Exhibit 10.1

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION

MEMORANDUM OF AGREEMENT

This Memorandum of Agreement is made and executed as of the 6th day of
September, 2006 at Pasig City, by and between:

GNPOWER LTD. CO., a duly registered limited partnership organized under
Philippine Law, with principal office at 1905 Orient Square Building, Don
Francisco Ortigas Jr. Road, Ortigas Center, Pasig City 1605, Metro Manila,
Philippines and represented herein by its Senior Vice President, Mr. John
Anthony Becker who is duly authorized to enter into this Memorandum of Agreement
by a Resolution, a copy of which is hereto attached as Annex A and hereinafter
referred to as the “Seller,”

and

CYPRESS MANUFACTURING LTD., a corporation duly organized under the Cayman Island
law, licensed to do business in the Philippines through its Philippine Branch,
Cypress Manufacturing Limited – Philippine Branch, with principal office at
Gateway Business Park, SEPZ, Brgy., Javalera, Gen. Trias, Cavite 4107
Philippines, represented by its Vice President & Managing Director, Mr. Conrado
R. Leal and its Finance Director, Ms. Edna Cuyo-Auxtero, who are duly authorized
to enter into this Memorandum of Agreement by a Resolution, a copy of which is
hereto attached as Annex B and hereinafter referred to as the “Buyer”

Each of the Seller and the Buyer are hereinafter individually referred to as a
“Party”, and together, as the “Parties”.

RECITALS:

A. The Seller intends to build, own and operate an electric power generation
facility (the “Facility”), to be located near Mariveles, Bataan, for the purpose
of supplying its customers with environmentally clean electric power commencing
in 2010 (the “Project”).

B. Upon the completion of the Project and the commercial operations of the
Facility, which is currently anticipated to occur in 2010, the Seller desires to
supply and sell to the Buyer, and the Buyer desires to purchase from the Seller,
the Product (as defined in the Master Power Purchase and Sale Agreement) and
accordingly, have agreed to execute, simultaneously with this Memorandum of
Agreement, a Master Power Purchase and Sale Agreement (the “Master Power
Purchase and Sale Agreement”) in the form of Annex C hereto, which will govern
such sale and purchase of the Product between the Parties.

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C. The effectiveness of the Master Power Purchase and Sale Agreement is subject
to the conditions set forth in this Memorandum of Agreement.

D. Accordingly, both the Seller and the Buyer have an interest in the
completion, and the maintenance of the viability, of the Project.

NOW, THEREFORE, pending the completion of the Facility and the effectiveness of
the Master Power Purchase and Sale Agreement, the Parties wish to document their
understanding of certain agreements and arrangements they have reached in
respect of the foregoing.

SECTION ONE: MASTER POWER PURCHASE AND SALE AGREEMENT

1.1 Simultaneously with the execution of this Memorandum of Agreement, the
Parties shall execute the Master Power Purchase and Sale Agreement in the form
set out in Annex C. Any capitalized term used and not defined herein shall have
the meaning specified in the Master Power Purchase and Sale Agreement.

1.2 Each Party represents and warrants that the execution, delivery and
performance by it of this Memorandum of Agreement and the Master Power Purchase
and Sale Agreement have been duly authorized by all necessary corporate action.
This Memorandum of Agreement has been duly executed and delivered and
constitutes, and the Master Power Purchase and Sale Agreement, when executed and
delivered in accordance herewith will constitute, its legal, valid and binding
obligation enforceable against it in accordance with its terms except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting creditor’s rights generally.

1.3 The Master Power Purchase and Sale Agreement shall not be amended without
the prior written consent by both Parties.

1.4 Notwithstanding anything in the Master Power Purchase and Sale Agreement to
the contrary, the Master Power Purchase and Sale Agreement shall become
effective upon the Financial Closing of the Project. For purposes hereof,
“Financial Closing” shall mean that date on which the first disbursement of
funds from senior lenders to the Seller (or its successor-in-interest) is made
in accordance with the loan documentation between the Seller (or its
successor-in-interest) and its lenders with respect to the construction of the
Project. The Seller shall promptly notify the Buyer in writing of the occurrence
of Financial Closing. In the event that Financial Closing does not occur by
December 31, 2007 (the “Target Date”), or such later date as the Parties may
agree, then this Memorandum of Agreement shall terminate and the Master Power
Purchase and Sale Agreement shall expire, in either case, without any further
liabilities or obligations to the Parties thereunder (except for Section 4
herein). Once the Master Power Purchase and Sale Agreement becomes effective
pursuant to this Section 1.4, it shall cease to be subject to this Memorandum of
Agreement.

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SECTION TWO: RIGHTS AND OBLIGATIONS OF THE PARTIES

2.1 The Seller shall continue to diligently market capacity and energy to
potential customers with a view to concluding binding agreements, substantially
in the form of the Master Power Purchase and Sale Agreement.

2.2 The Seller shall undertake to negotiate promptly with the relevant
distribution utility for the distribution services, and with the relevant
transmission service company for the transmission services, which may be
required, pursuant to the Master Power Purchase and Sale Agreement, in order to
allow the Buyer to receive and utilize the Product.

2.3 The Seller shall use all reasonable commercial efforts to obtain terms and
conditions for the financing of the Project that are no less favorable than
those assumed by the Seller that enable the Seller to arrive at the Capacity Fee
set out in the Master Power Purchase and Sale Agreement.

2.4 The Seller shall be responsible for timely obtaining any and all government
permits and regulatory approvals, including approval from the Energy Regulatory
Commission or its successor agency, which may be required in respect of the
Master Power Purchase and Sale Agreement. The Buyer, however, will cooperate
reasonably with the Seller in the Seller’s efforts to obtain such government
permits and regulatory approvals.

2.5 At the reasonable request of the Buyer, the Seller shall provide the Buyer
with accurate and timely updates on the status of the Project. Either Party may
convene a meeting to facilitate a status update on the Project.

SECTION THREE: TERMINATION

3.1 The Parties may, by mutual agreement expressed in writing, terminate this
Memorandum of Agreement. In case of such termination, neither Party shall be
liable to the other for any amount of whatsoever nature pursuant to this
Memorandum of Agreement and the Master Power Purchase and Sale Agreement,
provided, however, that this Section 3.1 shall cease to apply once the Master
Power Purchase and Sale Agreement becomes effective pursuant to Section 1.4
hereof.

3.2 This Memorandum of Agreement shall terminate, in accordance with Section 1.4
above, if Financial Closing does not occur by the Target Date, or as may be
agreed upon by the Parties or extended, as the case may be, in accordance with
Section 1.4 above. In case of such termination, neither Party shall be liable to
the other for any amount of whatsoever nature pursuant to this Memorandum of
Agreement and the Master Power Purchase and Sale Agreement.

SECTION FOUR: CONFIDENTIALITY

4.1 All information, data, documents and papers exchanged between the Buyer and
the Seller in relation to the preparation, negotiation and execution of this
Memorandum of

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Agreement and the Master Power Purchase and Sale Agreement shall be treated by
the Parties in utmost confidentiality and shall not be divulged or shared with
any third party, without the prior written consent of the other Party. The
provisions of this Section 4.1 shall survive and continue in full force and
effect for a period of three (3) years after the termination of this Memorandum
of Agreement and the Master Power Purchase and Sale Agreement.

4.2 The Parties agree to keep this Memorandum of Agreement and the Master Power
Purchase and Sale Agreement confidential and accordingly, neither Party may
divulge the existence and contents of this Memorandum of Agreement and the
Master Power Purchase and Sale Agreement to any third party without the prior
written consent of the other Party. This obligation of confidentiality set forth
in this Section 4.2 shall survive and continue in full force and effect for a
period of three (3) years after the termination of this Memorandum of Agreement
and the Master Power Purchase and Sale Agreement.

4.3 The provisions of this Section 4 do not apply to the extent the information
under Section 4.1 and the existence and contents of this Memorandum of Agreement
and the Master Power Purchase and Sale Agreement (collectively referred to as
the “Confidential Information”) are required to be disclosed by or to any
governmental, judicial or regulatory authority lawfully requesting or requiring
such Confidential Information.

4.4 Notwithstanding anything to the contrary, a Party shall be entitled to
disclose the Confidential Information to its directors, officers, employees and
advisors who need to know such Confidential Information only for the purpose of
directly carrying out its responsibilities under this Memorandum of Agreement
and the Master Power Purchase and Sale Agreement and provided such parties have
agreed to keep such Confidential Information confidential.

SECTION FIVE: GOVERNING LAW

5.1 This Memorandum of Agreement shall be governed by and construed in
accordance with the laws of the Republic of the Philippines.

SECTION SIX: FURTHER ASSURANCES

6.1 The Parties hereto agree to cooperate with each other, and execute and
deliver such other instruments and documents and take all such actions as may be
necessary or desirable to consummate the transactions contemplated in this
Memorandum of Agreement and the Master Power Purchase and Sale Agreement.

