Exhibit 10.1
FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
ALLIANCE AGREEMENT
for
ENGINEERING, CONSTRUCTION AND PROJECT MANAGEMENT
for the
TRANS-ALLEGHENY INTERSTATE LINE PROJECT
between
TRANS-ALLEGHENY INTERSTATE LINE COMPANY
and
KENNY CONSTRUCTION COMPANY
Dated: February 28, 2007

 

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Table of Contents

              Page
ARTICLE 1 DEFINITIONS; INTERPRETATION
    1  
1.1 Definitions
    1  
1.2 Interpretation
    12  
 
       
ARTICLE 2 SCOPE OF WORK; PROJECT WORKSHOP
    13  
2.1 Project Releases
    13  
2.2 Scope of Work
    13  
2.3 Project Workshop
    13  
2.4 Target Cost
    15  
2.5 Special Termination Right
    15  
 
       
ARTICLE 3 ENGINEERING SERVICES
    15  
3.1 Preliminary Engineering
    15  
3.2 Design of Facilities
    15  
3.3 Site Conditions
    16  
3.4 Incidental Engineering
    16  
3.5 Access to Design Information
    16  
 
       
ARTICLE 4 CONSTRUCTION SERVICES
    17  
4.1 Scope of Construction Services
    17  
4.2 Site Conditions
    17  
4.3 Environmental Protection
    17  
4.4 Archeological Materials
    18  
4.5 Commissioning
    19  
4.6 Construction Management
    19  
4.7 Scheduling
    19  
4.8 Health and Safety
    19  
4.9 Cleanup
    20  
4.10 Emergencies
    20  
4.11 Cooperation
    20  
4.12 Work Site Security
    20  
4.13 Interconnections
    21  
4.14 Contractor Liens
    21  
4.15 Utilities and Consumables
    21  
4.16 Laydown and Storage Areas
    21  
 
       
ARTICLE 5 PROCUREMENT MANAGEMENT SERVICES
    22  
5.1 Procurement Plan
    22  
5.2 Scope of Procurement Management Services
    23  
5.3 Relationship With Direct Suppliers
    23  
5.4 Enforcement of Warranties
    23  
 
       
ARTICLE 6 REAL PROPERTY MANAGEMENT SERVICES
    24  
6.1 Real Property Management Services
    24  
6.2 Real Property Plan
    24  
6.3 Ownership of Project Real Property
    25  

i

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

              Page
6.4 Limitation
    25  
 
       
ARTICLE 7 CONTRACTOR’S GENERAL OBLIGATIONS
    25  
7.1 Standards of Performance
    25  
7.2 Contractor Liable for Work
    25  
7.3 Project Manager
    25  
7.4 Contractor Personnel
    25  
7.5 Labor Disputes
    26  
7.6 Imports and Exports
    26  
7.7 Permits and Approvals
    26  
7.8 Reserved
    26  
7.9 Records
    26  
7.10 Financial Statements
    27  
7.11 Quality Assurance Program
    27  
7.12 Performance Testing
    27  
7.13 Office Space
    27  
7.14 Progress Reports
    27  
7.15 Meetings
    28  
7.16 Site Procedures
    28  
7.17 Insurance
    28  
7.18 Alcohol and Drug Policy
    30  
7.19 Business Standards
    30  
7.20 Compliance With Law
    30  
7.21 Authority
    31  
 
       
ARTICLE 8 OWNER’S RIGHTS AND OBLIGATIONS
    31  
8.1 Owner Permits
    31  
8.2 Owner Representative
    31  
8.3 Temporary Possession
    31  
8.4 Approvals
    31  
8.5 Inspections
    31  
8.6 Other Property
    32  
8.7 Disclosure
    32  
8.8 Reserved
    32  
8.9 Condemnation Proceedings
    32  
8.10 Preliminary Routing Information
    32  
 
       
ARTICLE 9 SUBCONTRACTORS
    32  
9.1 Right to Subcontract
    32  
9.2 Approval Rights
    33  
9.3 Justification of Non-Competitive Contracts
    33  
9.4 Subcontractor Warranties
    33  
9.5 Manufacturer Information
    33  
9.6 No Contractual Relationship
    33  
9.7 Assignment of Subcontracts
    33  
 
       
ARTICLE 10 PAYMENT TERMS
    34  
10.1 Management Fee
    34  

*** Confidential Treatment Requested

ii

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

              Page
10.2 Non-Craft Labor Costs
    34  
10.3 Craft Labor Costs
    35  
10.4 Out-of-Pocket Costs
    35  
10.5 Reimbursable Costs
    35  
10.6 Interest
    36  
10.7 Retention
    36  
10.8 Payments
    37  
10.9 Accuracy of Records
    38  
10.10 Breakdown of Agreement Price
    38  
10.11 Audit Rights
    38  
10.12 Waiver under Payment Act
    38  
 
       
ARTICLE 11 PROJECT BUDGET; PROJECT SCHEDULE
    39  
11.1 Project Budget
    39  
11.2 Project Schedule
    39  
11.3 Adjustments Based on Suspension of Work
    40  
11.4 Adjustments Based on Force Majeure
    40  
 
       
ARTICLE 12 STEERING COMMITTEE
    40  
12.1 Formation
    40  
12.2 Availability
    40  
12.3 Informed Status
    41  
 
       
ARTICLE 13 COMPLETION
    41  
13.1 Substantial Completion
    41  
13.2 Punch List
    41  
13.3 Final Completion
    41  
13.4 [***]
    42  
 
       
ARTICLE 14 SECURITY FOR PERFORMANCE
    42  
14.1 Performance Bond
    42  
 
       
ARTICLE 15 CONTRACTOR WARRANTIES
    43  
15.1 Scope of Warranties
    43  
15.2 Duration of Warranties
    43  
15.3 Warranty Obligations
    43  
15.4 Exclusions
    44  
 
       
ARTICLE 16 CHANGE ORDERS
    44  
16.1 Change in Scope
    44  
16.2 Equitable Adjustments to Schedule
    44  
16.3 Preparation of Change Orders
    45  
 
       
ARTICLE 17 FORCE MAJEURE
    45  
17.1 Excused Performance
    45  
17.2 Notification
    45  
 
       
ARTICLE 18 INDEMNIFICATION
    45  
18.1 General Indemnity
    45  
18.2 Environmental Indemnities
    46  

*** Confidential Treatment Requested

iii

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

              Page
18.3 Intellectual Property Indemnity
    46  
18.4 Indemnity Against Prohibited Liens
    47  
18.5 Defense of Indemnified Claims
    47  
 
       
ARTICLE 19 TAXES AND DUTIES
    48  
19.1 Cooperation
    48  
19.2 Payment Obligations
    48  
19.3 Assignment of Rights
    48  
 
       
ARTICLE 20 SUSPENSION; TERMINATION
    48  
20.1 Suspension of Work
    48  
20.2 Termination for Convenience
    49  
 
       
ARTICLE 21 DEFAULT; REMEDIES
    49  
21.1 Default by Contractor
    49  
21.2 Remedies for Contractor Default
    50  
21.3 Default by Owner
    51  
21.4 Remedies for Owner Default
    51  
21.5 Right to Suspend Performance
    51  
21.6 Effect of Termination
    52  
 
       
ARTICLE 22 TITLE AND RISK OF LOSS
    53  
22.1 Owner Procured Materials
    53  
22.2 Contractor Procured Materials
    53  
22.3 Care, Custody and Control
    53  
22.4 Risk of Loss
    53  
 
       
ARTICLE 23 REPRESENTATIONS AND WARRANTIES
    53  
23.1 Contractor’s Representations and Warranties
    53  
23.2 Owner’s Representations and Warranties
    54  
 
       
ARTICLE 24 LIMITATION OF LIABILITY
    55  
24.1 Aggregate Limit of Liability
    55  
24.2 Exclusion of Consequential Damages
    56  
 
       
ARTICLE 25 DISPUTE RESOLUTION
    56  
25.1 Informal Dispute Resolution
    56  
25.2 Steering Committee
    56  
25.3 Written Decisions
    56  
25.4 Litigation
    56  
25.5 Continued Performance
    56  
 
       
ARTICLE 26 INTELLECTUAL PROPERTY
    56  
26.1 Proprietary Information
    56  
26.2 Infringement Claims
    57  
26.3 Use of Trademarks
    57  
 
       
ARTICLE 27 CONFIDENTIAL INFORMATION
    57  
27.1 Protection of Confidential Information
    57  
27.2 Permitted Disclosures
    57  
27.3 Contractor’s Use of Confidential Information
    58  

*** Confidential Treatment Requested

iv

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

              Page
27.4 Survival
    58  
27.5 Contractor’s Proprietary Information
    58  
27.6 Contractor Information
    58  
 
       
ARTICLE 28 MISCELLANEOUS PROVISIONS
    58  
28.1 Governing Law
    58  
28.2 Notices
    58  
28.3 Entire Agreement
    59  
28.4 Severability
    60  
28.5 Independent Contractor
    60  
28.6 Assignment
    60  
28.7 Amendments
    60  
28.8 Precedence
    60  
28.9 Remedies Cumulative
    60  
28.10 Sole Benefit
    60  
28.11 Waiver
    60  
28.12 Counterparts
    60  
28.13 Survival
    61  
28.14 Small Business Investment Act
    61  
28.15 Announcements
    61  

LIST OF EXHIBITS AND SCHEDULES
Exhibits

      A            Alliance Philosophy         B            Description of
Facilities

Schedules

  1.1   Phases     4.13   Interconnection Points     7.4   Key Personnel    
7.17   Contractor Required Insurance     9.2   Approved Subcontractors     10.2
  Non-Craft Labor Multiplier     10.4   Out-of-Pocket Costs

*** Confidential Treatment Requested

v

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Alliance Agreement
for
Engineering, Construction and Project Management
This ALLIANCE AGREEMENT FOR ENGINEERING, CONSTRUCTION AND PROJECT MANAGEMENT,
dated as of February 28, 2007, is by and between TRANS-ALLEGHENY INTERSTATE LINE
COMPANY (“Owner”), a corporation organized under the laws of the Commonwealth of
Virginia and the State of Maryland, and KENNY CONSTRUCTION COMPANY
(“Contractor”), a corporation organized under the laws of the State of Illinois.
RECITALS
WHEREAS, based on PJM system requirements and load growth projections, PJM
Interconnection, L.L.C. has requested Owner to implement a transmission and
substation capacity/reliability upgrade; and
WHEREAS, Owner wishes to engage Contractor, based on its experience and
qualifications, to perform the Work associated therewith; and
WHEREAS, the Parties seek to establish a collaborative relationship built upon
mutual trust, in which both Parties will utilize their respective strengths and
best practices in order that each may achieve its corporate objectives; and
WHEREAS, the Parties intend to observe the principles set forth in Exhibit A;
and
WHEREAS, in order to incentivize Contractor to use all commercially reasonable
efforts, consistent with Good Utility Practices, to complete the Project no
later than the date requested by PJM, but with due regard for cost
considerations, Owner is willing to offer Contractor [***].
NOW THEREFORE, in consideration of the undertakings, promises and agreements as
set forth herein, Owner and Contractor, each agree as follows:
ARTICLE 1
DEFINITIONS; INTERPRETATION
     1.1 Definitions. For the purpose of this Agreement, the following
capitalized terms shall have the meanings set forth below.
     “Acceptable LC Provider” means any bank or financial institution that:
(a) has a combined capital and surplus of at least $500,000,000; and (b) has
unsecured long-term indebtedness rated at least “A” by S&P and “A-2” by Moody’s.
     “Affiliate” means, with respect to any Person, another Person that directly
or indirectly controls, is under common control with, or is controlled by, such
Person or any successor thereto. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, to: (a) vote fifty percent
(50%) or more of the securities having ordinary voting power for the election of
the governing body of such Person; or (b) direct
*** Confidential Treatment Requested

 

