recent financial statements included in the Prospectus to the specified date referred to in clause (E) above, there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income of the Company or Mobile Energy and its subsidiary or other items specified by the Underwriters, or any increases in any items specified by the Underwriters, in each case as compared with any other period of corresponding length specified by the A-3 Underwriters, except in each case for decreases or increases that the Prospectus discloses have occurred or may occur or that are described in such letter; and (vii) In addition to the examination referred to in their report included in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Underwriters, that are derived from the general accounting records of the Company and Mobile Energy and its subsidiary or that appear in the Prospectus, or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Underwriters, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and Mobile Energy and its subsidiary and have found them to be in agreement. A-4 EX-27 26 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-K for December 31, 1995, and is qualified in its entirety by reference to such financial statements. 0000945979 MOBILE ENERGY SERVICES HOLDINGS, INC YEAR DEC-31-1995 DEC-31-1995 PER-BOOK 357,091 0 59,067 14,862 0 431,020 1 41,367 (602) 40,766 0 0 308,361 14,075 0 0 (5,895) 0 0 0 87,788 431,020 82,497 8,058 44,215 52,273 30,224 1,076 31,300 18,501 12,799 0 12,799 14,694 13,007 41,949 0 0
EX-27 27 FINANCIAL DATA SCHEDULE
UT This schedule contains summary financial information extracted from the Form 10-K for December 31, 1995, and is qualified in its entirety by reference to such financial statements. 0000948362 MOBILE ENERGY SERVICES CO LLC YEAR DEC-31-1995 DEC-31-1995 PER-BOOK 357,091 0 58,938 14,862 0 430,891 0 0 66,772 66,772 0 0 308,361 14,075 0 0 (5,895) 0 0 0 61,653 430,891 82,497 0 44,005 44,005 33,492 1,012 39,504 18,501 21,003 0 21,003 37,058 13,007 28,227 0 0
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