SECTION SEVEN: ASSIGNMENT

7.1 Neither Party shall assign this Agreement or its rights hereunder without
the prior written consent of the other Party, which consent may be withheld in
the exercise of its sole discretion; provided, however, (a) notwithstanding the
foregoing provision, Buyer may, upon the consent of the Seller, which consent
shall not be unreasonably withheld, assign this Agreement in whole or in part to
Buyer’s Affiliate, the surviving corporation with or into which Buyer may merge
or consolidate, or an entity to which Buyer transfers all, or substantially all,
of its business and assets, and further provided, however, that any such
assignee shall agree in writing to be bound

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by the terms and conditions hereof, and upon such assumption, the assignor shall
be relieved of any further liability hereunder; and, (b) the Seller may, upon
the consent of the Buyer, (i) transfer, sell, pledge, encumber or assign this
Agreement or the accounts, revenues or proceeds hereof in connection with any
financing or other financial arrangements, (ii) transfer or assign this
Agreement to an affiliate of the Seller which affiliate’s creditworthiness is
equal to or higher than that of the Seller, or (iii) transfer or assign this
Agreement to any person or entity succeeding to all or substantially all of the
assets whose creditworthiness is equal to or higher than that of the Seller;
provided, further however, that in each such case, any such assignee shall agree
in writing to be bound by the terms and conditions hereof, and upon any such
assumption pursuant to (ii) or (iii) above, the assignor shall be relieved of
any further liability hereunder.”

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IN WITNESS WHEREOF, the Parties have executed this Memorandum of Agreement as of
the day and year first written above.

 

/s/ C. R. Leal

    9/06/06 Cypress Manufacturing Ltd. - Philippine Branch(Buyer) Gateway
Business Park, SEPZ, Brgy. Javalera, Gen. Trias     Cavite 4107 Philippines    

/s/ Edna Cuyo-Auxtero

    9/6/06 Cypress Manufacturing Ltd. - Philippine Branch(Buyer) Gateway
Business Park, SEPZ,     Brgy. Javalera, Gen. Trias     Cavite 4107 Philippines
   

/s/ John A. Becker

    9/6/06 GNPower Ltd. Co. (Seller)     1905 Orient Square Building     Don
Francisco Ortigas Jr. Road     Ortigas Center     Pasig City 1605    

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ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES) SS

                              CITY OF PASIG ) SS

BEFORE ME, a Notary Public for and in the City of Pasig, Metro Manila,
Philippines, this      day of                      2006, personally appeared the
following:

 

NAME

 

COMM. TAX CERT.

/PASSPORT

 

DATE/PLACE

ISSUED

JOHN A. BECKER (In his capacity as Sr. Vice President and COO of GNPower Ltd.
Co. )     GNPOWER LTD. CO.   TIN # 202920663000   07-27-99 / B.I.R. Pasig City
CONRADO R. LEAL (In his capacity as Vice President & Managing Director of
Cypress Manufacturing Ltd. - Philippine Branch)     EDNA CUYO-AUXTERO (In her
capacity as Finance Director of Cypress Manufacturing Ltd. - Philippine Branch)
    CYPRESS MANUFACTURING LTD. - PHILIPPINE BRANCH   TIN # 214069856000  
10-26-01 / Cavite

all known to me to be the same persons who executed the foregoing MASTER POWER
PURCHASE AND SALE AGREEMENT for and in behalf of their respective
corporations/companies, and they acknowledged to me that the same are their free
and voluntary acts and deeds as well as that of their respective
corporation/companies, and that they are duly authorized to sign, execute and
deliver the same.

This instrument consists of                      pages including this page
wherein the Acknowledgment is written and all pages are signed/initialed by both
parties and their instrumental witnesses.

IN WITNESS WHEREOF, I hereby set my hand and affixed my notarial seal at the
plate and on the date first above written.

Notary Public

Doc. No.                 ;

Page No.                 ;

Book No.                 ;

Series of 2006.

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ANNEX A

CERTIFICATION

WE, the undersigned, American citizens, of legal age, and with office address at
1905 Orient Square Building, Don Francisco Ortigas Jr. Road, Ortigas Center,
Pasig City 1605, Metro Manila Philippines, after having sworn in accordance with
law, hereby depose and say that:

We are the incumbent members of the Executive Committee of GNPOWER LTD. CO., a
limited partnership duly organized and existing in accordance with the laws of
the Republic of the Philippines, and with principal office address at 1905
Orient Square Building, Don Francisco Ortigas Jr. Road, Ortigas Center, Pasig
City 1605, Metro Manila Philippines.

At the special meeting of the Executive Committee of the GNPOWER LTD. CO., held
at Ortigas Center, Pasig City on August 8, 2006, during which a quorum was
present and acting throughout, the following resolution was unanimously approved
and adopted, to wit:

Resolution No.                         

“RESOLVED, as it is hereby resolved, that GNPOWER LTD. CO. be as it is hereby
empowered and authorized to enter into a Memorandum of Agreement (MOA) and
Master Power Purchase and Sale Agreement for the purpose of supplying its
customers with environmentally clean electric power commencing upon completion
of its project;”

“RESOLVED, FURTHER, as it is hereby resolved, that GNPOWER LTD. CO. be as it is
hereby empowered and authorized to enter into a Memorandum of Agreement (MOA)
and Master Power Purchase and Sale Agreement (final copies attached) with
CYPRESS MANUFACTURING LTD. – PHILIPPINE BRANCH, a domestic corporation duly
organized under Philippine Law, with principal office at Gateway Business Park
SEPZ, Barangay Javalera, Gen Trias, Cavite 4107 Philippines, to be represented
by its Vice President and Managing Director, Mr. Conrado R. Leal and its Finance
Director, Ms. Edna Cuyo-Auxtero (known as the “Customer”);”

“RESOLVED, FURTHER, that acting singly to wit:

 

Name    Position John A. Becker Sr.    Vice-President & COO

(“the Representative”), be as he is hereby empowered and authorized to do the
following acts on behalf of the Partnership:

1. To execute, sign, deliver and perform for and on behalf of the Partnership,
the above-mentioned Memorandum of Agreement (MOA) and Master Power Purchase and
Sale Agreement and the necessary documents or agreements relative to the
transaction, under such terms and conditions as the Representative may deem fit,
including notices and instructions that may be required or permitted under the
terms of such agreements;

2. To execute, deliver, perform any and all acts, documents, instruments as may
be necessary or required to give full force and effect to foregoing authorized
acts.”

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“RESOLVED, FURTHER, that the Partnership hereby ratifies and confirms all that
the Representative may lawfully do or cause to be done under and by virtue of
these presents;

“RESOLVED, FURTHER, that the foregoing resolutions shall remain valid and
subsisting unless otherwise revoked or amended in writing by the Partnership
copy of which is, duly served upon the Customer.”

“RESOLVED, FINALLY, that the representative is hereby empowered and authorized
to advise the Customer of these resolutions.”

IN WITNESS WHEREOF, I have signed this certification on this 18th day of August,
2006 at Pasig City.

 

/s/ John A. Becker

   

/s/ Daniel E. Chalmers

JOHN A. BECKER     DANIEL E. CHALMERS Sr. Vice-President and COO     Chairman
and President

/s/ Darrah-Jean D. Punzalan

    DARRAH-JEAN D. PUNZALAN     Secretary    

SUBSCRIBED AND SWORN to before me this      day of                     , 2006,
affiants exhibiting to me their Community Tax Certificates (CTC) – Daniel E.
Chalmers with CTC No. 21803518 issued on January 17, 2006 at Pasig City, John A.
Becker with US Passport No. US Passport No. 710494721 issued on February 18,
2004 at the US Embassy Manila and Darrah-Jean D. Punzalan with CTC No. 21803521
issued on January 17, 2006 at Pasig City.

Notary Public

Until              

Doc. No.                     ;

Page No.                     ;

Book No.                     ;

Series of 2006.

 

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ANNEX B

ACTION BY UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS

OF CYPRESS MANUFACTURING LTD.

AUGUST 22, 2006

WHEREAS, it is deemed in the best interests of Cypress Manufacturing Ltd. (the
“Company”) that the following actions be taken by its board of directors (the
“Board”) pursuant to this unanimous written consent:

Alternative Power Supply for CML: Power Supply Agreement with GNPOWER LTD. CO.

WHEREAS, Manila Electric Company (Meralco), current supplier of electricity to
Cypress Manufacturing Co. Limited (CML), a Philippines branch of the Company,
has informed CML that it expects a shortage of electricity power in 2010; and

WHEREAS, in order to avoid the potential consequences of said power shortage,
and to negotiate a more favorable purchase price for CML’s electricity supply,
CML intends to enter into the Memorandum of Agreement (with the Master Power
Purchase and Supply Agreement attached as Annex C) with GNPower Ltd. Co. (GNP);
and

WHEREAS, the Board believes it is in CML’s best interest and in the Company’s
overall best interest to enter into said agreements with GNPower Ltd. Co. with
the pertinent terms as follows:

Memorandum of Agreement: The purpose of the Memorandum of Agreement is to enable
GNP secure funding for building the power generating plant. The Master Power
Purchase and Supply Agreement is to enable GNP currently power purchase
commitments upon the completion of the building of the power plant. GNP
anticipates the completion of the power plant and the commencement of the sale
of power between 2010 and 2012.

Key Terms of the Master Power Purchase and Supply Agreement:

 

•   Term: 15 years beginning upon completion of the power generation facility.
CML is obligated to take the electricity and make the contract payments for the
full 15-year term.

 

•   There are no up-front payments. Over the 15-year life of the contract, the
total payments are projected to be $42M (at the 2010 rate) to $47M (assuming a
5%/yr increase in coal costs)

 

•   Quantity: 35M KWh/year.

 

•   Cost: The rate in 2010 is $0.078/KWh based on contracted purchase level.
Amount includes $0.025 energy fee that fluctuates with fuel cost. Contract cost
excludes transmission/distribution costs.

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•   Transferability: We are currently negotiating an assignment clause so CML
may, with the consent of GNP (which consent shall not be unreasonably withheld),
assign contract to a third party buyer.