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
or cause the direction of the management and policies of such Person, whether by
contract or otherwise.
     “Agreement” means this Alliance Agreement for Engineering, Construction and
Project Management by and between Owner and Contractor (including all Exhibits
and Schedules hereto), as the same may be amended, supplemented or otherwise
modified from time to time in accordance herewith.
     “Applicable Laws” means all laws, constitutions, statutes (including
Environmental Laws), treaties, judgments, decrees, edicts, codes, orders, rules
(including rules applicable to the Transmission Grid), ordinances, regulations
and Permits of any Governmental Authority pertaining to the Parties, the Project
or the performance of the Work.
     “Approved Subcontractors” means those Persons identified on Schedule 9.2.
     “Authorized Design” has the meaning set forth in Section 3.2.3.
     “Business Day” means any day other than a Saturday, Sunday or federal
holiday.
     “Change-in-Law” means any change in, or enactment of, any Applicable Law or
official published policy regarding the interpretation or enforcement of any
Applicable Law, in either case that takes place after the date of this Agreement
and affecting or related to the Work, including the imposition of any new Permit
requirements; provided, however, that a change in Applicable Law affecting only
a tax payable by Contractor or any other cost of Contractor’s performance
hereunder shall not constitute a Change-in-Law.
     “Change Order” means a document issued by Owner pursuant to Article 16,
setting forth adjustments to the scope of Work.
     “Claim” means any liability, claim, suit, demand, penalty, action, cause of
action, lien, cost (including attorney’s fees), expense, loss, damage or
judgment.
     “Commissioning” means the process of verifying the safety, reliability and
performance of the Project.
     “[***]” has the meaning set forth in Section 13.4.1.
     “[***Date]” means [***], as such date may be extended pursuant to
Section 13.4.2.
     “[***]” means the amount of [***].
     “Confidential Information” has the meaning set forth in Section 27.1.1.
     “Construction Services” has the meaning set forth in Section 2.2(b).
     “Contractor” has the meaning set forth in the preamble to this Agreement.
*** Confidential Treatment Requested

2

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     “Contractor Default” has the meaning set forth in Section 21.1.
     “Contractor Indemnitees” has the meaning set forth in Section 18.1.2.
     “Contractor Lien” means any claim, lien, charge or encumbrance on the
Project Real Property, the Facilities or any part thereof or interest therein in
favor of Contractor, any Subcontractor or any of their respective employees,
laborers, materialmen or other suppliers of goods or services.
     “Contractor Permits” means all Permits other than Owner Permits.
     “Contractor Personnel” means all of Contractor’s employees performing any
portion of the scope of Work (but excluding any Subcontractors and their
respective employees).
     “Contractor Procured Materials” has the meaning set forth in Section 5.1.2.
     “Contractor Required Insurance” has the meaning set forth in
Section 7.17.1.
     “Craft Labor Costs” means, with respect to any period, the non-duplicative
charges assessed by Contractor for the use of Contractor Personnel who perform
craft labor Work in accordance with the terms of this Agreement, as approved by
Owner pursuant to Section 10.3.
     “Dedicated Personnel” means any Contractor Personnel who are dedicated to
performing the Work.
     “Delayed Facilities” has the meaning set forth in Section 13.4.2.
     “Direct Supplier” means any Person providing any Owner Procured Materials
to Owner.
     “Dollar” and “$” means the lawful currency of the United States of America.
     “Emergency” has the meaning set forth in Section 4.10.
     “Engineering Services” has the meaning set forth in Section 2.2(a).
     “Environmental Laws” means any applicable local, state or federal law
regulating the use, storage, transportation or disposal of hazardous or toxic
materials, including without limitation the Resource Conservation and Recovery
Act, as amended (42 U.S.C. §§ 6901 et seq.), the Comprehensive Environmental
Response, Compensation, and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (42 U.S.C. §§ 9601 et seq.), the
Clean Air Act, as amended (42 U.S.C. §§ 7401 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. §§ 1801 et seq.), the Clean Water Act (33 U.S.C.
§§ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.),
the Safe Drinking Water Act (42 U.S.C. §§ 300f et seq.), the Uranium Mill
Tailings Radiation Control Act (42 U.S.C. §§ 7901 et seq.), the Federal
Insecticide, Fungicide and
*** Confidential Treatment Requested

3

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Rodenticide Act (7 U.S.C. §§ 136 et seq.) and the amendments, regulations,
orders, decrees, Permits or licenses now or hereafter promulgated or issued
under any of the foregoing.
     “Facilities” means all of the equipment, material, installations and
facilities comprising the Trans-Allegheny Interstate Line project, as described
in Exhibit B, including: (a) two new substations, consisting of the Prexy
500/138kV step-down substation located near Washington, Pennsylvania and the 502
Junction 500kV switchyard step-down substation located near Mt. Morris,
Pennsylvania; (b) approximately 210 miles of 500 kV overhead transmission lines
to be installed between the proposed Prexy Substation and a point to the east of
the existing Meadow Brook Substation where it will interconnect with a Dominion
Virginia Power transmission line; (c) three overhead radial 138 kV lines running
from the proposed Prexy Substation to each of (i) the existing Manifold-Houston
138kV transmission line, (ii) the existing Washington-Charleroi transmission
line, and (iii) the existing Cecil-Peters 138kV transmission line; (d) an
expansion of the existing Meadow Brook Substation; and (e) such other facilities
as are described in Exhibit B.
     “FERC” means the Federal Energy Regulatory Commission.
     “Field Office” means an office facility to be established by Contractor to
monitor and supervise the Work at a site in northern West Virginia mutually
acceptable to the Parties.
     “Final Completion” means the achievement of the following conditions:
(a) Contractor shall have achieved Substantial Completion; (b) Contractor shall
have completed all Punch List items in accordance with this Agreement;
(c) Contractor shall have delivered to Owner the Project Design Book; and
(d) Contractor shall have delivered to Owner written certification, executed by
an officer of Contractor, that the conditions set forth in clauses (a) through
(c) have been satisfied.
     “Force Majeure” means any event that: (a) renders a Party unable to comply
with its obligation under this Agreement; (b) is beyond the reasonable control
of the affected Party; (c) does not result from the fault, negligence or
intentional act of the affected Party or such Party’s failure to comply with
Applicable Laws or Good Utility Practices; and (d) could not have been avoided
by the affected Party through the exercise of proper diligence including the
expenditure of reasonable monies and/or taking reasonable precautionary
measures, including (to the extent that such events satisfy the foregoing
criteria), the following:

  (i)   acts of God or the public enemy;     (ii)   expropriation or
confiscation of facilities;     (iii)   war, terrorism, rebellion, sabotage or
riot;     (iv)   floods;

*** Confidential Treatment Requested

4

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

  (v)   fires, explosions, hurricanes, tornados, microbursts or other natural
catastrophes;     (vi)   actions or inaction of Governmental Authorities that
render(s) illegal performance required in connection with the Work;     (vii)  
strikes and other concerted acts of workers;     (viii)   a Change-in-Law;    
(ix)   delays in the delivery of Owner Procured Materials;     (x)   underground
conditions at, on or under the Project Real Property that Contractor could not
reasonably anticipate, including the existence of Hazardous Substances or
archaeological materials;     (xi)   extraordinary delays by Governmental
Authorities in issuing Permits;     (xii)   unreasonable delays by Owner in
applying for Owner Permits for reasons other than Contractor’s failure to
satisfy its obligations under this Agreement;     (xiii)   delays by
Governmental Authorities in granting right of entry onto Project Real Property
beyond the time periods specified in the Project Schedule;     (xiv)  
injunctions issued by Governmental Authorities; and     (xv)   operating
conditions on the Transmission Grid that restrict outages, testing or access
properly scheduled in accordance with the requirements of the Transmission Grid
operator;

     provided, however, that Force Majeure shall not include:

  (A)   lack of finances;     (B)   strikes or labor disturbances limited to a
single employer performing any of the Work, unless, as a result of any such
strike or labor disturbance, there is no other Person capable and reasonably
available to Contractor to perform such Work;     (C)   shortages or price
fluctuations with respect to Contractor Procured Material;     (D)   late
delivery of Contractor Procured Material, except to the extent caused by an
event that would otherwise constitute a Force Majeure;     (E)   economic
hardship;

*** Confidential Treatment Requested

5

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

  (F)   shortages of manpower, except to the extent caused by an event that
would otherwise constitute a Force Majeure;     (G)   delay or failure to
perform of a Subcontractor, except to the extent caused by an event that would
otherwise constitute a Force Majeure;     (H)   machinery or equipment
breakdown, except to the extent caused by an event that would otherwise
constitute a Force Majeure;     (I)   unavailability at the Work Site of
necessary water and other utilities, except to the extent caused by an event
that would otherwise constitute a Force Majeure; or     (J)   flaws in any
design, drawing or technical specifications requiring Contractor to re-design or
re-engineer any portion of the Facilities.

     “GAAP” means generally accepted accounting principles in the United States
applied on a consistent basis.
     “Good Utility Practices” means those practices, methods and standards that,
in the exercise of reasonable and prudent judgment by an electric utility
company designing, installing, constructing and operating high-voltage,
interstate electric transmission lines in the United States, based on the facts
known or which reasonably should have been known at the time a decision was
made, would have been expected to efficiently accomplish the desired result in a
manner that: (a) is consistent with Applicable Laws and standards generally
utilized in projects similar to the Project; (b) makes due consideration for
reliability, safety and protection of equipment; and (c) is consistent with
manufacturers’ recommendations and warranties.
     “Governmental Authority” means any Federal, state, municipal, foreign,
governmental or quasi-governmental ministry, department, court, commission,
board or agency in any jurisdiction having authority over Owner, Contractor,
Direct Suppliers, Subcontractors or the Project.
     “Hazardous Substance” means asbestos or any substance containing asbestos,
polychlorinated biphenyls, radioactive materials, pollutants, contaminants,
infectious wastes, any petroleum or petroleum-derived waste or product or
related materials and any items defined as hazardous, special or toxic
materials, substances or waste under any Environmental Laws.
     “Indemnitee” means an Owner Indemnitee or a Contractor Indemnitee, as
applicable.
     “Initial Project Schedule” means a schedule for performance of the Work
identifying, at a minimum, major elements of Work associated with each Phase and
the Management Fee Milestones.
*** Confidential Treatment Requested

6

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     “Interest Rate” means an annual rate of interest equal to the lesser of:
(a) the “[***]” as published in The Wall Street Journal under the caption “Money
Rates” in effect on the date a payment hereunder is due [***]; and (b) the
maximum rate of interest permitted by Applicable Laws.
     “Labor Costs” means Craft Labor Costs and Non-Craft Labor Costs.
     “Lender” means any lender or institution providing or guaranteeing
financing or refinancing to Owner or any Affiliate of Owner in connection with
the Project, and any agent, consultant, advisor, counsel, consulting engineer or
trustee therefor.
     “List of Materials” has the meaning set forth in Section 5.1.1.
     “Major Subcontractor” shall mean any Subcontractor that is party to one or
more Subcontracts expected to cost more than One Hundred Thousand Dollars
($100,000) in the aggregate.
     “Management Fee” means [***]; provided, however, that if the Target Cost
(including an amended Target Cost pursuant to a Change Order) [***], the
Management Fee shall be [***].
     “Management Fee Milestone” means each event, the satisfaction of which is a
condition to payment of a portion of the Management Fee, all of which Management
Fee Milestones shall be identified in the Management Fee Payment Schedule.
     “Management Fee Payment Schedule” means the schedule of Management Fee
Milestones.
     “Material Milestone” means each milestone designated as a “Material
Milestone” in the Project Schedule.
     “Moody’s” means Moody’s Investors Service, Inc., a division of Moody’s
Corporation, or any successor thereto.
     “Non-Craft Labor Costs” means, with respect to any period, the actual cost
to Contractor for Contractor Personnel performing non-craft labor Work, as
determined in accordance with the terms of this Agreement.
     “Non-Craft Labor Multiplier” means, with respect to non-craft Contractor
Personnel, the factor by which the average salaries or wages of such personnel
must be multiplied to result in Contractor’s total cost of employing such
personnel (but excluding any profit), as further described in Section 10.2.
     “Non-Craft Labor Rates” means, with respect to non-craft Contractor
Personnel, the actual, unburdened salaries or wages of such personnel (without
any profit component) calculated on an hourly basis (based on 2,080 working
hours).
*** Confidential Treatment Requested

7

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     “Notice of Final Completion” means the notice issued by Owner confirming
that Contractor has completed the conditions of Final Completion.
     “Notice of Substantial Completion” means the notice issued by Owner
confirming that Contractor has completed the conditions of Substantial
Completion.
     “Out-of-Pocket Costs” means the reasonable and documented out-of-pocket
costs incurred by Contractor to perform the Work in accordance with the terms of
this Agreement, including amounts paid: (a) to Subcontractors; (b) to purchase
Contractor Procured Materials; (c) applicable per diems for Contractor
Personnel; and (d) for other items identified in Schedule 10.4; provided,
however, that (i) Out-of-Pocket Costs shall not include any overhead or general
and administrative costs charged by Contractor related thereto or costs incurred
by Contractor with respect to defective or non-conforming Work, and
(ii) Contractor shall take advantage of, and credit toward Reimbursable Costs,
all cash and trade discounts, refunds, rebates, freight allowances, annual
volume and other allowances, credits, salvages and commissions to which
Contractor is entitled in connection with Out-of-Pocket Costs.
     “Owner” has the meaning set forth in the preamble to this Agreement.
     “Owner Additional Insureds” means Allegheny Energy Service Corporation,
Monongahela Power Company, The Potomac Edison Company and West Penn Power
Company.
     “Owner Default” has the meaning set forth in Section 21.3.
     “Owner Indemnitees” has the meaning set forth in Section 18.1.1.
     “Owner Nominee” means any Person, including a Lender, financial advisor,
technical advisor, inspector, outside auditor, consultant or expert, nominated
in writing by Owner from time to time to assist or advise Owner or a Lender in
connection with the Project.
     “Owner Permits” has the meaning set forth in Section 7.7.1.
     “Owner Procured Materials” has the meaning set forth in Section 5.1.2.
     “Owner Reimbursed Insurance” has the meaning set forth in Section 7.17.3.
     “Owner Representative” has the meaning set forth in Section 8.2.
     “Party” means Owner or Contractor and “Parties” means Owner and Contractor.
     “Payment Act” means the Contractor and Subcontractor Payment Act, title 73
Pa. Stat. Ann. §§501-516.
     “Permit” means any permit, license, authorization, consent, decree, waiver,
privilege, approval, exemption from, filing with and notice to, any Governmental
*** Confidential Treatment Requested

8

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Authority required in connection with: (a) the development of the Project;
(b) the engineering, construction, installation, operation or ownership of the
Facilities; and/or (c) the performance of the Work, regardless of whether such
permits, licenses, authorizations, consents, decrees, waivers, privileges,
approvals, exemptions, filings or notices are required to be obtained,
maintained or filed in the name of Owner or Contractor, and which Permits shall
include (i) professional board certifications and licenses, and (ii) all
required approvals of the Authorized Design.
     “Person” means any individual, partnership, corporation, association,
business, trust, limited liability company, Governmental Authority or other
legal entity.
     “Phase” means each discreet segment of the Facilities to be constructed by
Contractor, as identified on Schedule 1.1.
     “PJM” means PJM Interconnection, L.L.C.
     “PJM Extended Deadline” has the meaning set forth in Section 13.4.3.
     “PJM Extended Deadline [***]” means, if there are Savings as of Final
Completion, [***].
     “Procurement Management Services” has the meaning set forth in
Section 2.1(c).
     “Procurement Plan” has the meaning set forth in Section 5.1.5.
     “Progress Report” has the meaning set forth in Section 7.14.
     “Prohibited Lien” means any Contractor Lien other than a Contractor Lien
based on Owner’s continuing failure to pay any amount claimed by Contractor to
be owed pursuant to this Agreement and not disputed in good faith by Owner.
     “Project” means: (a) the acquisition of the Project Real Property; (b) the
procurement of the Project Materials; and (c) the engineering, design,
permitting, construction, testing and Commissioning of the Facilities.
     “Project Budget” has the meaning set forth in Section 11.1.1.
     “Project Design Book” means the compilation, both in electronic and hard
copy format, of documents, drawings and information which reflects the final
Project specifications and design, including “as built” design, engineering and
construction documents, as certified by the Project Manager on behalf of the
Contractor as being true, complete and correct.
     “Project Manager” has the meaning set forth in Section 7.3.
     “Project Materials” means Owner Procured Materials and Contractor Procured
Materials, in the aggregate.
*** Confidential Treatment Requested

9

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     “Project Real Property” means the rights-of-way, easements and other real
property interest on which the Facilities are to be located, including any
rights-of-way, easements and other real property interests necessary for access
to the Facilities.
     “Project Release” has the meaning set forth in Section 2.1.
     “Project Schedule” has the meaning set forth in Section 11.2.1.
     “Project Workshop” has the meaning set forth in Section 2.3.1.
     “Proprietary Information” has the meaning set forth in Section 26.1.
     “Punch List” has the meaning set forth in Section 13.2.1.
     “Punch List Security Amount” means an amount equal to [***] of the
reasonably estimated cost of completing the Work set forth on the Punch List,
determined by Contractor or, at Owner’s option, an independent engineering and
construction firm retained by Owner.
     “Real Property Acquisition Costs” means the aggregate cost incurred by
Owner to acquire all Project Real Property.
     “Real Property Management Services” has the meaning set forth in
Section 2.2(d).
     “Real Property Plan” has the meaning set forth in Section 6.2.1.
     “Reimbursable Costs” means, subject to the limitations set forth in
Section 10.5.3, all Out-of-Pocket Costs and Labor Costs.
     “Replacement Contractor” means any Person other than Contractor retained by
Owner to perform some or all of the Work following Contractor’s failure to
perform such Work.
     “Retention” has the meaning set forth in Section 10.7.1.
     “Retention Amount” has the meaning set forth in Section 10.7.1.
     “Retention Letter of Credit” means an irrevocable, stand-by letter of
credit in form and substance acceptable to Owner issued by a financial
institution acceptable to Owner, as further described in Section 10.7.2.
     “S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies,
Inc., or any successor thereto.
     “Safety Standards” has the meaning set forth in Section 4.8.1.
*** Confidential Treatment Requested

10

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     “Savings” means the positive difference, if any, as of Final Completion,
between: (a) the Target Cost; and (b) the sum of (i) Reimbursable Costs actually
incurred by Owner pursuant to this Agreement, plus (ii) the amount of the
Management Fee, plus (iii) [***].
     “[***]” means, in the event there are Savings, [***] of such Savings and
[***] of any additional Savings; provided, however, that [***].
     “[***]” means [***].
     “[***]” means the [***].
     “Services” means Engineering Services, Construction Services, Procurement
Management Services and Real Property Management Services.
     “Steering Committee” has the meaning set forth in Section 12.1.
     “Subcontract” means any contract, agreement, purchase order or obligation
between Contractor and any Subcontractor.
     “Subcontractor” means any Person retained by Contractor to supply
Contractor Procured Materials or perform any portion of the Work on behalf of
Contractor.
     “Substantial Completion” means the achievement of the following conditions:
(a) Contractor shall have completed the Work to the extent required for the
safe, reliable and continuous operation of the Facilities consistent with Good
Utility Practices and all Applicable Laws; (b) Contractor shall have completed
testing and Commissioning of the Facilities; (c) Contractor shall have delivered
equipment documentation, start-up procedures and any special tools necessary to
support continued operation of the Facilities; (d) the Facilities shall be
energized and commercially operable; and (e) Contractor and Subcontractors shall
have delivered duly executed lien waivers and Contractor shall have delivered a
duly executed indemnity against Subcontractor liens relating to the Work, each
in form and substance reasonably acceptable to Owner and Contractor.
     “Substantial Completion Date” means the date on which Substantial
Completion occurs.
     “Target Cost” means the sum of: (a) the total estimated Reimbursable Costs
projected to be incurred by Owner, as estimated by Contractor; plus (b) the
amount of the Management Fee; plus (c) the [***], which Target Cost shall not be
subject to change for any reason other than pursuant to a Change Order.
     “Target Cost Delivery Date” means April 15, 2007.
     “Transmission Grid” means the high-voltage electric transmission system
with which the Facilities will be directly interconnected, including
transmission facilities owned and/or operated by Allegheny Power, Dominion
Virginia Power and PJM Interconnection, Inc.
*** Confidential Treatment Requested

11

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     “Unrestricted Information” means any information disclosed by one Party to
the other Party that: (a) is or becomes part of the public domain without fault
of the receiving Party; (b) was received by the receiving Party from a Person
under no obligation to the disclosing Party with respect to maintaining the
confidentiality thereof; or (c) was already in the receiving Party’s possession
and not subject to confidentiality restrictions at the time the information was
made available by the disclosing Party.
     “Warranty Period” has the meaning set forth in Section 15.2.
     “Work” means the engineering, procurement, construction, management,
testing, Commissioning and other services and activities necessary to design,
install and commission the Facilities in accordance with Good Utility Practices,
including the Engineering Services, the Construction Services, the Procurement
Management Services and the Real Property Management Services and the completion
of the Punch List.
     “Work Site” means the Project Real Property, the Field Office, any laydown
areas and storage yards required or used in connection with the Work and all
access roads, rights-of-way and easements used by Contractor, Subcontractors and
their respective employees, agents, representatives and invitees in respect
thereto.
     1.2 Interpretation. The following rules of construction shall apply when
interpreting this Agreement:

  (a)   all references in this Agreement to Articles, Sections, Exhibits and
Schedules refer to Articles, Sections, Exhibits and Schedules of this Agreement
unless expressly provided otherwise;     (b)   the headings appearing in this
Agreement are for convenience only, do not constitute any part of this Agreement
and shall be disregarded in construing the language contained herein;     (c)  
the terms “this Agreement,” “herein,” “hereby,” “hereunder,” “hereof” and terms
of similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited and the term “this Section” refers only
to the Section hereof in which such words occur;     (d)   the word “including”
(in its various forms) means “including without limitation”;     (e)   pronouns
in masculine, feminine, or neuter genders shall be construed to state and
include any other gender;     (f)   unless the context otherwise requires, all
defined terms contained herein shall include the singular and plural;     (g)  
each Exhibit and Schedule hereto is incorporated into this Agreement by
reference as if such Exhibit or Schedule were set forth in its entirety herein;

*** Confidential Treatment Requested

12

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      provided, however, that if any conflicts exist between Exhibit A and the
remainder of this Agreement, such conflict shall be resolved in favor of the
remainder of this Agreement; and     (h)   no term of this Agreement shall be
construed in favor of, or against, a Party as a consequence of one Party having
had a greater role in the preparation or drafting of this Agreement, but shall
be construed as if the language were mutually drafted by both Parties with full
assistance of counsel.

ARTICLE 2
SCOPE OF WORK; PROJECT WORKSHOP
     2.1 Project Releases. Contractor may elect to describe specified portions
of the Work through written documentation (each, a “Project Release”). Project
Releases shall specify, among other things, specific Contractor Procured
Materials to be purchased, other portions of the Work to be executed and the
date(s) that such Work is scheduled to be completed, all in accordance with the
Project Schedule. The specific form of the Project Release shall be developed
during the Project Workshop. Project Releases shall not affect, in any way,
Contractor’s obligations to perform all the Work in accordance with the terms of
this Agreement.
     2.2 Scope of Work. Contractor shall perform the following services:

  (a)   structural and design engineering for the Facilities, as described
further in Article 3 (the “Engineering Services”);     (b)   construction of the
Facilities, as described further in Article 4 (the “Construction Services”);    
(c)   management of the procurement of Project Materials, as described further
in Article 5 (the “Procurement Management Services”); and     (d)   management
of the acquisition of the Project Real Property, as described further in
Article 6 (the “Real Property Management Services”).

     2.3 Project Workshop.
     2.3.1 Promptly after execution of this Agreement, Owner and Contractor
shall schedule a series of meetings (the “Project Workshop”) to be attended by
qualified representatives of Owner, Contractor and proposed major Subcontractors
designated by Contractor and approved by Owner. The purpose of the Project
Workshop shall be to jointly develop an alliance culture, a Project execution
plan, to exchange information and to develop working protocols and other
policies and procedures deemed necessary or desirable for the efficient and
timely prosecution of the Work.
     2.3.2 The Project Workshop shall be divided into functional working groups
and shall take place at Owner’s corporate offices or another mutually agreeable
location.
*** Confidential Treatment Requested

13

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     2.3.3 At the Project Workshop, Contractor shall present to Owner, for
Owner’s review, comment and approval:

  (a)   a proposed drug testing plan;     (b)   proposed Safety Standards;    
(c)   a proposed environmental orientation program;     (d)   a preliminary
Procurement Plan and preliminary List of Materials;     (e)   preliminary
man-hour and labor cost estimates for Engineering Services, Construction
Services, Procurement Management Services and Real Property Management Services;
    (f)   proposed Field Office locations;     (g)   a preliminary Real Property
Plan; and     (h)   the identity of proposed survey and geotechnical
Subcontractors.

  2.3.4   At the Project Workshop, the Parties shall agree on:

  (a)   the Initial Project Schedule;     (b)   the Management Fee Payment
Schedule;     (c)   a Project execution plan;     (d)   forms for monthly
invoices, weekly and monthly reports, and cost control reporting;     (e)  
protocols, meeting schedules and procedures for the Steering Committee;     (f)
  detailed rules for Real Property Management Services, including rules of
engagement with landowners, procedures for payment of landowners, access rules,
record-keeping requirements, training of agents on how to respond to questions
concerning the Project, manpower projections and preliminary plans for
initiating Real Property Management Services;     (g)   engineering standards
that require development prior to starting detailed engineering; and     (h)  
the identity of the Project Manager and Owner Representative.