 

•   Spot Market Sale Option: CML can instruct GNP to sell any excess electricity
into the spot market. Sale proceeds will be netted against CML’s commitment.

NOW, THEREFORE, BE IT HEREBY RESOLVED, that pursuant to applicable law, the
undersigned, being all of the Directors of the Company, hereby consent to and
approve the signing of the Memorandum of Agreement and the Master Power Purchase
Agreement as attached hereto, by CML, with any changes deemed necessary by
Company’s management.

Omnibus

RESOLVED, that the officers of the Company are, and each acting alone is, hereby
authorized to do and perform any and all such acts, including execution of any
and all documents and certificates, as such officers shall deem necessary or
advisable, to carry out the purposes and intent of the foregoing resolutions and
that any and all actions taken by the officers of the Company prior to the date
hereof in furtherance of the foregoing resolution are hereby approved, ratified
and confirmed in all respects.

IN WITNESS WHEREOF, the parties have duly executed this Action by Unanimous
Written Consent of the Board of Directors of Cypress Manufacturing Ltd. as of
the day and year first set forth above. This action may be signed in one or more
counterparts, each of which is an original, and all of which, together, shall be
deemed one instrument.

 

/s/ Emmanuel Hernandez

Emmanuel Hernandez

/s/ Neil Weiss

Neil Weiss

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ANNEX C

MASTER POWER PURCHASE AND SALE AGREEMENT

This Master Power Purchase and Sale Agreement is made and executed as of the
date and at the place specified in Schedule 1, by and between:

GNPOWER LTD. CO., a duly registered limited partnership organized under
Philippine Law, with principal office at 1905 Orient Square Building, Don
Francisco Ortigas Jr. Road, Ortigas Center, Pasig City 1605, Metro Manila,
Philippines and represented herein by its Senior Vice President, Mr. John
Anthony Becker who is duly authorized to enter into this Agreement by a
Resolution, a copy of which is hereto attached as Annex A hereinafter referred
to as the “Seller,”

and

The Party identified in Schedule 1 as the “Buyer,” with principal office address
as set out in Schedule 1, represented by the individual who is duly authorized
to enter into this Agreement by a Resolution, a copy of which is hereto attached
as Annex B and hereinafter referred to as the “Buyer”.

Each of the Seller and the Buyer are hereinafter individually referred to as a
“Party”, and together, as the “Parties”.

RECITALS:

A. The Seller will build, own and operate an electric power generation facility
(the “Facility”), to be located near Mariveles, Bataan, for the purpose of
supplying its customers with environmentally clean electric power commencing in
2010 (the “Project”).

B. Seller desires to supply and sell to the Buyer, and the Buyer desires to
receive and purchase from the Seller, the Product (as defined herein).

NOW, THEREFORE, for and in consideration of the premises and the covenants
herein contained, the Parties hereby agree as follows:

 

1

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ARTICLE ONE: GENERAL DEFINITIONS

1.1 “Affiliate” means, with respect to any person, any other person (other than
an individual) that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such person. For
this purpose, “control” means the direct or indirect ownership of fifty percent
(50%) or more of the outstanding capital stock or other equity interests having
ordinary voting power.

1.2 “Agreement” means this Master Power Purchase and Sale Agreement.

1.3 “Agreement Termination Date” means the date that is one hundred eighty
(180) months, unless extended pursuant to Sections 2.4 or 2.5, from the date
specified in the Delivery Period Commencement Date Notice as set forth in
Schedule 1, or January 1, 2012, if the Seller has not provided the Buyer with
the Delivery Period Commencement Date Notice by January 1, 2012, or such later
date as the Parties may agree to in writing.

1.4 “Applicable Laws” means any and all applicable laws, regulations, codes,
directives, judgments, decrees, orders or interpretations of any court,
arbitrator or governmental agency or authority and any valid waivers,
exemptions, variances, permits, licenses, authorizations, orders, consents or
conditions of or from, in any such case, any governmental instrumentality, court
or other entity having jurisdiction over the sale of electricity contemplated by
this Agreement and the performance of the obligations of each Party to be
performed hereunder, including all consents, licenses, registrations and permits
required to be issued pursuant thereto by any governmental instrumentality or
agency for or in respect of the transactions contemplated hereby.

1.5 “Bankrupt” means with respect to any entity, such entity when it: (i) files
a petition or otherwise commences, authorizes or acquiesces in the commencement
of a proceeding or cause of action under any bankruptcy, insolvency,
reorganization or similar law, or has any such petition filed or commenced
against it; (ii) makes an assignment or any general arrangement for the benefit
of creditors; (iii) otherwise becomes bankrupt or insolvent (however evidenced);
(iv) has a liquidator, administrator, receiver, trustee, conservator or similar
official appointed with respect to it or any substantial portion of its property
or assets; or (v) is generally unable to pay its debts as they fall due.

1.6 “Business Day” means any day except a Saturday, Sunday or an official
non-working holiday in the Philippines. A Business Day shall open at 8:00 a.m.
and close at 5:00 p.m. local time for the relevant Party’s principal place of
business. The relevant Party, in each instance unless otherwise specified, shall
be the Party from whom the notice, payment or delivery is being sent and by whom
the notice or payment or delivery is to be received.

1.7 “Capacity Factor” means, with respect to the Buyer’s purchases from the
Seller during any Billing Period, the number derived from dividing (i) the
actual quantity of the Product made available by the Seller to be purchased and
received by the Buyer at the Delivery Point, by (ii) the quantity of the Product
(a) that could have been made available by the Seller to be purchased and
received by the Buyer if the Contracted Capacity was utilized continuously
during the Billing Period LESS (b) the quantity of the Product not available for
delivery due to any Scheduled Outages and Unscheduled Outages during the Billing
Period computed as set forth in Schedule 2.

 

2

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1.8 “Capacity Fee” means the component of the Contract Price allocated to pay
for the cost, as well as the operations and maintenance, of the Facility and is
designated as the Capacity Fee in Schedule 1 as such may be adjusted from time
to time based on the Buyer’s Capacity Factor.

1.9 “Claims” means all third party claims or actions, threatened or filed and,
whether groundless, false, fraudulent or otherwise, that directly or indirectly
relate to the subject matter of an indemnity, and the resulting losses, damages,
expenses, attorneys’ fees and court costs, whether incurred by settlement or
otherwise, and whether such claims or actions are threatened or filed prior to
or after the termination of this Agreement.

1.10 “Contract Price” means the price in Dollars (as adjusted in accordance with
Schedule 1) to be paid by the Buyer to the Seller for the purchase of the
Product, as specified herein. The Contract Price is comprised of the relevant
Capacity Fee and Energy Fee.

1.11 “Contract Year” means the period commencing on the date specified by the
Seller to the Buyer in a Delivery Period Commencement Date Notice and ending on
May 31 of the then current calendar year (or the next calendar year, if such
Delivery Period should begin after May 31), and thereafter each period
commencing on June 1 and ending on May 31 (or on the Agreement Termination Date
in the final Contract Year).

1.12 “Contracted Capacity” means the contractual upper limit on the capacity of
the Facility that the Buyer can demand at any hour expressed in kilowatts as set
forth in Schedule 1.

1.13 “Delivery Period” means the period of delivery of the Product as specified
in Schedule 1. The Delivery Period shall commence on the date specified by the
Seller to the Buyer in a Delivery Period Commencement Date Notice and shall
continue up to and including the Delivery Period Expiration Date specified in
Schedule 1; provided, however, that the commencement of the Delivery Period
shall not occur any earlier than thirty (30) days following the Buyer’s receipt
of the Delivery Period Commencement Date Notice.

1.14 “Delivery Period Commencement Date Notice” means the written notice to be
provided by the Seller to the Buyer through which the Seller shall indicate to
the Buyer the commencement of the first Delivery Period.

1.15 “Delivery Period Expiration Date” means the date specified as the final day
of deliveries for the relevant Delivery Period specified in Schedule 1 hereto,
as such shall be extended pursuant to Section 7.1, if applicable, or such other
date as the Parties may agree to in writing.

1.16 “Delivery Point” means the point at which the Product will be delivered and
received, and where title to, and risk in respect of, the Product shall pass to
the Buyer, as specified in Schedule 1.

 

3

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1.17 “Distribution Agreement” means an agreement with a relevant Distribution
Utility for the provision of distribution services to enable the Product to be
delivered from the Delivery Point to the Receiving Point.

1.18 “Distribution Utility” means any entity transporting the Product on behalf
of the Buyer from the Delivery Point, pursuant to a Distribution Agreement.

1.19 “Dollars” or “$” or “USD” means the monetary currency of the United States
of America.

1.20 “Effective Date” means the date specified as the “Effective Date” in
Schedule 1 hereto or such other date as the Parties may agree to in writing.

1.21 “Energy Fee” means the component of the Contract Price allocated to pay for
the fuel, including Governmental Charges, designated as the Energy Fee in
Schedule 1 as adjusted from time to time due to changes in the delivered price
of fuel.

1.22 “Equitable Defenses” means any bankruptcy, insolvency, reorganization and
other laws affecting creditors’ rights generally, and with regard to equitable
remedies, the discretion of the court before which proceedings to obtain the
same may be pending.

1.23 “Equivalent Hour” means an hour the Facility is unable to produce
sufficient electricity, whether due to a Scheduled Outage or an Unscheduled
Outage, multiplied by the percentage of the Contracted Capacity that was
unavailable during such hour.

1.24 “ERC” means the Energy Regulatory Commission or any successor government
agency with similar responsibilities.