*** Confidential Treatment Requested

14

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

     2.3.5 The Project Workshop shall include any discussions necessary to
permit Contractor to prepare the Project Budget and a responsibilities matrix.
     2.3.6 No later than fourteen (14) days after completion of the Project
Workshop, Contractor shall provide Owner with a written report on all material
decisions made and agreements reached at the Project Workshop, which report,
once acceptable to Owner, shall be confirmed in writing by Owner.
     2.3.7 Costs incurred by Contractor and Subcontractors in connection with
their participation in the Project Workshop shall constitute Reimbursable Costs.
     2.4 Target Cost. No later than the Target Cost Delivery Date, Contractor
shall notify Owner in writing of the Target Cost. Such notice shall include a
line item breakdown of the Target Cost in a form reasonably acceptable to Owner.
     2.5 Special Termination Right. If: (a) [***]; or (b) the Parties have been
unable to agree on any of the matters set forth in Section 2.3.4(a) through (c),
Owner shall have the unilateral right, exercisable by written notice delivered
to Contractor no later than ninety (90) days after Target Cost Delivery Date, to
terminate this Agreement. In the event Owner terminates the Agreement pursuant
to this Section 2.5, Owner’s sole liability pursuant to this Agreement shall be
to pay Contractor: (i) all Reimbursable Costs incurred through the date of
termination; (ii) reasonable demobilization costs incurred by Contractor and
Subcontractors; and (iii) expenses incurred to terminate Subcontracts. Upon any
termination pursuant to this Section 2.5, Contractor shall submit to Owner an
invoice detailing all Reimbursable Costs incurred through the date of such
termination. Such invoice shall separately identify applicable taxes (including
sales, gross receipts and business and occupation taxes) and shall be
accompanied by: (A) copies of receipts or other evidence reasonably satisfactory
to Owner documenting such Reimbursable Costs, including evidence of hours worked
by Contractor Personnel; and (B) lien waivers in form and substance reasonably
acceptable to Owner with respect to all Work performed, executed by Contractor
and each Subcontractor performing such Work. Any amounts owed by Owner pursuant
to this Section 2.5 shall be due to Contractor thirty (30) days after Owner’s
receipt of such invoice.
ARTICLE 3
ENGINEERING SERVICES
     3.1 Preliminary Engineering. No later than the deadline(s) set forth in the
Project Schedule, Contractor shall engage Subcontractors to prepare surveys,
environmental analyses and reports, soils and subsurface studies and preliminary
phase I engineering design services related to the Project Real Property.
     3.2 Design of Facilities.
     3.2.1 Contractor shall design the Facilities, including the specification
of all materials and equipment to be incorporated therein, in accordance with
Good Utility Practices and any other requirements of Owner as communicated in
writing to Contractor.
*** Confidential Treatment Requested

15

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     3.2.2 Contractor shall submit initial design drawings for review by Owner
by the deadline(s) set forth in the Project Schedule. Contractor shall cause the
Subcontractor that prepared such drawings to make its offices (or another
mutually agreeable location) available to Owner to review such drawings and
Owner shall review such drawings at such offices or other location and provide
comments thereon, if any, to Contractor no later than ten (10) Business Days
after Owner’s receipt of notice that such drawings are available for review. No
later than ten (10) Business Days after Contractor’s receipt of comments from
Owner, Contractor shall provide revised design drawings incorporating Owner’s
comments. This process shall be repeated until the design drawings are accepted
by Owner.
     3.2.3 No later than thirty (30) days after Owner’s acceptance of the design
drawings, Contractor shall provide detailed construction drawings of the
Facilities and make such drawings available to Owner for review and comment.
Owner shall review such drawings and provide comments thereon, if any, to
Contractor no later than ten (10) Business Days after Owner’s receipt of notice
that such drawings are available for review. No later than ten (10) Business
Days after receipt of comments from Owner, Contractor shall provide revised
construction drawings incorporating Owner’s comments. This process shall be
repeated until the construction drawings are accepted by Owner (such drawings,
once accepted, the “Authorized Design”).
     3.2.4 All engineering design drawings shall be prepared using Microstation
or PLS CADD software and provided to Owner in hard copy and electronic formats.
     3.2.5 Notwithstanding anything to the contrary set forth herein, no review,
comment or acceptance by Owner of or on any design or engineering performed by
Contractor shall: (a) release Contractor from responsibility with respect to any
design or engineering Work or any requirements regarding any specifications set
forth therein; (b) be taken as approval of any engineering or design; or
(c) release Contractor from liability resulting from errors or omissions related
to faulty design.
     3.3 Site Conditions. Contractor shall conduct core borings on the Project
Real Property as shall be reasonably necessary or appropriate based on Good
Utility Practices. Contractor shall design the Facilities having full regard for
the actual ground conditions existing at the Project Real Property.
     3.4 Incidental Engineering. Contractor shall be responsible for any
engineering necessary to facilitate the transportation and delivery of equipment
and materials in connection with the Work, including the transportation and
delivery of Owner Procured Materials and Contractor Procured Materials to the
Work Site.
     3.5 Access to Design Information. Contractor shall furnish Owner with
copies of detail and working drawings, specifications, engineering calculations
and other documents prepared in connection with the engineering and design of
the Facilities, and Contractor shall provide Owner and Owner Nominees with
access at reasonable times to design and engineering methods, calculations and
data used in performing the Engineering Services. Without limiting the
generality of the foregoing requirements, Contractor shall promptly provide
Owner with copies of
*** Confidential Treatment Requested

16

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
the most recent design drawings, specifications and other documents produced,
created or used in connection with the Project or pursuant to this Agreement,
including those which have been produced, created or used by Subcontractors, in
a medium (e.g., disk, magnetic tape, network direct transfer, etc.) approved by
Owner.
ARTICLE 4
CONSTRUCTION SERVICES
     4.1 Scope of Construction Services. Contractor shall perform all work
necessary or appropriate to carry out and complete the construction,
installation, testing and Commissioning of the Facilities in accordance with the
Authorized Design and the terms of this Agreement and the performance of all
warranty obligations hereunder. Contractor shall construct the Facilities (and
ensure that the Facilities are constructed) in conformance with the Authorized
Design.
     4.2 Site Conditions.
     4.2.1 Contractor shall build the Facilities having full regard for the
actual ground conditions existing at the Project Real Property, regardless of
whether such conditions are discovered before or after the date of this
Agreement, the Project Workshop or the issuance of the Authorized Design.
     4.2.2 Contractor shall prepare and, if necessary, make improvements to the
Project Real Property for construction and installation of the Facilities,
including clearing, grubbing, introducing and removing fill, leveling,
compacting and draining.
     4.3 Environmental Protection.
     4.3.1 Contractor shall be responsible for ensuring that the Work complies
in all respects with Applicable Laws regarding protection of the environment and
archaeological and cultural resources, including Environmental Laws. Contractor
shall ensure that no Hazardous Substances introduced by Contractor,
Subcontractors or any of their respective employees, agents, representatives or
invitees is released at, on or under the Work Site. Contractor shall promptly
notify Owner of the discovery of any Hazardous Substances at, on or under the
Work Site.
     4.3.2 Contractor shall be responsible for all Hazardous Substances brought
onto or generated at the Work Site in connection with the Work, including the
proper permitting, removal and disposal of all such Hazardous Substances in
accordance with Applicable Laws. Without limiting the generality of the
foregoing, Contractor shall implement, and ensure that all Subcontractors
implement, procedures to minimize the generation of Hazardous Substances. These
procedures shall include, at a minimum, process substitution, materials
recovery, and continued product use. When reasonably possible, Contractor shall
select less toxic alternatives to minimize the generation of Hazardous
Substances.
     4.3.3 In the event Contractor discovers any Hazardous Substances at, on or
under the Work Site, Contractor shall: (a) promptly cease work in the affected
area and
*** Confidential Treatment Requested

17

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
direct all Contractor Personnel and Subcontractors not to remove or further
disturb such Hazardous Substances; (b) promptly notify Owner of such discovery;
and (c) use all reasonable efforts to mitigate the effects of any such
discovery; provided, however, that except as provided in Section 4.3.4,
Contractor shall not be required to remediate Hazardous Substances at, on or
under the Work Site except as expressly provided for in this Agreement.
     4.3.4 In the event Contractor discovers any Hazardous Substances at, on or
under the Work Site which Contractor is not otherwise obligated to remediate
under the terms of this Agreement, Owner may authorize Contractor to perform any
necessary remediation in accordance with Applicable Laws, in which case,
Contractor shall (directly or through one or more Subcontractors) remediate such
Hazardous Substances in accordance with Applicable Laws; provided, however, that
if the anticipated cost of the remediation is in excess of [***], Contractor may
request that Owner directly retain one or more third parties to perform such
remediation directly on behalf of Owner, in which case: (a) Contractor shall
provide Owner with the names of qualified Persons to evaluate and/or perform
such remediation; and (b) Contractor shall provide any Persons retained by Owner
to perform such remediation access to the applicable Work Site, inform such
Persons of the Safety Standards and monitor such Persons’ compliance therewith.
     4.3.5 Contractor shall provide Owner with a list of any Hazardous
Substances to be installed or otherwise incorporated into the Project or used in
performing the Work. Contractor shall not, nor shall Contractor permit any
Subcontractor, directly or indirectly, to: (a) bring any other Hazardous
Substances on the Work Site; or (b) permit the manufacture, storage,
transmission or presence of any Hazardous Substances over, on or under the Work
Site except in accordance with Applicable Laws. Contractor shall maintain a log
of all Hazardous Substances, including their quantity, locations and place of
disposal, and provide copies of such log to Owner upon request.
     4.3.6 Contractor shall be fully liable for any Work Site contamination
caused by the negligence or willful misconduct of Contractor, Subcontractors and
their respective employees, agents, representatives and invitees with respect to
Hazardous Substances discovered at, on or under the Work Site. Without limiting
Contractor’s obligations pursuant to Section 18.2, Contractor shall be obligated
to remediate, in accordance with all Applicable Laws, any Hazardous Substances
introduced or released by Contractor, Subcontractors, their subcontractors at
any level or any of their respective employees, agents, representatives or
invitees at, on or under the Work Site. Contractor shall not be liable for
Hazardous Substances not released by Contractor or its Subcontractors.
     4.4 Archeological Materials. In the event Contractor discovers any
archaeological materials at, on or under the Work Site, Contractor shall:
(a) promptly cease work in the affected area and direct all Contractor Personnel
and Subcontractors not to remove or further disturb such archaeological
materials; (b) promptly notify Owner of such discovery; and (c) exercise all
commercially reasonable efforts, consistent with Applicable Laws, to protect
such archaeological materials.
*** Confidential Treatment Requested

18

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     4.5 Commissioning. Contractor shall be responsible for Commissioning,
testing and turning over to Owner fully operational Facilities. Without limiting
the generality of the foregoing, Contractor shall perform all tasks necessary
for start-up, testing and Commissioning of the Facilities, including:
(a) performing all inspection, testing, operations and other tasks inherent in
Commissioning in accordance with Good Utility Practices and equipment
manufacturers’ procedures; and (b) providing qualified, equipped and competent
personnel to execute tasks as described in this Agreement and the Project
Schedule.
     4.6 Construction Management. Contractor shall manage the construction,
installation, inspection, storage, testing and Commissioning of materials and
equipment comprising, or necessary for the operation of, the Facilities through
the Final Completion Date, all in accordance with Good Utility Practices and
otherwise as necessary for the timely completion of the Work in accordance with
the Project Schedule. Contractor shall be solely responsible for all
construction means, methods, techniques, sequences, procedures, safety and
security programs in connection with the performance of the Work.
     4.7 Scheduling. Contractor shall perform all scheduling activities
necessary or advisable in connection with the performance of the Work, including
scheduling and coordinating outages of the Facilities in accordance with
Applicable Laws.
     4.8 Health and Safety.
     4.8.1 Contractor shall be responsible, until Final Completion, for assuring
the health, safety and protection of all Persons while at the Work Site or
otherwise performing or inspecting the Work. Without limiting the generality of
the foregoing, Contractor shall develop, implement, comply with and monitor
compliance with a quality assurance program, a construction safety program, a
fire protection program, an accident prevention program and any other programs
(collectively, “Safety Standards”) necessary to: (a) comply with all Applicable
Laws, including laws pertaining to health and safety; and (b) satisfy, at a
minimum, the policies and procedures set forth Owner’s 2006 Safety Manual, a
copy of which has been provided by Owner to Contractor. Without limiting the
generality of the foregoing, Contractor shall: (i) erect and maintain reasonable
safeguards for the protection of equipment, workers and the public, including
first-aid facilities at the Work Site; and (ii) exercise reasonable efforts to
eliminate or abate all reasonably foreseeable safety hazards created by, or
otherwise resulting from, performance of the Work.
     4.8.2 Owner may, at any time during performance of the Work, conduct a
compliance audit with respect to the Safety Standards. In the event such audit
demonstrates non-compliance with any aspect of the Safety Standards, Owner may
notify Contractor of such non-compliance and Contractor shall promptly undertake
appropriate remedial action.
     4.8.3 Contractor shall: (a) promptly notify Owner in writing of all
accidents, injuries and near-misses to the Owner Representative, including
providing reasonable back-up documentation with respect thereto; (b) promptly
notify Owner in writing of any non-compliance with the Safety Standards; and
(c) provide Owner with written monthly
*** Confidential Treatment Requested

19

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
health and safety reports, which reports shall be in form and substance
acceptable to Owner.
     4.9 Cleanup. Contractor shall at all times keep the Work Site free from
waste materials and rubbish. As soon as practicable, and in no event later than
Final Completion, Contractor shall remove all of its equipment and materials not
constituting part of the Facilities and shall remove all waste material and
rubbish from and around the Work Site.
     4.10 Emergencies. In the event of any condition that poses an imminent
threat to life, health or property (an “Emergency”), Contractor shall take such
action as may be necessary to prevent, avoid or mitigate injury, damage or loss
and shall, as soon as practicable, report any such incidents, including
Contractor’s response thereto, to Owner. If Contractor fails to take adequate
measure to avoid, address or mitigate the effects of such an Emergency Owner
may, but shall be under no obligation to, take reasonable precautions to avoid,
address or mitigate the effects of such Emergency; provided, however, that
neither the taking of such action by Owner nor Owner’s failure to take such
action shall limit Contractor’s liability or its obligations under this
Agreement.
     4.11 Cooperation.
     4.11.1 Contractor shall make available to Owner and Owner Nominees
information relating to the status of the Work, including information relating
to the construction, testing and Commissioning of the Facilities and such other
matters as Owner may reasonably request.
     4.11.2 Contractor shall cooperate with Owner’s efforts to obtain, maintain
and comply with the terms of any third-party financing of the Facilities,
including: (a) executing documents (including consents, certifications,
acknowledgements and legal opinions) as Owner and Lenders may reasonably
request, provided that the reasonable attorneys’ fees and costs incurred by
Contractor in connection therewith shall be Reimbursable Costs; (b) consenting
to the collateral assignment of this Agreement to Lenders; (c) agreeing not to
amend this Agreement without the consent of Lenders, except pursuant to a Change
Order executed pursuant to Article 16; and (d) agreeing to give Lenders notice
of, and an opportunity to cure, any Owner default(s) hereunder. Contractor shall
also give due consideration to any reasonable proposals to amend this Agreement
proposed by Lenders to address financing concerns; provided, however, that
Contractor shall not be required to subordinate Contractor Liens except to the
extent expressly required hereunder.
     4.11.3 Contractor shall use all commercially reasonable efforts (including
providing documents and information requested by Owner) to assist Owner in
efforts to obtain Owner Permits.
     4.12 Work Site Security. Contractor shall be responsible for: (a) the
proper fencing, guarding, lighting and security of the Work Site as may be
necessary to secure the Work and to prevent damage or injury to owners or
occupants of adjacent property, the public or others; and (b) the security and
protection of the Work Site and all equipment and materials located thereon.
Contractor’s responsibility pursuant to this Section 4.12 shall continue until
the Substantial
*** Confidential Treatment Requested

20

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Completion Date or such earlier date as Owner energizes certain Facilities or
portions thereof, at which time Contractor’s obligations pursuant to this
Section 4.12 shall cease as to such Facilities or portions thereof. Contractor
shall not be required to fence any portion of the Facilities consisting of
transmission lines, but shall patrol the transmission lines with security
personnel to the extent reasonably necessary.
     4.13 Interconnections. Contractor shall be responsible for connecting the
Facilities to the electrical terminal points on the Transmission Grid designated
on Schedule 4.13. Contractor’s scope of Work with respect to the electrical
interconnection shall include installing all breakers, relays, switches,
synchronization equipment, communications equipment and other protective and
control devices and metering equipment for full hook-up and parallel operation
at the specified voltage level in accordance with the Authorized Design and any
requirements imposed by Transmission Grid operators.
     4.14 Contractor Liens.
     4.14.1 Contractor shall not directly or indirectly create, incur, assume or
suffer to be created any Prohibited Liens. Contractor shall promptly pay or
discharge, and discharge of record, any claim, lien or encumbrance which, if
unpaid, might be or become a Prohibited Lien. Contractor shall immediately
notify Owner of the assertion of any Contractor Lien.
     4.14.2 Upon the failure of Contractor promptly to pay or discharge any
Prohibited Lien within thirty (30) days of notice of the existence thereof from
any source, Owner may, but shall not be obligated to, pay or discharge such
Prohibited Lien and, upon the payment or discharge thereof, shall be entitled
immediately to: (a) recover from Contractor any costs incurred in removing such
Prohibited Lien; or (b) set off any such costs against amounts owed by Owner to
Contractor; provided, however, that Contractor shall not be liable to reimburse
Owner for interest charges, reasonable attorneys’ fees and similar costs
incurred by Owner to release any Prohibited Lien filed pursuant to a Subcontract
as a result of Owner’s failure to timely pay Contractor the Out-of-Pocket Costs
incurred with respect to such Subcontract.
     4.14.3 Nothing in this Section 4.14 shall be construed as a limitation on
or waiver by Contractor of any of its rights to encumber the Facilities or the
Project Real Property as security for any payments owed to it by Owner
hereunder; provided, however, that Contractor shall provide Owner with thirty
(30) days prior written notice of its intent to so encumber.
     4.15 Utilities and Consumables. Contractor shall provide utilities and
other consumables required in connection with the Construction Services,
including potable water and electricity.
     4.16 Laydown and Storage Areas. Contractor shall lease, maintain and
provide security for any real property and other facilities required for laydown
areas and storage yards to be used in connection with the performance of the
Work.
*** Confidential Treatment Requested

21

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
ARTICLE 5
PROCUREMENT MANAGEMENT SERVICES
     5.1 Procurement Plan.
     5.1.1 No later than the deadline(s) set forth in the Project Schedule,
Contractor shall provide Owner with a detailed list (the “List of Materials”) of
equipment, supplies and materials to be incorporated into the Facilities. The
List of Materials shall include proposed deadlines for the reservation of
capacity and/or ordering in order that all such equipment, supplies and
materials can be manufactured, fabricated, purchased and/or delivered in a
manner to permit compliance with the Project Schedule. Contractor shall promptly
amend the List of Materials from time to time based on updated information
developed through the design process.
     5.1.2 Promptly after receipt of the List of Materials, Owner shall identify
the equipment, supplies and materials it proposes to procure directly (such
equipment, supplies and materials, the “Owner Procured Materials”); provided,
however, that Owner may revise the list of Owner Procured Materials at any time
and from time to time. All equipment, supplies and materials on the List of
Materials that are not designed by Owner as Owner Procured Materials shall
constitute “Contractor Procured Materials”; provided, however, that Contractor
Procured Materials shall not include major equipment, lattice structures and
conductors.
     5.1.3 Owner shall directly procure all Owner Procured Materials pursuant to
Owner purchase orders or agreements; provided, however, that Contractor shall
assist Owner in connection with the procurement of Owner Procured Materials,
including: (a) assisting Owner in preparing bid packages; (b) assisting Owner in
negotiating purchase orders and agreements; (c) performing expediting service;
(d) performing inventory control and receipt inspection services; and
(e) processing and prosecuting damage claims. Notwithstanding anything to the
contrary set forth herein, Owner shall: (i) directly pay each Direct Supplier
for Owner Procured Materials in accordance with the terms of applicable purchase
orders and agreements; and (ii) receive and sign for all acceptable Owner
Procured Materials. Warranties on all Owner Procured Materials shall be in the
name of Owner. Immediately following delivery of Owner Procured Materials to
Owner, Contractor shall assume care, custody and control of such Owner Procured
Materials.
     5.1.4 Contractor shall procure all Contractor Procured Materials pursuant
to terms and conditions to be approved by Owner.
     5.1.5 No later than fifteen (15) days after Owner’s initial designation of
Owner Procured Materials, Contractor shall provide Owner with a proposed plan
for the procurement of all Project Materials, which proposed plan shall include
a schedule for procuring the Project Materials, including the timing for issuing
bid packages, if applicable, estimated production or fabrication times and
potential Direct Suppliers and Subcontractors. Owner shall review such proposed
plan and provide comments thereon, if any, to Contractor no later than ten
(10) Business Days after Owner’s receipt thereof. Contractor shall incorporate
any written comments offered by Owner. Contractor shall
*** Confidential Treatment Requested

22

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
provide a revised plan to Owner within ten (10) days of receipt of Owner’s
comments and such process shall be repeated until the plan is approved by Owner
(such plan, as approved, the “Procurement Plan”). Contractor shall amend or
update the Procurement Plan as reasonably necessary or as requested by Owner.
The Parties shall jointly review the Procurement Plan no less frequently than
once per month.
     5.2 Scope of Procurement Management Services. The Procurement Management
Services shall consist of:

  (a)   management of the Procurement Plan, including the timing of bidding and
delivery so as to minimize cost while complying with the Project Schedule;    
(b)   preparation of bid packages for all Project Materials based on the
Authorized Design and on terms and conditions approved by Owner (including
preparation of purchase orders and technical documentation, assistance in the
selection of qualified Direct Suppliers and preparation of Direct Supplier
scopes of work);     (c)   assisting Owner in timely obtaining and evaluating
bids for Owner Procured Materials;     (d)   coordinating, monitoring and
expediting the manufacture and delivery of materials, equipment and supplies,
including Project Materials and, where applicable, conducting factory
inspections and testing of such materials, equipment and supplies, including
Project Materials;     (e)   where necessary, arranging for transportation and
insurance of Project Materials to the appropriate locations;     (f)  
coordinating and expediting the delivery of all Project Materials to the
appropriate locations so as to meet the Project Schedule;     (g)   inspecting
and verifying all Project Materials at the point of delivery to verify they are
undamaged, suitable for use and meet the requirements of the relevant purchase
order(s), in a manner consistent with Owner’s rights and obligations under
contracts with Direct Suppliers; and     (h)   reviewing and validating invoices
for Project Materials prior to their payment.

     5.3 Relationship With Direct Suppliers. Contractor’s performance of
Procurement Management Services shall not be construed to create any form of
contractual relationship between Contractor and any Direct Suppliers.
     5.4 Enforcement of Warranties. Contractor shall assure that all warranties
issued with respect to Contractor Procured Materials shall run directly, or be
assignable by Contractor, to Owner. Contractor shall assign any such assignable
warranties to Owner no later than the
*** Confidential Treatment Requested

23

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Substantial Completion Date. Notwithstanding anything to the contrary set forth
herein, Contractor shall enforce warranties on Contractor Procured Materials and
assist Owner in enforcing warranties on Owner Procured Materials.
ARTICLE 6
REAL PROPERTY MANAGEMENT SERVICES
     6.1 Real Property Management Services. The Real Property Management
Services shall consist of:

  (a)   identification of landowners and required crossing permits, and managing
communications with such landowners so as to obtain required permissions;    
(b)   with the concurrence of Owner on a case by case basis, agreeing on the
terms for acquisition of each parcel of Project Real Property, including all
monetary payments associated therewith;     (c)   documenting by files and maps,
in accordance with formats designated by Owner, all Project Real Property; and  
  (d)   providing surveys as needed to obtain the Project Real Property.