1.25 “Force Majeure” means an event or circumstance which prevents one Party
from performing its obligations hereunder, which event or circumstance was not
within the reasonable control of, or the result of the negligence of, the
Claiming Party, and which, by the exercise of due diligence, the Claiming Party
is unable to overcome or avoid or cause to be avoided. Without limiting the
generality of the foregoing, “Force Majeure” shall include:

 

  (a) acts of God;

 

  (b) acts of war or the public enemy, whether war be declared or not, invasion,
armed conflict or act of foreign enemy, blockade, embargo, revolution, public
disorders, insurrection, rebellion, civil commotion, act of terrorism,
explosion, sabotage, arson, riots and violent demonstrations;

 

  (c) strikes, labor disputes, in any such case which are widespread,
nationwide, or directed only at a Party (provided, in the case of a strike
directed at a Party, such Party is using reasonable efforts to overcome such
strike and it could not reasonably have been avoided or prevented);

 

4

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  (d) floods, tidal waves, tsunamis, fires, earthquakes, typhoons and other
natural calamities;

 

  (e) expropriation, requisition, confiscation, nationalization or other
compulsory acquisition, export or import restriction by any governmental
authorities, closing of harbors, docks, canals or other assistance to or
adjuncts of the shipping or navigation of or within any place, rationing or
allocation, whether imposed by law, decree or regulation by, or by compliance of
industry at the insistence of, any governmental authority;

 

  (f) arbitrary or capricious or unreasonable denial, conditioning, variation,
termination or voiding of, or failure or delay in granting or renewing, any
governmental authorization required for such Party’s performance of its material
obligations hereunder, notwithstanding such Party’s due application therefore
and diligent efforts to obtain the same;

 

  (g) a change in Applicable Laws in force from time to time after the date
hereof;

 

  (h) the inability of the Seller to purchase electricity for delivery to the
Buyer due to the unavailability of electricity in the wholesale electricity spot
market; and,

 

  (i) a grid-wide transmission system failure.

Without limiting the generality of the foregoing, “Force Majeure” shall not
include:

 

  (a) mechanical and electrical breakdown or failure of equipment, machinery or
plant owned or operated by either Party due to the manner in which such
equipment, machinery or plant has been operated or maintained (whether or not by
such Party);

 

  (b) the Seller finding another market for the Product at a price greater than
the Contract Price;

 

  (c) the Buyer losing its markets;

 

  (d) the Buyer having the opportunity to buy the Product at a price lower than
the Contract Price;

 

  (e) the Buyer’s inability economically to use or resell the Product purchased
hereunder; and,

 

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  (f) without prejudice to Section 2.5, the Buyer’s inability to use or receive
the Product as a result of a failure by a Transmission Utility and/or a
Distribution Utility, as the case may be, to perform its obligations under a
relevant Transmission Agreement and/or Distribution Agreement including those
due to any localized transmission line outages.

1.26 “Interest Rate” means, for any date, the lesser of (a) the per annum rate
of interest equal to the prime lending rate prevailing in the United States of
America as may from time to time be published in The Wall Street Journal under
“Money Rates” on such day (or if not published on such day on the most recent
preceding day on which published), plus two percent (2%) and (b) the maximum
rate permitted by applicable law, if any.

1.27 “Minimum Capacity Factor” means the Capacity Factor set forth in Schedule 1
used to compute the minimum amount of the Product, for each Billing Period of a
Contract Year, the Buyer is obligated to receive and purchase hereunder unless
excused by Force Majeure. The Minimum Capacity Factor for a Billing Period
during any Contract Year may be adjusted by the Seller for any planned outage of
a Buyer’s facility; provided, however, that the Buyer shall remain obligated to
purchase the Minimum Quantity during the Contract Year.

1.28 “Minimum Quantity” means the minimum amount of kilowatthours, as set forth
in Schedule 1, that the Seller agrees herein to make available to sell and
deliver, or cause to be delivered, to the Buyer, and that the Buyer agrees
herein to purchase and receive, or cause to be received, from the Seller. The
Minimum Quantity during the first and last Contract Year of a Delivery Period
shall be adjusted pro rata depending on the date specified in the Delivery
Period Commencement Date Notice. The Minimum Quantity, while stated as an amount
of kilowatthours for each Contract Year of a Delivery Period, shall be subject
to actual delivery pursuant to a schedule, updated at least annually, to be
agreed between the Parties, which shall reflect an allocation for any planned
outages of the Buyer’s facility as well as Seller’s Scheduled Outages and
Unscheduled Outages and partial load operations throughout each Contract Year of
a Delivery Period during which reduced or no deliveries will be available to the
Buyer, and which schedule shall be approved by the relevant governmental
authorities, including those entities having jurisdiction over the electricity
market such as the Philippine Electricity Market Corporation, the Market
Operator and the System Operator, and which by reference shall form an integral
part of this Agreement.

1.29 “Pesos” or “PhP” means the monetary currency of the Republic of the
Philippines.

1.30 “Potential Event of Default” means an event which, with notice or passage
of time or both, would constitute an Event of Default.

1.31 “Product” means electric capacity, contracted on a variable Capacity Factor
basis, together with energy, as specified in Schedule 1 hereto or as otherwise
agreed by the Parties.

 

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1.32 “Receiving Point” means the point at which the Product is delivered to the
Buyer by, and received by the Buyer from, the Transmission Utility and/or
Distribution Utility, as the case may be, as specified in Schedule 1.

1.33 “Schedule” or “Scheduling” means the actions of Seller, Buyer and/or their
designated representatives, including each Party’s Transmission Utility and/or
Distribution Utility, as the case may be, and if applicable, the Wholesale
Electricity Spot Market including the Market Operator and the System Operator,
of notifying, requesting and confirming to each other the quantity of the
Product to be delivered on any given day during the Delivery Period.

1.34 “Scheduled Outage” means the partial or complete shutdown of the Facility,
for planned inspection or maintenance, in accordance with an advance schedule.

1.35 “Transmission Agreement” means an agreement with a Transmission Utility for
the provision of transmission services to enable the Product to be delivered
from the Delivery Point to the Receiving Point.

1.36 “Transmission Utility” means an entity transporting the Product on behalf
of the Buyer from the Delivery Point pursuant to a Transmission Agreement.

1.37 “Unscheduled Outage” means the partial or complete shutdown of the Facility
due to unplanned or emergency events.

ARTICLE TWO: OBLIGATIONS AND DELIVERIES

2.1 Seller’s and Buyer’s Obligations. Subject to the terms and conditions of
this Agreement, the Seller shall, during the term of this Agreement, sell and
deliver, or cause to be delivered, whether (at the Seller’s sole discretion)
sourced from the Facility or from other electricity generators, and the Buyer
shall purchase and receive, or cause to be received, the Minimum Quantity of the
Product at the Delivery Point, and the Buyer shall pay the Seller the Contract
Price. The Buyer shall be responsible for any Governmental Charges imposed on or
associated with the Product at, before or after the Delivery Point, including
the fuel utilized to generate the Product.

2.2 Scheduled Outages and Unscheduled Outages. The Seller is allowed Scheduled
Outages not to exceed seven hundred twenty (720) Equivalent Hours for each
Contract Year during which times reduced or no deliveries will be available to
the Buyer. The Seller is likewise allowed Unscheduled Outages of five hundred
four (504) Equivalent Hours for each Contract Year during which times reduced or
no deliveries will be available to the Buyer. If the Seller exceeds the
Equivalent Hours allowed for Unscheduled Outages in any Contract Year, it shall
be permitted to credit any unutilized Equivalent Hours to Scheduled Outages.
Conversely, if the Seller exceeds the Equivalent Hours allowed for Scheduled
Outages in any Contract Year, it shall be permitted to credit any unutilized
Equivalent Hours to Unscheduled Outages. Unutilized Equivalent Hours for either
Scheduled Outages or Unscheduled Outages in any Contract Year cannot be carried
forward to subsequent Contract Years.

 

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During any Scheduled Outage or Unscheduled Outage the Seller, in consultation
with the Buyer, shall use its best efforts to negotiate on behalf of the Buyer
for the supply and delivery of the Product for a price as close as possible to
the Contract Price with third parties (including the Wholesale Electricity Spot
Market). If the Buyer agrees to the negotiated price, including WESM Charges, if
any, and any applicable transaction and administrative charges for arranging
this alternative supply, it shall take and pay for such quantity regardless of
whether the price, including WESM Charges, if any, and any applicable
transaction and administrative charges, is higher or lower than the Contract
Price. The Buyer, however, has no obligation to agree to the price negotiated by
the Seller and is permitted to procure its own supply of the Product during any
Scheduled Outage or Unscheduled Outage. If the Seller, despite its best efforts,
is unable to arrange for this alternative supply, it shall have no further
liability to the Buyer for such quantity. Quantities of the Product purchased by
the Buyer during any Scheduled Outage or Unscheduled Outage, regardless of
whether such quantities were arranged by the Seller or the Buyer, shall not
constitute part of the Minimum Quantity.

If during any Contract Year the total Equivalent Hours for both Scheduled
Outages and Unscheduled Outages exceeds one thousand two hundred twenty-four
(1,224) then, unless excused by Force Majeure, the Seller shall procure from
third parties (including the Wholesale Electricity Spot Market) at its cost, and
deliver the contracted quantities of the Product to the Buyer and the Buyer
shall be obligated to pay only the Contract Price to the Seller for such
quantities.