     6.2 Real Property Plan.
     6.2.1 No later than the deadline set forth in the Project Schedule,
Contractor shall provide Owner with a proposed plan for the acquisition of all
Project Real Property, which proposed plan shall be in writing and shall
include: (a) a schedule for the acquisition of the Project Real Property,
including identification of real property interests and locations thereof, that
will need to be acquired; (b) the timing of optioning and acquiring the Project
Real Property; (c) the estimated costs of acquiring the Project Real Property,
including the costs of retaining rights to Project Real Property not acquired in
fee simple; and (d) guidelines and procedures to be utilized by Contractor in
negotiating the acquisition of the Project Real Property. Owner shall review
such proposed plan and provide comments thereon, if any, to Contractor no later
than ten (10) Business Days after Owner’s receipt thereof. Contractor shall
incorporate any written comments offered by Owner. Contractor shall provide a
revised plan to Owner within ten (10) days of receipt of Owner’s comments and
such process shall be repeated until the plan is approved by Owner (such plan,
as approved, the “Real Property Plan”). Contractor shall amend or update the
Real Property Plan as reasonably necessary or as requested by Owner.
     6.2.2 Contractor shall diligently proceed to implement the Real Property
Plan. Contractor shall be responsible for negotiating the terms for the
acquisition of the Project Real Property in accordance with the Real Property
Plan; provided, however, that Owner shall have the right to participate in any
such negotiations.
*** Confidential Treatment Requested

24

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     6.2.3 Notwithstanding anything to the contrary set forth herein, Contractor
shall not enter into any agreement or bind Owner in respect of any Project Real
Property without Owner’s express written consent.
     6.3 Ownership of Project Real Property. All Project Real Property shall be
acquired, and any options with respect thereto shall be executed, in the name of
Owner pursuant to forms of agreement(s) approved by Owner. Any amounts owed to
landowners in respect of the acquisition of Project Real Property shall be paid
directly by Owner.
     6.4 Limitation. Real Property Management Services shall not include
initiating or managing litigation to condemn Project Real Property; provided,
however, that Contractor shall cooperate with, and provide support to, Owner and
Owner’s legal counsel with respect to any such litigation, including providing
evidence and testimony regarding valuation, prior negotiations and other matters
related to the condemnation.
ARTICLE 7
CONTRACTOR’S GENERAL OBLIGATIONS
     7.1 Standards of Performance. Contractor shall perform the Work in a
professional, competent and diligent manner in accordance with the terms of this
Agreement, Good Utility Practices and all Applicable Laws, including standards
of the appropriate engineering and construction codes. Contractor shall conduct
itself (and ensure that each Subcontractor conducts itself) in accordance with
appropriate ethical and professional standards.
     7.2 Contractor Liable for Work. Contractor shall be responsible for the
manner and methods by which the Work is performed, regardless of whether or not
any changes are made as a result of any comments received from any other Person,
including Owner.
     7.3 Project Manager. Contractor shall designate an experienced and
qualified person acceptable to Owner (the “Project Manager”) to manage
Contractor’s performance of the Work and implementation of the Project. The
Project Manager shall be exclusively dedicated to the Project and shall be
available to Owner and its representatives seven days per week, twenty-four
hours per day. Contractor shall ensure that Project Manager cooperates with, and
promptly replies to inquiries made by, Owner, Direct Suppliers and Owner
Nominees regarding the Work or any other matter related to this Agreement. The
Project Manager shall have the authority to act for Contractor with respect to
all matters pertaining to the Work, this Agreement and Contractor’s performance.
     7.4 Contractor Personnel.
     7.4.1 Contractor shall provide sufficient supervisory and other personnel
to perform, and control the progress of, the Work until Contractor’s performance
under this Agreement has been completed.
     7.4.2 None of the key personnel identified on Schedule 7.4 shall be
reassigned or removed from the Work by Contractor without the approval of Owner,
unless such reassignment or removal results from circumstances beyond
Contractor’s
*** Confidential Treatment Requested

25

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
control, such as death, incapacity or the employee leaving Contractor’s
employment. Any replacement key personnel must be approved in advance by Owner.
     7.4.3 Upon Owner’s instruction, Contractor shall promptly remove from the
Work Site any Contractor Personnel and shall cause Subcontractors to remove from
the Work Site any of their employees performing Work in an unsatisfactory
manner. If Owner has a reasonable basis for designating such removal, Contractor
shall indemnify, defend and hold harmless each Owner Indemnitee from and against
any and all Claims of any kind whatsoever based on negligence, defamation,
wrongful discharge, wrongful dismissal or otherwise that such Owner Indemnitee
may suffer, sustain, pay or incur as the result of any such removal.
     7.5 Labor Disputes. Contractor shall take all steps reasonably necessary to
minimize and/or eliminate labor disputes with respect to this Agreement.
     7.6 Imports and Exports. Contractor shall be responsible for obtaining all
Permits necessary for the import or export (including customs clearances) of any
equipment, materials, tools and supplies (including Owner Procured Materials)
necessary for the performance of the Work.
     7.7 Permits and Approvals.
     7.7.1 No later than the deadline set forth in the Project Schedule,
Contractor shall provide Owner with a list of all Permits. Promptly after
receipt of such list, Owner shall designate those Permits that Owner intends to
obtain in its own name (such designated Permits, the “Owner Permits”) which
Owner Permits shall include all Permits required by Applicable Laws to be
obtained in the name of Owner. Contractor shall promptly amend the list of all
Permits as reasonably necessary based on any change in design, Change-in-Law or
other circumstances.
     7.7.2 Contractor shall obtain and maintain in full force and effect all
Contractor Permits and shall cooperate with, support and assist Owner in
obtaining all Owner Permits, including preparing documentation to be submitted
by Owner to Governmental Authorities in connection therewith. Contractor shall
provide Owner with copies of each Contractor Permit promptly after receipt
thereof by Contractor.
     7.8 Reserved.
     7.9 Records. Contractor shall maintain, for a period of not less than seven
(7) years after Final Completion or such longer period as may be required by
Applicable Laws, all Project-related records, including: (a) records maintained
by Affiliates; (b) payroll records and daily time sheets and other personnel
records; (c) Contractor and Subcontractor invoices; (d) drawings, plans,
specifications, schedules, instructions, samples, receipts, Subcontract
documentation, purchase orders and vouchers; (e) correspondence, minutes of
meetings, daily logs, including schedule status reports, memoranda and other
similar data; (f) all Subcontracts; (g) records of all Change Orders;
(h) written and electronic records and books of account; and (i) Contractor
Permits. All such records shall be maintained in accordance with Contractor’s
standard document retention
*** Confidential Treatment Requested

26

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
policies. Contractor shall, promptly upon Owner’s request, provide Owner with
any such records relating to the Project.
     7.10 Financial Statements.
     7.10.1 Upon Owner’s reasonable request, Contractor shall provide Owner with
reasonable assurances of the financial condition and ability to perform of
Contractor and/or any Subcontractors. Without limiting the generality of the
foregoing, Contractor shall provide to Owner, promptly upon the preparation
thereof: (a) unaudited financial statements for the most recent fiscal quarter;
(b) audited financial statements for the three most recently completed annual
periods prepared in accordance with GAAP; and (c) such other financial
information as may be reasonably requested by Owner.
     7.10.2 Contractor shall: (a) include in all Subcontracts with
Subcontractors expected to perform Work costing more than [***] a provision
requiring such Subcontractors to provide audited financial statements (or
unaudited financial statements for Subcontractors that do not prepare audited
financial statements) and information to Owner upon Owner’s reasonable request;
and (b) use commercially reasonable efforts to obtain from other Subcontractors
such financial information as may be reasonably requested by Owner.
     7.10.3 Owner shall hold in confidence and refrain from disclosing any
information (other than Unrestricted Information) made available to it pursuant
to this Section 7.10; provided, however, that Owner may disclose such
information to Lenders.
     7.11 Quality Assurance Program. Contractor shall implement and comply with
a quality assurance program satisfactory to Owner. Owner may make
recommendations to Contractor regarding the implementation of, or suggested
modification to, such program. Contractor shall undertake to implement any
reasonable recommendations made by Owner with respect thereto.
     7.12 Performance Testing. Contractor shall: (a) provide Owner with
reasonable advance notice of any inspections or tests of the Facilities;
(b) afford Owner and Owner Nominees the right to attend and witness such
inspections and tests; and (c) provide Owner with true, correct and complete
copies of the results thereof.
     7.13 Office Space. Contractor shall provide for Owner and Owner Nominees
temporary furnished office space, clerical support, communication services,
internet access and other similar facilities and services at Contractor’s home
office, the Field Office, each construction management office maintained by
Contractor in connection with the Project, and each Major Subcontractor’s
office, for purposes related to the Project.
     7.14 Progress Reports. Contractor shall prepare and submit to the Steering
Committee on a weekly basis written reports (each, a “Progress Report”). Each
Progress Report shall be in form and substance acceptable to Owner and shall
include:

  (a)   the status of Contractor’s acquisition of Contractor Permits;

*** Confidential Treatment Requested

27

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

  (b)   the status of the Work, including a reconciliation of the Work to the
Project Schedule and a reasonably detailed explanation of any variances;     (c)
  identification of Subcontractors and the scope of their Work;     (d)  
identification of any Claims regarding the performance of the Work of which
Contractor has knowledge (including facts and circumstances of which Contractor
has knowledge that are reasonably likely to give rise to a Claim);     (e)   a
report on safety, injury and illness incidents;     (f)   identification of any
Contractor Liens of which Contractor has knowledge;     (g)   the status of
testing and inspections (including the results thereof);     (h)   a line-item
reconciliation of actual Reimbursable Costs for the relevant period compared to
those set forth in the Project Budget, including a reasonably detailed
explanation of any variances; and     (i)   any other matters related to the
Project that Owner reasonably requests.

     7.15 Meetings. Contractor shall conduct meetings no less frequently than
once each month (and more frequently if reasonably requested by Owner) at the
Work Site or such other location(s) as may be mutually agreed (and at which the
Project Manager shall be present) to apprise the Steering Committee of the
progress of the Work and to discuss the Progress Reports, Contractor’s
compliance with the Project Schedule and other matters related to Contractor’s
performance of the Work and compliance with this Agreement.
     7.16 Site Procedures. Contractor shall be responsible for ensuring that all
Contractor Personnel, all Subcontractors and their employees, agents,
representatives and invitees and all others permitted by Contractor to enter the
Work Site or any other site(s) made available by Owner for construction-related
activities shall comply with Owner’s regulations and requirements, this
Agreement, Good Utility Practices and all Applicable Laws.
     7.17 Insurance.
     7.17.1 Contractor shall obtain and maintain in force the insurance coverage
specified in Schedule 7.17 (“Contractor Required Insurance”).
     7.17.2 Contractor shall require each Subcontractor (and each indirect
subcontractor at any level) to provide and maintain in force insurance coverage
as shall be reasonable and appropriate for the portions of the Work provided by
such Subcontractor or other Person. Such Subcontractors and other Persons shall
name Contractor, Owner, Owner Additional Insureds and Lenders as additional
insureds on all liability policies (other than professional liability policies
and workers’ compensation policies).
*** Confidential Treatment Requested

28

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     7.17.3 The cost of Contractor Required Insurance specified in paragraphs
(h) through (m) of Schedule 7.17 and the incremental cost (based on additional
revenues to be derived from the Work) to maintain the Contractor Required
Insurance specified in paragraphs (f) and (g) of Schedule 7.17 (collectively,
“Owner Reimbursed Insurance”) shall constitute Out-of-Pocket Costs. The cost of
Contractor Required Insurance other than Owner Reimbursed Insurance shall not be
an Out-of-Pocket Cost; provided, however, that: (a) Contractor shall be entitled
to recover the cost of certain insurance coverage (as identified in
Schedule 10.2) pursuant to the Non-Craft Labor Multiplier; and (b) to the extent
the cost of any insurance coverage is included as a component of the Non-Craft
Labor Multiplier, such cost shall not be reimbursed as an Out-of-Pocket Cost.
     7.17.4 Owner shall have the right, in its reasonable discretion and
exercisable on not less than thirty (30) days written notice to Contractor, to
modify Owner Reimbursed Insurance. Upon issuance of any such notice: (a)
Schedule 7.17 shall automatically be deemed amended to include the new
requirements with respect to Owner Reimbursed Insurance; and (b) if any such
amendment of Schedule 7.17 increases or decreases the cost of Owner Reimbursed
Insurance by more than Two Hundred Thousand Dollars ($200,000) in the aggregate,
the Parties shall execute a Change Order to equitably adjust the Target Price to
account for the change in cost of Owner Reimbursed Insurance.
     7.17.5 In the event Owner elects to evaluate an “owner-controlled insurance
program” or a “contractor-controlled insurance program,” Contractor will
cooperate in such evaluation process. Owner shall have the right, in its
reasonable discretion and exercisable on not less than six (6) months written
notice to Contractor, to implement an Owner Controlled Insurance Program or a
Contractor Controlled Insurance Program, in which case: (a) Owner shall have the
right to modify Owner Reimbursed Insurance and insurance requirements for
Subcontractors and their subcontractors at any level; (b) Schedule 7.17 shall
automatically be deemed amended to include the new requirements with respect to
Owner Reimbursed Insurance; and (c) if any such amendment of Schedule 7.17
materially increases or decreases the cost of Owner Reimbursed Insurance or the
Work, the Parties shall execute a Change Order to equitably adjust the Target
Price to account for such change(s).
     7.17.6 Contractor shall be responsible for the cost of all deductibles
under Contractor Required Insurance other than Owner Reimbursed Insurance. Owner
shall be responsible for the cost of all deductibles under Owner Reimbursed
Insurance; provided, however, that notwithstanding the foregoing, Contractor
shall be responsible for: (a) the [***] for each claim under the Builders Risk
Insurance or Contractor Tools and Equipment Insurance which results from
Contractor’s negligence or failure to perform in accordance with the terms of
this Agreement; and (b) [***] under Workers’ Compensation Insurance.
     7.17.7 In the event any claims valued at more than [***] are made under
Contractor’s Professional Protection Indemnity Insurance, Contractor shall
provide Owner with prompt written notice thereof, which notice shall include a
description of such claim(s) and the basis of Contractor’s defenses thereto.
*** Confidential Treatment Requested