2.3 Transmission and Scheduling. The Seller shall arrange and be responsible for
transmission service to the Delivery Point and shall Schedule or arrange for
Scheduling services with the Transmission Utility and/or Distribution Utility,
as the case may be, pursuant to a relevant Transmission Agreement and/or
Distribution Agreement, as specified by the Parties, or in the absence thereof,
in accordance with the practice of the Transmission Utility and/or Distribution
Utility, as the case may be, to deliver the Product from the Delivery Point to
the Receiving Point. The Buyer shall bear the cost of such transmission service
from the Delivery Point up to the Receiving Point including the cost of any
electric losses incurred in such transmission.

2.4 Force Majeure. To the extent either Party is prevented by Force Majeure from
carrying out, in whole or part, its obligations under this Agreement and such
Party (the “Claiming Party”) gives notice and details of the Force Majeure to
the other Party as soon as practicable, then the Claiming Party shall be excused
from the performance of its obligations herein (other than the obligation to
make payments then due or becoming due with respect to performance prior to the
Force Majeure). During the Force Majeure event, the non-Claiming Party shall
likewise be relieved of its obligations to the Claiming Party, but only those
obligations corresponding to the performance of the Claiming Party excused by
such Force Majeure event.

The Claiming Party shall always attempt to remedy the Force Majeure with all
reasonable dispatch. However, if the duration of any Force Majeure event exceeds
or is expected by the Claiming Party to exceed 180 days, then the Parties shall
meet and discuss any appropriate action required with the objective of
maintaining, to the extent feasible, the rights and obligations of the Parties
under this Agreement. If any Force Majeure exceeds or is expected by the
Claiming

 

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Party to exceed 360 days then this Agreement shall be terminated. For the
avoidance of doubt, the Agreement Termination Date shall be extended, day for
day, for the duration of any Force Majeure event.

2.5 Transmission/Distribution Failures. If the Buyer is not able to take the
Product from the Delivery Point, or receive the Product at the Receiving Point,
for causes attributable to any failure by the Transmission Utility and/or
Distribution Utility, as the case may be, to transmit the Product (other than as
a result of a system-wide or grid-wide blackout or service interruption), such
event shall not excuse the Buyer from paying the Contract Price for the quantity
of the Product otherwise made available to the Buyer by the Seller. However, in
such instances the Seller will exert its best efforts to cause a quantity of the
Product, equal to the quantity of the Product not so taken or received by the
Buyer, to be delivered to the Buyer before the Agreement Termination Date in
accordance with a schedule to be agreed upon between the Seller and the Buyer.
If the Seller is able to cause such quantity of the Product to be delivered, the
Buyer shall not be required to pay the Contract Price for such Product upon
actual delivery; provided, however, that if the cost of fuel for generating the
Product at the time the Product was originally scheduled to be delivered to, but
was not taken, or received by, the Buyer is lower than when the Product is
actually delivered in accordance with this Section 2.5, the Buyer shall pay to
the Seller an amount equal to such difference in the cost of fuel. If the Seller
is unable to cause such quantity to be delivered before the Agreement
Termination Date, the Seller shall extend the term of the Agreement for as long
as necessary to deliver such quantity.

Instead of redelivering the quantity, the Buyer may instruct the Seller, before
the end of the Billing Period during which the delivery failure occurred, to
credit the Contract Price for such quantity with any net proceeds from the
Wholesale Electricity Spot Market actually received by the Seller for such
quantity (“Net Proceeds”). If the Net Proceeds are less than the Contract Price
for such quantity, the Buyer shall pay the Seller any deficiency as set forth in
the invoice for the relevant Billing Period. If the Net Proceeds are greater
than the Contract Price for such quantity, any excess shall be credited to the
Buyer in the invoice for the relevant Billing Period.

2.6 Spot Market Sale Option. The Buyer may, upon proper notification to the
Seller and in compliance with all Applicable Laws, instruct the Seller to sell
into the Wholesale Electricity Spot Market in any Billing Period, on behalf of
the Buyer, some or all of the Minimum Quantity in any Contract Year subject, at
all times, to the Contracted Capacity and Minimum Capacity Factor as set forth
in Schedule 1. The Buyer is obligated to pay to the Seller the Contract Price
for such quantities, as set forth in Schedule 1, but any proceeds from such
sales into the Wholesale Electricity Spot Market will be paid to the Buyer or,
if retained by the Seller, netted against amounts owed by the Buyer to the
Seller; provided, however, the Buyer shall be responsible for all WESM Charges
related to such spot market sales. Any request by the Buyer to sell electricity
into the Wholesale Electricity Spot Market will be combined with all similar
requests from other buyers, as well as any market operations of the Seller, and,
in the event that the total quantity offered to the market cannot be sold, all
parties’ quantities shall be reduced pro rata. Before the commencement of any
spot market sales, the Buyer and the Seller shall establish a mutually
acceptable protocol for executing such sales and determine any charges by Seller
for conducting such sales through the WESM on the Buyer’s behalf.

 

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2.7 Regulatory Approvals. The obligations of the Seller to sell and deliver the
Product, or cause the Product to be delivered, to the Buyer hereunder are
subject to the Seller having obtained all required governmental approvals and
permits including, without limitation, any required approvals from the ERC or
the Wholesale Electricity Spot Market. The Buyer and Seller acknowledge that,
given the ongoing evolution of the Wholesale Electricity Spot Market and
regulations governing the electricity market, there may be circumstances that
require the Parties to amend this Agreement. Both Buyer and Seller hereby agree
to fully cooperate to implement such amendments, especially as they relate to
full compliance with Applicable Laws.

ARTICLE THREE: EVENTS OF DEFAULT; REMEDIES

3.1 Events of Default. An “Event of Default” shall mean, with respect to the
relevant Party (such Party being, in respect of the Event of Default, a
“Defaulting Party” and the other Party being the “Non-Defaulting Party”), any of
the following Buyer Events of Default or Seller Events of Default:

3.1.1 A “Buyer Event of Default” shall mean, with respect to the Buyer, the
occurrence of any one or more of the following:

 

  (a) the failure to make, when due, any payment to Seller required pursuant to
this Agreement if such failure is not remedied within five (5) Business Days
after Buyer’s receipt of written notice for such payment;

 

  (b) any representation or warranty made by the Buyer herein is false or
misleading in any material respect when made or when deemed made or repeated and
has a material adverse effect on the transactions contemplated by this
Agreement;

 

  (c) the failure to perform any material covenant or obligation set forth in
this Agreement if such failure is not remedied within five (5) Business Days
after Buyer’s receipt of written notice thereof;

 

  (d) the Buyer consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all of its assets to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer, the resulting,
surviving or transferee entity fails to assume all the obligations of the Buyer
under this Agreement to which it or its predecessor was a party by operation of
law or pursuant to an agreement reasonably satisfactory to the Seller; and,

 

  (e) the Buyer becomes Bankrupt or there occurs and is a continuation of (i) a
default, event of default or other similar condition or event in respect of the
Buyer under one or more agreements or instruments, individually or collectively,
relating to indebtedness for borrowed money in an aggregate amount of not less
than $10,000,000.00, which results in such indebtedness becoming, or becoming
capable at such time of being declared, immediately due

 

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     and payable or (ii) a default by the Buyer in making on the due date
therefore one or more payments, individually or collectively, in an aggregate
amount of not less than $1,000,000.00.

3.1.2 A “Seller Event of Default” shall mean, with respect to the Seller, the
occurrence of one or more of the following:

 

  (a) the failure to make, when due, any payment to Buyer required pursuant to
this Agreement if such failure is not remedied within five (5) Business Days
after Seller’s receipt of written notice for such payment;

 

  (b) any representation or warranty made by the Seller herein is false or
misleading in any material respect when made or when deemed made or repeated and
has a material adverse effect on the transactions contemplated by this
Agreement;

 

  (c) the failure by the Seller to perform any material covenant or obligation
set forth in this Agreement, including delivering the Minimum Quantity at the
Contract Price, if such failure is not remedied within five (5) Business Days
after Seller’s receipt of written notice thereof; and,

 

  (d) the Seller consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all of its assets to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer, the resulting,
surviving or transferee entity fails to assume all the obligations of the Seller
under this Agreement to which it or its predecessor was a party by operation of
law or pursuant to an agreement reasonably satisfactory to the Buyer.

3.2 Notice of Default. The Non-Defaulting Party may deliver a notice to the
Defaulting Party specifying in reasonable detail the relevant Event of Default
(the “Notice of Default”). If, within thirty (30) days after the receipt of the
Notice of Default by the Defaulting Party, the Event of Default has not been
remedied, the Non-Defaulting Party may terminate this Agreement and pursue any
remedy available to it under this Agreement, at law or in equity. If an Event of
Default with respect to a Defaulting Party shall have occurred and be
continuing, the Non-Defaulting Party shall have the right to (i) designate a
day, no earlier than the day such notice is effective and no later than thirty
(30) days after such notice is effective, as an early termination date (“Early
Termination Date”) to accelerate all amounts owing between the Parties and to
liquidate and terminate this Agreement, (ii) withhold any payments due to the
Defaulting Party under this Agreement and (iii) suspend performance.

3.3 Replacement Contract. If this Agreement is terminated due to a Buyer Event
of Default, the Seller shall use its best efforts to secure a contract or series
of contracts (each a “Replacement Contract”) with other third parties with a
view to substituting a buyer or buyers for all or a portion of the remaining
term of this Agreement for the Minimum Quantity of the Product the Buyer is
obligated to purchase on terms as comparable as possible to this Agreement.

 

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If the Seller is able to enter into such Replacement Contract(s), the Buyer
shall pay to the Seller the sum of (i) the positive difference, if any, of the
remaining gross receipts from the Capacity Fees in this Agreement less the
comparable gross receipts from the Capacity Fees in the Replacement Contract(s),
and (ii) the positive difference, if any, of the remaining total of the Minimum
Quantity of the Product stated in this Agreement less the total of the Minimum
Quantity of the Product stated in the Replacement Contract(s), multiplied by the
highest Energy Fee over the twelve (12) months immediately preceding the Early
Termination Date (the “Replacement Contract Payment”); provided, however, if the
Seller is unable to enter into any Replacement Contract before the Early
Termination Date, the Buyer shall pay to the Seller an amount equal to the total
Contract Price for the remaining term of this Agreement calculated using the
highest Capacity Fee and highest Energy Fee paid by the Buyer over the twelve
(12) months immediately preceding the Early Termination Date .

The relevant period for the purposes of the calculation in this Section 3.3
shall be from the date the Event of Default occurred to the Agreement
Termination Date.

3.4 Net Out. The Non-Defaulting Party may net out any or all amounts due to the
Defaulting Party under this Agreement against all amounts that are due to the
Non-Defaulting Party under this Agreement, so that all such amounts shall be
netted out to a single liquidated amount (the “Termination Payment”) payable by
one Party to the other.

3.5 Notice of Payment of Termination Payment. As soon as practicable after a
liquidation, notice shall be given by the Non-Defaulting Party to the Defaulting
Party of the amount of the Termination Payment and whether the Termination
Payment is due to or due from the Non-Defaulting Party. The notice shall include
a written statement explaining in reasonable detail the calculation of such
amount. The Termination Payment shall be made by the Party that owes it within
two (2) Business Days after such notice is effective.

3.6 Disputes With Respect to Termination Payment. If the Defaulting Party
disputes the Non-Defaulting Party’s calculation of the Termination Payment, in
whole or in part, the Defaulting Party shall, within two (2) Business Days of
receipt of the Non-Defaulting Party’s calculation of the Termination Payment,
provide to the Non-Defaulting Party a detailed written explanation of the basis
for such dispute. If the Parties are unable to resolve this dispute within 30
days, either Party may refer the dispute to arbitration in accordance with
Article Eight of this Agreement.

3.7 Suspension of Performance. Notwithstanding any other provision of this
Agreement, if an Event of Default or Potential Event of Default shall have
occurred and be continuing, the Non-Defaulting Party, upon written notice to the
Defaulting Party, shall have the right (i) to suspend performance of its
obligations under this Agreement, and (ii) to the extent an Event of Default
shall have occurred and be continuing to exercise any remedy available at law or
in equity.

 

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ARTICLE FOUR: PAYMENT

4.1 Billing Period. The calendar month shall be the standard period for all
payments under this Agreement (other than a Termination Payment). The Seller
shall make the necessary arrangements with the Distribution Utility in order to
incorporate the Contract Price into the monthly billings of the Distribution
Utility to the Buyer.

4.2 Timeliness of Payment. All invoices under this Agreement shall be due and
payable in accordance with the Distribution Utility’s invoice instructions. Any
amounts not paid by the due date will be deemed delinquent and will accrue
interest at the Interest Rate, such interest to be calculated from, and
including, the due date to, but excluding, the date the delinquent amount is
paid in full. In addition, the Buyer acknowledges that in the event the Buyer
fails to pay in full the amounts due to be paid by it in accordance with the
Distribution Utility’s invoice instructions, the Distribution Utility may, at
the instruction of the Seller, cause a disconnection in the supply of
electricity to the Buyer until all amounts due are paid in full.

4.3 Seller Direct Billing. In the event the Seller is unable to make the
necessary arrangements with the Distribution Utility in accordance with
Section 4.1 above, the Seller may directly bill the Buyer for the Contract Price
in accordance with the following procedure:

 

  (a) Unless otherwise specifically agreed upon by the Parties, the calendar
month shall be the standard period for all payments under this Agreement (other
than a Termination Payment). As soon as practicable after the end of each month,
the Seller will render to the Buyer an invoice for the payment obligations
incurred hereunder during the preceding month.

 

  (b) Unless otherwise agreed by the Parties, all invoices under this Agreement
shall be due and payable in accordance with the Seller’s invoice instructions on
or before the tenth (10th) day after receipt of the invoice or, if such day is
not a Business Day, then on the next succeeding Business Day. The Buyer will
make payments by electronic funds transfer, or by other mutually agreed
alternative method, to the account designated by the Seller. Any amounts not
paid by the due date will be deemed delinquent and will accrue interest at the
Interest Rate, such interest to be calculated from, and including, the due date
to, but excluding, the date the delinquent amount is paid in full. In addition,
the Buyer acknowledges that in the event the Buyer fails to pay in full the
amounts due to be paid by it in accordance with the Seller’s invoice, the
Transmission Utility and/or Distribution Utility, as the case may be, may, at
the instructions of the Seller, cause a disconnection in the supply of
electricity to the Buyer until all amounts due are paid in full.

4.4 Currency of Payment. The Buyer acknowledges that the Contract Price is
denominated and payable in Dollars. However, this notwithstanding, the Buyer
shall have the

 

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option of paying the Contract Price set out in the relevant invoice from the
Distribution Utility, under Section 4.1, or from the Seller, under Section 4.3,
in Pesos. If, in the event the Buyer makes any payment in Pesos, such payment,
when converted into Dollars at the rate of exchange on the date such payment is
actually received by the Seller, does not exactly equal the amount due under the
terms of this Agreement, then (i) the Buyer shall be liable to pay the Seller
the amount of any resulting underpayment, which amount of underpayment may, at
the Seller’s option, be included in subsequent invoices to the Buyer and
(ii) the Seller shall be liable to pay the Buyer the amount of any resulting
overpayment, which amount of overpayment shall be included, as a credit, in
subsequent invoices to the Buyer. For the purpose of this Section 4.4, “rate of
exchange” means the rate at which the Seller is able, on the relevant date, to
purchase Dollars with Pesos, which rate shall not be less than the average
conversion rate for Pesos to Dollars posted by the three largest (by combined
capital and surplus) commercial banks in the Republic of the Philippines, and
which shall take into account any premium and other costs of exchange.

4.5 Other Billing Procedures. The Buyer and Seller acknowledge that, given the
ongoing evolution of the Wholesale Electricity Spot Market, there may be more
desirable and efficient billing procedures established in the future. Both Buyer
and Seller agree to cooperate to implement such procedures if they are found to
be mutually beneficial.

ARTICLE FIVE: LIMITATIONS

5.1 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH HEREIN,
THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND
ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE
EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE
ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS
REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW
OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY
PROVIDED HEREIN, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL
DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY
AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS
EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER
BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN QUASI-DELICT OR CONTRACT, UNDER
ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE
LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT
REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY
PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR
PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED,
THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO

 

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DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE
DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM
OR LOSS.

ARTICLE SIX: GOVERNMENTAL CHARGES AND WESM CHARGES

6.1 Cooperation. Each Party shall use reasonable efforts to implement the
provisions of and to administer this Agreement in accordance with the intent of
the Parties to minimize all taxes and charges, so long as neither Party is
materially adversely affected by such efforts and provided the same is not
contrary to law.

6.2 Governmental Charges. All value added taxes, sales taxes, goods and services
taxes, excise taxes, import duties, stamp taxes and similar taxes imposed by any
government authority (“Governmental Charges”) on or with respect to the Product,
including taxes on fuel purchased by the Seller to generate electricity pursuant
to this Agreement, or the transactions contemplated by this Agreement, shall be
for the account of the Buyer. The Seller’s own income taxes, property taxes and
local business taxes are for its account. In the event the Seller is required by
Applicable Laws to remit or pay any such Governmental Charges, such amounts will
be set forth in the invoice for the next subsequent Billing Period and shall be
due and payable by the Buyer according to the provisions of Article Four.

6.3 Governmental Charges as of the Effective Date. The Governmental Charges that
are included in the Contract Price as of the Effective Date are:

 

  6.3.1 Excise Tax of US$0.20 per ton of fuel (coal).

 

  6.3.2 Import Duty of 7.0% of the CIF (Cost, Insurance and Freight) price of
fuel (coal)

Any changes to these Governmental Charges, upward or downward, or the imposition
of additional Governmental Charges will affect the Contract Price invoiced to
the Buyer.

6.4 WESM Charges. All line rental charges, market fees and other similar fees
imposed by the Wholesale Electricity Spot Market (“WESM Charges”) on or with
respect to the Product shall be for the account of the Buyer. WESM Charges have
not been finalized and are not yet included in the Contract Price therefore any
subsequent imposition of WESM Charges will increase the Contract Price invoiced
to the Buyer.