29

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     7.18 Alcohol and Drug Policy.
     7.18.1 Contractor shall ensure that no Contractor Personnel performs any
Work while under the influence of alcohol, drugs or any other substance that
could reasonably be expected to impair his or her ability to perform such Work
in accordance with Good Utility Practices. Contractor shall ensure that all
Contractor Personnel are informed of, and adhere to, such “zero tolerance”
alcohol, drug and substance abuse policy.
     7.18.2 Contractor shall ensure that Contractor Personnel shall not abuse
medications or use, possess, distribute or sell alcohol and/or drugs when
performing the Work or while in transit to or from or on the Work Site.
Contractor shall provide Owner with evidence of pre-employment and other alcohol
and drug testing on Contractor Personnel consistent with the Safety Standards
and policies and procedures established at the Project Workshop. To the fullest
extent permitted by Applicable Laws, Contractor shall immediately suspend any
Contractor Personnel that are in breach of, or are reasonably suspected of being
in breach of, any policy referred to in this Section 7.18. In addition, Owner
shall have the right to instruct Contractor to remove any Contractor Personnel
that it reasonably suspects of being in breach of any policy referred to in this
Section 7.18. In those instances where any Contractor Personnel have been
suspended or removed from performing the Work due to documented or suspected
alcohol and drug abuse, Contractor may reinstate such Person only with the prior
written consent of Owner.
     7.18.3 Contractor shall develop and implement guidelines and procedures to
ensure that the policies set forth in this Section 7.18 are strictly adhered to
and shall, upon Owner request, provide a copy of such guidelines and procedures
to Owner and provide evidence of its effective implementation.
     7.19 Business Standards. Contractor, in performing its obligations under
this Agreement, shall establish and maintain in effect appropriate business
standards, procedures and controls to avoid any real or apparent impropriety
that might affect adversely or conflict with the best interests of Owner or
violate any Applicable Laws. Contractor shall exercise all reasonable care and
diligence to prevent any actions or conditions which could adversely affect or
result in a conflict with the best interests of Owner or violate any Applicable
Laws. Contractor shall ensure the compliance by all Contractor Personnel with
the obligations set forth in this Section 7.19, which obligations shall apply to
the activities of all Contractor Personnel with other Contractor Personnel,
Owner, each Owner Indemnitee and their respective families and third parties
relating to this Agreement or the Project. Such obligations shall include
establishing precautions to prevent Contractor Personnel from making, receiving,
providing or offering any gifts, entertainment, payments, loans, or other
consideration that could constitute any real or apparent impropriety that might
adversely affect or conflict with the interests of Owner or violate any
Applicable Laws.
     7.20 Compliance With Law. Contractor shall comply with, and shall ensure
that all Subcontractors comply with, all Applicable Laws in the performance of
the Work. Notwithstanding anything to the contrary set forth herein, no
provision shall be interpreted or applied so as to require Owner or Contractor
to do, or refrain from doing, anything that would
*** Confidential Treatment Requested

30

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
constitute a violation of, or result in a loss of economic benefit under, United
States anti-boycott and other export laws and regulations. Contractor shall not
make, or permit any Contractor Personnel or Subcontractor to make, any improper
payments of money or anything of value to a government official (whether
appointed, elected, honorary or a career government employee) or a Governmental
Authority in connection with this Agreement or the Work, nor shall it make, or
permit any Contractor Personnel or Subcontractor to make, any improper payments
of money or anything of value to any Person knowing or suspecting that such
Person will give any such payment or thing of value, or a portion of it, to a
government official or Governmental Authority.
     7.21 Authority. Contractor shall have no authority to make statements,
representations or commitments of any kind or take any other action binding on
Owner, except as may be specifically authorized by the terms of this Agreement.
ARTICLE 8
OWNER’S RIGHTS AND OBLIGATIONS
     8.1 Owner Permits. Owner shall obtain and maintain in full force and effect
all Owner Permits.
     8.2 Owner Representative. Owner shall appoint an individual (the “Owner
Representative”) who shall have the authority to act for Owner with respect to
all matters pertaining to the Work.
     8.3 Temporary Possession. Owner may take temporary possession of, and use
partially completed parts of, the Work prior to Substantial Completion by
providing written notice thereof to Contractor and, in any such case, shall use
commercially reasonable efforts to coordinate with Contractor in an effort to
minimize any adverse impact on remaining Work. Such possession by Owner shall
not be deemed an acknowledgement of completion of said parts of the Work. In the
event Owner takes temporary possession or use of any material part of the Work
pursuant to this Section 8.3, the Project Schedule and the Project Budget shall
be modified to the extent necessary to reflect the impact of such temporary
possession; provided, however, that no such modification shall be made if such
temporary possession or use by Owner is required due to failure by Contractor
to: (i) perform in accordance with this Agreement; or (ii) complete any part of
the Work as set forth in the Project Schedule.
     8.4 Approvals. No Owner approvals, authorizations or agreements shall:
(a) be effective unless in writing and signed by the Owner Representative or
another authorized agent of Owner; or (b) relieve Contractor of any of its
obligations or responsibilities under this Agreement.
     8.5 Inspections. Contractor shall provide to Owner and Owner Nominees:
(a) full access to the Work, wherever located and at any stage of completion,
and the right to be present at all inspections and testing at or outside the
Work Site; and (b) the right to inspect the Work or any part thereof at any
other time. Contractor shall provide proper facilities for such access and
inspections. No inspection performed by or failed to be performed by Owner under
this Section 8.5 will be deemed a waiver of Contractor’s obligations under this
Agreement or be construed as an approval or acceptance of the Work or any
portion thereof.
*** Confidential Treatment Requested

31

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     8.6 Other Property. Owner may use any portion of its property for its own
purpose and may employ workers and/or hire contractors of its own choosing for
constructing other facilities or maintaining or changing any existing
facilities. Owner may refuse any person admission to all or any part of the
Project Real Property or exclude any person from performing Work under this
Agreement, and Contractor shall cooperate with Owner with respect thereto.
     8.7 Disclosure. Owner shall keep Contractor reasonably apprised of
information known to Owner that would reasonably be expected to affect
Contractor’s performance of the Work, including: (a) siting studies;
(b) litigation against Owner filed in connection with the Project; (c) Owner
agreements pertaining to Owner Procured Materials or Project Real Property; (d)
applications for, and decisions regarding, Owner Permits; (e) Owner applications
for zoning on any Project Real Property and decisions of Governmental
Authorities with respect thereto; (f) written notices received by Owner
regarding material political opposition to the Project; and (g) the status of
condemnation proceedings, including motions to permit early access, provided,
however, that Owner’s failure to provide any such information to Contractor
shall not be deemed a breach of this Agreement unless such failure was knowing
and intentional.
     8.8 Reserved.
     8.9 Condemnation Proceedings. Promptly upon, and in no event more than
fifteen (15) Business Days after, receipt by Owner of (a) written notice from
Contractor that it has engaged in good faith negotiations to acquire certain
Project Real Property and that any owner of such Project Real Property is
unwilling to convey to Owner an interest therein to permit performance of the
Work and (b) all information and documentation necessary for Owner to commence a
condemnation action to acquire such Project Real Property, including the names
of all owners of the subject property, a legal description of the subject
property and a written log of prior negotiations to acquire the Project Real
Property, Owner shall, to the extent permitted by Applicable Laws, commence, and
thereafter prosecute diligently and in good faith, an action to condemn such
Project Real Property.
     8.10 Preliminary Routing Information. [***] after the execution of this
Agreement, Owner shall provide Contractor with information regarding potential
transmission line routing in order for Contractor to develop the Target Cost.
ARTICLE 9
SUBCONTRACTORS
     9.1 Right to Subcontract.
     9.1.1 Subject to the terms and conditions set forth herein, including the
limitation set forth in Section 9.1.2, Contractor shall have the right to
utilize Subcontractors to perform portions of the Work; provided, however,
Contractor shall remain liable to Owner for Work performed by Subcontractors to
the same extent as if Contractor had performed such Work directly.
     9.1.2 Contractor may not enter into a Subcontract with an Affiliate of
Contractor without Owner’s prior written consent. Without limiting the
generality of the
*** Confidential Treatment Requested

32

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
foregoing, in the event Contractor enters into any Subcontract with any of its
Affiliates, such Subcontract shall include the same limitations with respect to
such Subcontractor(s) as are set forth herein with respect to Contractor
regarding charges for labor, profit, overhead and general and administrative
costs.
     9.2 Approval Rights. Owner shall have the right to review and approve:
(a) all bid lists for Subcontracts with Major Subcontractors; (b) proposed
requests for proposals for all Subcontracts with Major Subcontractors; (c) the
identity of all Major Subcontractors; (d) the terms and conditions of all
Subcontracts with Major Subcontractors; and (e) the terms and conditions of all
Subcontracts that include any potential termination liability [***]. Without
limiting Owner’s rights to approve the terms of any Subcontracts, Owner hereby
approves each Person identified in Schedule 9.2 as a potential Subcontractor.
     9.3 Justification of Non-Competitive Contracts. In the event Contractor
proposes to retain any Subcontractor other than pursuant to a competitive
bidding process, Contractor shall demonstrate to Owner’s reasonable satisfaction
that: (a) the pricing and all material terms and conditions in the proposed
Subcontract are no less favorable to Contractor than the pricing and material
terms and conditions that would have resulted from a competitive bidding
process; or (b) the proposed Subcontractor is uniquely qualified to perform the
services or supply the materials or equipments provided pursuant to the proposed
Subcontract.
     9.4 Subcontractor Warranties. Contractor shall procure from all
Subcontractors warranties with respect to any materials, equipment or services
provided by such Subcontractors and shall require that all such Subcontractor
warranties be assignable to Owner. Contractor shall conditionally assign to
Owner such Subcontractor warranties pursuant to an instrument in form and
substance reasonably acceptable to Owner, such conditional assignment to become
effective following the termination of this Agreement. Contractor shall
diligently enforce all Subcontractor warranties at all times prior to the
termination of this Agreement. Contractor shall not take any action which could
amend, modify, release, void, impair, discharge or waive any Subcontractor
warranties, except in the event that a Subcontract is terminated by Contractor
and replaced with another Subcontract with an equivalent warranty.
     9.5 Manufacturer Information. Contractor shall require that Owner be a
recipient of manufacturer’s notices (including any and all health and safety
advisories and notices) related to any equipment, supplies, structures and/or
materials supplied to Owner by Contractor or any Subcontractor. Contractor shall
also require Subcontractors to provide Owner with documentation regarding
equipment and materials comprising the Facilities, including design manuals,
operation and maintenance manuals and start-up documentation.
     9.6 No Contractual Relationship. None of Owner’s rights under this
Agreement, including its right to review and approve Subcontractors, shall
create any contractual relationship between Owner and any Subcontractor.
     9.7 Assignment of Subcontracts. Contractor shall be responsible for
including in each Subcontract a consent to the assignment of such Subcontract to
Owner or Owner’s designee upon the termination of this Agreement, which
assignment shall be effected automatically, at Owner’s option, by notice from
Owner to the applicable Subcontractor.
*** Confidential Treatment Requested