ARTICLE SEVEN: MISCELLANEOUS

7.1 Term of Agreement. This Agreement shall be binding upon the Parties from the
Effective Date up to, and including, the Agreement Termination Date unless
otherwise earlier terminated by either Party in accordance with this Agreement;
provided, however, that such termination shall not affect or excuse the
performance of either Party under any provision of this Agreement that by its
terms survives any such termination. If the Delivery Period Expiration Date is
earlier than the Agreement Termination Date, then the Seller, upon no less than
180 days’ notice to the Buyer, shall extend the Delivery Period for 60 months,
provided, however, (a) if the Minimum Quantity in the Contract Year immediately
preceding the notice to the Buyer exceeded

 

15

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50% of the Buyer’s total electricity consumption for such period, then the Buyer
may elect to reduce the Minimum Quantity to such 50% level for the next 60 month
Delivery Period, and (b) if the Buyer and Seller agree that the quantity, type
and terms of electricity procured by the Buyer from or through the Distribution
Utility is comparable to the Product, and the average of the Contract Price over
the Contract Year immediately preceding the notice to the Buyer is higher than
the average price for such electricity, then the Seller shall reduce its price
for the next 60 month Delivery Period to the price for such comparable
electricity. For the avoidance of doubt, the Buyer is obligated by this
Agreement to purchase electric capacity and energy from the Seller for 180
months from the date specified in the Delivery Period Commencement Notice
subject only to possible adjustments to the Contract Price and Minimum Quantity
specified in this Section 7.1 and Schedule 1. In no event shall the sum of all
the Delivery Periods exceed 180 months unless required by Sections 2.4 or 2.5 or
otherwise agreed to by the Parties.

7.2 Representations and Warranties. Commencing on the Effective Date, each Party
represents and warrants to the other Party that:

 

  (a) it is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation;

 

  (b) it has all regulatory authorizations necessary, except those procured or
renewed in the normal course of business, for it to legally perform its
obligations under this Agreement;

 

  (c) the execution, delivery and performance of this Agreement are within its
powers, have been duly authorized by all necessary action and do not violate any
of the terms and conditions in its governing documents, any contracts to which
it is a party or any law, rule, regulation, order or the like applicable to it;
and,

 

  (d) this Agreement and each other document executed and delivered in
accordance with this Agreement constitutes its legally valid and binding
obligation enforceable against it in accordance with its terms, subject to any
Equitable Defenses.

7.3 Title and Risk of Loss. Title to and risk of loss related to the Product
shall transfer from Seller to Buyer at the Delivery Point. The Seller warrants
that it will deliver to the Buyer the Product free and clear of all liens,
security interests, claims and encumbrances or any interest therein or thereto
by any person arising prior to the Delivery Point.

7.4 Indemnity. Each Party shall indemnify, defend and hold harmless the other
Party from and against any Claims arising from or out of any event,
circumstance, act or incident first occurring or existing during the period when
control and title to Product is vested in such Party as provided in Section 7.3.
Each Party shall indemnify, defend and hold harmless the other Party against any
Governmental Charges for which such Party is responsible under Article Six.

7.5 Assignment. Neither Party shall assign this Agreement or its rights
hereunder without the prior written consent of the other Party, which consent
may be withheld in the

 

16

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exercise of its sole discretion; provided, however, (a) notwithstanding the
foregoing provision, the Buyer may, upon the consent of the Seller, which
consent shall not be unreasonably withheld, assign this Agreement in whole or in
part to Buyer’s Affiliate, the surviving corporation with or into which Buyer
may merge or consolidate, or an entity to which Buyer transfers all, or
substantially all, of its business and assets, and further provided, however,
that any such assignee shall agree in writing to be bound by the terms and
conditions hereof and (b) the Seller may, without the consent of the Buyer
(i) transfer, sell, pledge, encumber or assign this Agreement or the accounts,
revenues or proceeds hereof in connection with any financing or other financial
arrangements, (ii) transfer or assign this Agreement to an affiliate of the
Seller which affiliate’s creditworthiness is equal to or higher than that of the
Seller, or, (iii) transfer or assign this Agreement to any person or entity
succeeding to all or substantially all of the assets whose creditworthiness is
equal to or higher than that of the Seller; provided, further however, that in
each such case, any such assignee shall agree in writing to be bound by the
terms and conditions hereof, and upon any such assumption pursuant to (ii) or
(iii) above, the assignor shall be relieved of any further liability hereunder.

7.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN
ACCORDANCE WITH THE LAWS OF THE PHILIPPINES.

7.7 Notices. All notices, requests, statements or payments shall be made to the
address specified below each Party’s signature at the end of this Agreement.
Notices shall, unless otherwise specified herein, be in writing and may be
delivered by hand delivery, Philippine mail, overnight courier service or
facsimile. Notice by facsimile or hand delivery shall be effective at the close
of business on the day actually received, if received during business hours on a
Business Day, and otherwise shall be effective at the close of business on the
next succeeding Business Day. Notice by overnight mail or courier shall be
effective on the next Business Day after it was sent. A Party may change its
addresses by providing notice of same in accordance herewith.

7.8 General. This Agreement (including the schedules and any written supplements
hereto), constitutes the entire agreement between the Parties relating to the
subject matter. Neither Party makes any representations or warranties hereunder
except as expressly set forth herein. This Agreement shall be considered for all
purposes as prepared through the joint efforts of the Parties and shall not be
construed against one Party or the other as a result of the preparation,
substitution, submission or other event of negotiation, drafting or execution
hereof. Except to the extent herein provided for, no amendment or modification
to this Agreement shall be enforceable unless reduced to writing and executed by
both Parties. This Agreement shall not impart any rights enforceable by any
third party (other than a permitted successor or assignee bound to this
Agreement). Waiver by a Party of any default by the other Party shall not be
construed as a waiver of any other default. Any provision declared or rendered
unlawful by any applicable court of law or regulatory agency or deemed unlawful
because of a statutory change (individually or collectively, such events
referred to as a “Regulatory Event”) will not otherwise affect the remaining
lawful obligations that arise under this Agreement; and provided, further, that
if a Regulatory Event occurs, the Parties shall use their best efforts to modify
this Agreement in order to give effect to the original intention of the Parties.
The term “including” when used in

 

17

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this Agreement shall be by way of example only and shall not be considered in
any way to be in limitation. The headings used herein are for convenience and
reference purposes only. All indemnity and audit rights shall survive the
termination of this Agreement for twenty-four (24) months. This Agreement shall
be binding on each Party’s successors and permitted assigns.

7.9 Audit. Each Party has the right, at its sole expense and during normal
working hours, to examine the records of the other Party to the extent
reasonably necessary to verify the accuracy of any statement, charge or
computation made pursuant to this Agreement. If requested, a Party shall provide
to the other Party statements evidencing the quantity delivered at the Delivery
Point. If any such examination reveals any inaccuracy in any statement, the
necessary adjustments in such statement and the payments thereof will be made
promptly and shall bear interest calculated at the Interest Rate from the date
the overpayment or underpayment was made until paid; provided, however, that no
adjustment for any statement or payment will be made unless objection to the
accuracy thereof was made prior to the lapse of twelve (12) months from the
rendition thereof, and thereafter any objection shall be deemed waived.

7.10 Confidentiality. Neither Party shall disclose the terms or conditions of
this Agreement to a third party (other than the Party’s employees, lenders,
counsel, accountants or advisors who have a need to know such information and
have agreed to keep such terms confidential) except in order to comply with any
applicable law, regulation, or any exchange, control area or independent system
operator rule or in connection with any court or regulatory proceeding;
provided, however, each Party shall, to the extent practicable, use reasonable
efforts to prevent or limit the disclosure. The Parties shall be entitled to all
remedies available at law or in equity to enforce, or seek relief in connection
with, this confidentiality obligation.

7.11 U.S. Foreign Corrupt Practices Act. The Parties agree to comply with the
provisions of the United States Public Law 95-213, the Foreign Corrupt Practices
Act of 1977, and any amendments thereto (the “FCPA”). The Parties specifically
understand and agree that they shall not, contrary to the prohibitions set forth
in the FCPA, make any offer, payment, promise to pay or authorization of the
payment of any money, or make any offer, gift, promise to give, or authorization
of the giving of anything of value, to any government official, any political
party or official thereof, any candidate for political office, any official of
any public organization, or any other person associated with the Buyer or its
executives or officers related in any way with the transactions contemplated by
this Agreement.

ARTICLE EIGHT: DISPUTE RESOLUTION

8.1 Executive Resolution. If any dispute or disagreement shall arise between the
Parties in connection with or arising out of this Agreement, either Party may
request in writing that the respective chief executive officers of the Seller
and Buyer meet within ten (10) days and attempt to resolve the dispute. In the
event such officers are unable to resolve such dispute within thirty (30) days
after such notice, upon written request of either Party, such dispute shall be
arbitrated pursuant to Section 8.2 below. Except as otherwise provided in this
Agreement, any disagreement, dispute, controversy or claim arising out of or
relating to this Agreement shall be settled exclusively and finally by
commercial arbitration as provided below.

 

18

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8.2 Commercial Arbitration. In the event that the Parties fail to resolve a
dispute pursuant to Section 8.1 above, the Party initiating arbitration
proceedings may request commercial arbitration. Within ten (10) days after
receipt of such a request, each Party’s authorized representative shall confer
with the other and attempt to agree upon appointment of a single arbitrator. If
such agreement is not accomplished, either Party may request the International
Chamber of Commerce to appoint an arbitrator familiar with the industry
standards for international private power facilities in accordance with its
Rules of Conciliation and Arbitration, which rules shall govern the conduct of
the arbitration in the absence of contrary agreements by both Parties. The
arbitrator shall conduct a hearing in Sydney, Australia, the language to be used
shall be English, and within thirty (30) days thereafter, shall notify the
Parties in writing of its decision stating separately findings of fact and
determinations of law. The arbitrator shall not have the power to add to or
amend this Agreement. The Parties exclude any right of application or appeal to
any courts in connection with any question of law arising in the course of
arbitration or with respect to any award made. Subject to such limitation, the
decision of the arbitrator shall be final and binding, and the arbitrator shall
be entitled to grant equitable awards compelling specific performance or
restraining any actual or threatened breach of any material obligation of the
Agreement. The decision of the arbitrator shall determine and specify how the
expenses of the arbitration shall be allocated.

 

19

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IN WITNESS WHEREOF, the Parties have executed this Master Power Purchase and
Sale Agreement as of the day and year set out in Schedule 1.

 

/s/ C. R. Leal

Cypress Manufacturing Ltd. - Philippine Branch (Buyer) Gateway Business Park,
SEPZ, Brgy. Javalera, Gen. Trias Cavite 4107 Philippines

 

Phone:    812-8161 Facsimile:    433-0447 Attention:    Conrado R. Leal - Vice
President & Managing Director

 

/s/ Edna-Cuyo Auxtero

Attention:   Edna-Cuyo Auxtero - Finance Director

 

/s/ John A. Becker

GNPower Ltd. Co. (Seller) 1905 Orient Square Building Don Francisco Ortigas Jr.
Road Ortigas Center Pasig City 1605

 

Phone:    638-4542 Facsimile:    638-4575 Attention:    Contract Administrator

 

/s/ Ariel P. Bunzalan

   

/s/ Agnes L. Macadangdang

Witness     Witness

 

20

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ACKNOWLEDGMENT

 

REPUBLIC OF THE PHILIPPINES   ) SS CITY OF PASIG   ) SS

BEFORE ME, a Notary Public for and in the City of Pasig, Metro Manila,
Philippines, this      day of                      2006, personally appeared the
following:

 

NAME

 

COMM. TAX CERT.

/PASSPORT

 

DATE/PLACE

ISSUED

JOHN A. BECKER

    (In his capacity as Sr. Vice President and COO of GNPower Ltd. Co.)    
GNPOWER LTD. CO.   TIN # 202920663000   07-27-99 / B.I.R. Pasig City CONRADO R.
LEAL (In his capacity as Vice President & Managing Director of Cypress
Manufacturing Ltd. - Philippine Branch)     EDNA CUYO-AUXTERO (In her capacity
as Finance Director of Cypress Manufacturing Ltd. - Philippine Branch)    
CYPRESS MANUFACTURING LTD. - PHILIPPINE BRANCH   TIN # 214069856000   10-26-01 /
Cavite

all known to me to be the same persons who executed the foregoing MASTER POWER
PURCHASE AND SALE AGREEMENT for and in behalf of their respective
corporations/companies, and they acknowledged to me that the same are their free
and voluntary acts and deeds as well as that of their respective
corporation/companies, and that they are duly authorized to sign, execute and
deliver the same.

This instrument consists of                      pages including this page
wherein the Acknowledgment is written and all pages are signed/initialed by both
parties and their instrumental witnesses.

IN WITNESS WHEREOF, I hereby set my hand and affixed my notarial seal at the
plate and on the date first above written.

Notary Public

Doc. No.                 ;

Page No.                 ;

Book No.                ;

Series of 2006.

 

21

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SCHEDULE 1

 

•      Name of Buyer:

   CYPRESS MANUFACTURING LTD. - PHILIPPINE BRANCH

•      Address:

   Gateway Business Park, SEPZ, Brgy. Javalera    Gen. Trias, Cavite 4107
Philippines

•      Effective Date:

   September 6, 2006 (date of execution of Agreement)

•      Agreement Termination Date:                                         
                             180 months from date specified in the Delivery
Period Commencement Date Notice (TO BE FILLED IN SPECIFICALLY AFTER RECEIPT OF
THE DELIVERY PERIOD COMMENCEMENT DATE NOTICE )

•      Delivery Period Expiration Date:                                         
                         60 months from date specified in the Delivery Period
Commencement Date Notice (TO BE FILLED IN SPECIFICALLY AFTER RECEIPT OF THE
DELIVERY PERIOD COMMENCEMENT DATE NOTICE )

•      Delivery Period: 60 months

 

MINIMUM

CAPACITY

FACTOR (%)

 

MINIMUM QUANTITY (kWh)

 

CONTRACTED CAPACITY (kW)

   CAPACITY FEE ($/kWh) ***%   ***   ***    As per attached
Capacity Factor
Pricing table

 

•      Energy Fee:

  Initial Energy Fee x        CIF Cost of Fuel for Billing Period           
Base CIF Cost of Fuel         Where:         Initial Energy Fee = $***/kWh*   
     Base CIF Cost of Fuel = $***/million kcal      

 

--------------------------------------------------------------------------------

* Indicative Energy Fee

 

•      Delivery Point: The Seller’s meter at the high voltage connection with
the Transmission Utility

•      Receiving Point: Cypress Manufacturing Ltd. - Philippine Branch Facility,
Gateway, Business Park, SEPZ, Brgy. Javalera, Gen. Trias, Cavite

 

--------------------------------------------------------------------------------

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

22

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Capacity Factor Pricing

60 Month Delivery Period

 

   

Capacity Factor (%)

  

Capacity Fee

(US$/kWh)

      

100%

   ***     

99%

   ***     

98%

   ***     

97%

   ***     

96%

   ***     

95%

   ***     

94%

   ***     

93%

   ***     

92%

   ***     

91%

   ***     

90%

   ***     

89%

   ***     

88%

   ***     

87%

   ***     

86%

   ***     

85%

   ***     

84%

   ***     

83%

   ***     

82%

   ***     

81%

   ***     

80%

   ***     

79%

   ***     

78%

   ***     

77%

   ***     

76%

   ***     

75%

   ***     

74%

   ***     

73%

   ***     

72%

   ***     

71%

   ***     

70%

   ***     

69%

   ***     

68%

   ***     

67%

   ***     

66%

   ***     

65%

   ***     

64%

   ***     

63%

   ***     

62%

   ***     

61%

   ***     

60%

   ***     

59%

   ***     

58%

   ***     

57%

   ***     

56%

   ***     

55%

   ***     

54%

   ***     

53%

   ***     

52%

   ***     

51%

   ***     

50%

   ***     

49%

   ***     

48%

   ***     

47%

   ***     

46%

   ***     

45%

   ***   

--------------------------------------------------------------------------------

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

23

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SCHEDULE 2

Capacity Factor Computation

 

Capacity Factor (CF) =        Q          CC * (HT - EHSO - EHUO)      

Where:

 

Q    =      the actual quantity of the Product made available by the Seller to
be purchased and received by the Buyer at the Delivery Point in any Billing
Period CC    =      Contracted Capacity, in kW, as set forth in Schedule 1 HT   
=      Total number of hours in such Billing Period EHSO    =      the sum of
the duration, in Equivalent Hours, of Scheduled Outages in such Billing Period
EHUO    =      the sum of the duration, in Equivalent Hours, of Unscheduled
Outages in such Billing Period

CAPACITY FACTOR SAMPLE CALCULATION #1

 

Buyer:      Purchases the full quantity scheduled for the Billing Period   
Seller:      Produces at its full availability assuming normal outage hours    Q
     =        5,000,000kWh       CC      =        10,000kW       HT      =    
   720hours       EHSO      =        40hours       EHUO      =        61hours   
   CF      =        5,000,000kWh              
10,000kW * (720hrs – 40hrs – 61hrs)            =        5,000,000kWh           
   6,190,000kWh            =        80.78%      

 

24

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CAPACITY FACTOR SAMPLE CALCULATION #2 Buyer:      Purchases LESS than the full
quantity scheduled for the Billing Period    Seller:      Produces at its full
availability assuming normal outage hours    Q      =    4,000,000kWh       CC
     =    10,000kW       HT      =    720hours       EHSO      =    40hours   
   EHUO      =    61hours       CF      =    4,000,000kWh              
10,000kW * (720hrs – 40hrs – 61hrs)            =    4,000,000kWh              
6,190,000kWh            =    64.62%       CAPACITY FACTOR SAMPLE CALCULATION #3
Buyer:      Purchases the full quantity scheduled for the Billing Period   
Seller:      Produces at LESS than full availability because of more outage
hours    Q      =    5,000,000kWh       CC      =    10,000kW       HT      =   
720hours       EHSO      =    100hours       EHUO      =    120hours       CF
     =    5,000,000kWh               10,000kW * (720hrs – 100hrs – 120hrs)      
     =    5,000,000kWh               5,000,000kWh            =    100.00%      

 

25

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CAPACITY FACTOR SAMPLE CALCULATION #4 Buyer:      Purchases LESS than the full
quantity scheduled for the Billing Period    Seller:      Produces at LESS than
full availability because of more outage hours    Q      =    4,000,000kWh      
CCT      =    10,000kW       HT      =    720hours       EHSO      =    100hours
      EHUO      =    120hours       CF      =    4,000,000kWh              
10,000kW * (720hrs – 100hrs – 120hrs)            =    4,000,000kWh              
5,000,000kWh            =    80.00%      

SAMPLE CALCULATION of EHSO and EHUO

 

EHSO

 

Duration

   Percentage of Contracted Capacity
Unavailable during Billing Period (%)     Duration of Scheduled Outages in
Equivalent Hours during Billing Period

80 Hours

   50 %   40.00       

TOTAL (EHSO)

     40.00       

EHUO

    

Duration

   Percentage of Contracted Capacity
Unavailable during Billing Period (%)     Duration of Unscheduled Outages in
Equivalent Hours during Billing Period

36 Hours

   50 %   18.00

72 Hours

   25 %   18.00

36 Hours

   25 %   9.00

70 Hours

   20 %   14.00

20 Hours

   10 %   2.00       

TOTAL (EHUO)

     61.00       

 

26