33

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
ARTICLE 10
PAYMENT TERMS
     10.1 Management Fee.
     10.1.1 Owner shall pay Contractor the Management Fee in installments based
on the completion of Management Fee Milestones. The Management Fee shall be
allocated to the Work associated with each Phase based on the relative cost of
such Work.
     10.1.2 No later than the [***] day following the date on which Contractor
believes it has satisfied or completed, as applicable, a Management Fee
Milestone, Contractor shall submit to Owner an invoice setting forth in
reasonable detail evidence to support Contractor’s claim that such Management
Fee Milestone has been satisfied or completed, as applicable.
     10.1.3 If Owner agrees that a Management Fee Milestone has been satisfied
or completed, as applicable, Owner shall pay the invoice with respect thereto no
later than [***] days after Owner’s receipt thereof. In the event Owner
disagrees that a Management Fee Milestone has been satisfied or completed, as
applicable, it shall promptly notify Contractor, which notice shall include a
written statement setting forth a reasonable basis upon which Owner rejects
Contractor’s claim. In the event that Owner notifies Contractor that a
Management Fee Milestone has not been achieved, Contractor shall diligently
continue performing the Work until such Management Fee Milestone is achieved.
     10.2 Non-Craft Labor Costs.
     10.2.1 Owner shall pay Contractor for all Non-Craft Labor Costs reasonably
incurred through Final Completion.
     10.2.2 Prior to submitting any invoice for Non-Craft Labor Costs,
Contractor shall provide to Owner all Non-Craft Labor Rates (including
corresponding job titles, qualifications and job responsibilities) represented
in such Non-Craft Labor Costs. Non-Craft Labor Rates may be adjusted in August
of each year based on changes in the salaries or wages of Contractor Personnel;
provided, however, that: (a) any such annual increases shall be limited to
[***], in the aggregate, for individuals working on a full-time basis on the
Project; and (b) any such annual increases for other Contractor Personnel shall
be limited to [***]. Contractor warrants to Owner that all Non-Craft Labor Rates
shall be reasonable based on the qualifications and job descriptions of the
relevant Contractor Personnel.
     10.2.3 Subject to Sections 10.2.5 , the initial Non-Craft Labor Multiplier
and the cost categories used in the derivation thereof are shown in
Schedule 10.2. At the conclusion of each calendar year, the Non-Craft Labor
Multiplier for the prior calendar year shall be audited and revised to the
extent necessary to account for Contractor’s actual costs incurred for the
relevant cost categories during such prior year.
*** Confidential Treatment Requested

34

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     10.2.4 No later than March 1 of each year (beginning with 2008), Contractor
shall provide Owner with evidence reasonably satisfactory to Owner documenting
the employee bonuses paid to Dedicated Personnel with respect to their
performance during the prior calendar year. To the extent that the amount
charged to Owner with respect to employee bonuses pursuant to the Non-Craft
Labor Multiplier is greater than the aggregate amount of employee bonuses paid
to Dedicated Personnel, such excess amount shall be reimbursed to Owner no later
than ten (10) days after the due date for such information to be provided to
Owner. Nothing contained in this Agreement shall restrict Contractor from paying
employee bonuses to Dedicated Personnel in an aggregate amount greater than the
amount paid to Contractor for employee bonuses pursuant to the Non-Craft Labor
Multiplier; provided, however, that if Contractor seeks reimbursement from Owner
of all or any portion of any such additional employee bonus payments for
Dedicated Personnel: (a) Contractor shall notify Owner of its intent to seek
reimbursement of such additional bonus payments and the justification therefor;
(b) Owner shall reasonably consider Contractor’s request for reimbursement of
any such additional bonus payments; and (c) if Owner determines, in its sole
judgment, that all or any portion of such additional bonus payments is warranted
based on the performance of Dedicated Personnel, Owner shall reimburse
Contractor for all or such portion of the additional bonus payments.
     10.2.5 Contractor shall notify Owner promptly upon its procurement of West
Virginia Workers’ Compensation Insurance and shall provide Owner with evidence
of the cost of such insurance. To the extent that the cost of such insurance
affects the costs set forth for Workers’ Compensation Insurance in
Schedule 10.2, the initial Labor Cost Multiplier shall be increased or decreased
to reflect such cost.
     10.3 Craft Labor Costs. Subject to the limitations set forth in
Section 10.7, Owner shall pay Contractor for Craft Labor Costs reasonably
incurred through Final Completion; provided, however, that: (a) Contractor shall
notify Owner in advance of its intention to utilize Contractor Personnel to
perform craft labor Work; (b) Contractor shall justify, to Owner’s satisfaction,
any Craft Labor Costs that Contractor proposes to charge in connection with such
Work; (c) Owner shall be given the opportunity to solicit and evaluate
competitive bids from third parties to perform such Work and/or to retain a
third party to evaluate Contractor’s proposed Craft Labor Costs; and (d) Owner
shall approve the utilization of Contractor Personnel to perform craft labor
Work and all Craft Labor Costs associated with such Work.
     10.4 Out-of-Pocket Costs. Owner shall pay Contractor for all Out-of-Pocket
Costs reasonably incurred through Final Completion (including such costs that
are incurred prior to Final Completion but due thereafter) in connection with
the performance of the Work. Such Out-of-Pocket Costs shall include those cost
items identified in Schedule 10.4. Out-of-Pocket Costs shall not be subject to
mark-up.
     10.5 Reimbursable Costs.
     10.5.1 No later than the [***] day following the end of each calendar
month, Contractor shall submit to Owner an invoice detailing all Reimbursable
Costs incurred during the preceding month. Each such invoice shall separately
identify applicable taxes (including sales, gross receipts and business and
occupation taxes) and shall be
*** Confidential Treatment Requested

35

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
accompanied by: (a) copies of receipts or other evidence reasonably satisfactory
to Owner documenting such Reimbursable Costs, including evidence of hours worked
by Contractor Personnel; and (b) lien waivers in form and substance reasonably
acceptable to Owner with respect to all Work performed through the end of such
preceding month, executed by Contractor and each Subcontractor performing Work
in respect of which Reimbursable Costs are being invoiced.
     10.5.2 No later than [***] days after Owner’s receipt of an invoice
submitted in accordance with Section 10.5.1, Owner shall pay such invoice. In
the event Owner rejects any portion of the invoiced amount, Owner shall, within
such [***] day period: (a) pay the undisputed portion of the invoice; and
(b) provide Contractor with a written statement setting forth a reasonable basis
upon which Owner rejects such invoiced amount.
     10.5.3 Notwithstanding anything to the contrary set forth herein, costs
and/or expenses which may be incurred by Contractor (including interest and
penalties assessed with respect thereto) shall not constitute Reimbursable Costs
to the extent such costs, expenses, interest or penalties:

  (a)   are incurred as a result of Contractor’s failure to perform in
accordance with this Agreement (including any failure to pay taxes, fees and
assessments in accordance with Section 19.2);     (b)   are incurred as a result
of Contractor’s failure to comply with any Applicable Laws, including any
reporting, filing or other procedural requirements thereunder, and any
assessment, fees or penalties, and interest owed thereon;     (c)   represent
Contractor’s payment of any indemnity obligations owed pursuant to this
Agreement;     (d)   represent Contractor’s performance of its warranty
obligations hereunder;     (e)   are incurred as a result of Contractor’s
failure to obtain immunity or exemption from taxes, fees, assessments and duties
from which Contractor or any Subcontractor is entitled to exemption under
Applicable Laws; or     (f)   are incurred as a result of Contractor’s failure
to obtain a refund or credit, including interest, applicable thereto.

     10.6 Interest. Any amounts owed under this Agreement and not paid when due
shall bear interest from the date due until the date paid, calculated at the
Interest Rate.
     10.7 Retention.
     10.7.1 Notwithstanding anything to the contrary set forth herein, but
subject to Section 10.7.2, all amounts owed by Owner in respect of the Craft
Labor Costs shall be subject to [***] retention (the “Retention”), which shall
be retained or applied by Owner
*** Confidential Treatment Requested

36

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
in accordance with the terms of this Agreement (the aggregate amount subject to
such Retention, the “Retention Amount”).
     10.7.2 In lieu of Retention, Contractor shall have the right, in its sole
and absolute discretion and at its sole cost and expense, to post and cause to
be maintained a Retention Letter of Credit with a face amount equal to the
Retention Amount. If posted, a Retention Letter of Credit shall be drawable:
(a) if the issuer thereof ceases to constitute an Acceptable LC Provider and a
substitute Retention Letter of Credit issued by an Acceptable LC Provider is not
posted within ten (10) days of notice of such fact, or (b) if, on any date, the
Retention Letter of Credit has an expiry date within thirty (30) days of such
date. Contractor shall notify Owner promptly upon Contractor obtaining knowledge
that the issuer of a Retention Letter of Credit is no longer an Acceptable LC
Provider.
     10.7.3 The Retention, or the Retention Letter of Credit, as applicable,
shall be drawable in whole or in part to satisfy Contractor’s obligations under
the Agreement.
     10.7.4 Promptly after Substantial Completion, the Retention Amount shall be
adjusted, if necessary, to an amount equal to the Punch List Security Amount.
     10.7.5 On the Final Completion Date: (a) any remaining Retention held by
Owner (net of amounts applied by Owner pursuant to Section 10.7.3) shall be paid
to Contractor; or (b) if Contractor has posted a Retention Letter of Credit,
such Retention Letter of Credit shall be returned to Contractor.
     10.8 Payments.
     10.8.1 In the event a good faith dispute arises in connection with the
payment by Owner of any invoiced amount, Owner shall have the right to withhold
the disputed portion of such payment, provided that it deliver reasonably
detailed notice of the basis of such dispute. Any disputed payments shall be
addressed in accordance with Article 25.
     10.8.2 Owner shall have the right to contest any invoice or charge
submitted by Contractor, regardless of whether such invoice or charge was
previously paid, provided that Owner notifies Contractor in writing of such
contest no later than: (a) Final Completion; or (b) one (1) year after the date
of invoice, whichever occurs last.
     10.8.3 Owner shall have the right to set-off any amounts owed by Contractor
pursuant to this Agreement against any amounts that it owes to Contractor
pursuant to this Agreement. Notwithstanding the foregoing, Owner shall defer
setting off any such amount owed by Contractor to the extent: (a) Contractor or
any Subcontractor is seeking recovery of such amount from any of its/their
respective insurers; and (b) Contractor or such Subcontractor, as applicable is
reasonably likely, in Owner’s reasonable judgment, to recover such amount on
behalf of Owner; provided, however, that Owner shall not be obligated to defer
setting off any such amounts if: (i) Contractor or such Subcontractor, as
applicable, fails, after a reasonable period of time, to recover such amount
from its insurer; or (ii) Owner determines, in its reasonable judgment, that
Contractor or such
*** Confidential Treatment Requested

37

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Subcontractor, as applicable, is not reasonably likely to recover such amount on
behalf of Owner.
     10.9 Accuracy of Records. Contractor covenants that all financial
settlements, billings, and reports rendered by or on behalf of Contractor to
Owner shall properly and accurately reflect the facts about all activities and
transactions which are the subject matter of such financial settlements,
billings and reports and shall not omit any information required to make such
financial settlement, bill or report true, complete, accurate or not misleading.
Contractor agrees to notify Owner immediately in writing upon discovery of any
circumstance that would cause Contractor not to be in compliance with this
Section 10.9. If Contractor is not in compliance with this Section 10.9,
Contractor and Owner shall jointly review the errors and Contractor shall, if
appropriate, promptly take corrective action, including adjusting relevant
invoices and refunding overpayments, with accrued interest calculated at the
Interest Rate.
     10.10 Breakdown of Agreement Price. At Owner’s request, and promptly
following Final Completion, Contractor shall prepare a breakdown of all amounts
paid by Owner pursuant to this Agreement categorized according to accounting
classifications, which shall be specified by Owner within ten (10) Business Days
after execution of this Agreement, but which shall be subject to revision upon
the reasonable request of Owner.
     10.11 Audit Rights.
     10.11.1 Contractor shall permit Owner and Owner Nominees to have access to
its offices and work locations to examine, reproduce and retain copies
(including electronic recordings) of such documentation and data pertaining to
this Agreement and the Work to the extent necessary for Owner to audit: (a) any
invoice submitted under this Agreement; (b) Labor Costs (including the
derivation of Non-Craft Labor Rates and the Non-Craft Labor Multiplier) to
determine whether they have been calculated in accordance with the terms of this
Agreement; (c) Reimbursable Costs; (d) Contractor’s and Subcontractors’ business
practices; (e) that the Work performed is free of any imperfection, defect and
deficiency and that any imperfection, defect or deficiency has been remedied;
(f) Contractor’s implementation of, and compliance with, the Safety Standards
and the quality assurance program required pursuant to Section 7.11;
(g) Contractor’s compliance with the terms of this Agreement; and (h) any other
matters reasonably necessary for Owner to comply with Applicable Laws, including
the Sarbanes-Oxley Act. Owner shall hold in confidence and refrain from
disclosing any documentation and data (other than Unrestricted Information) made
available to it pursuant to this Section 10.11; provided, however, that Owner
may disclose such documentation and data to Lenders.
     10.11.2 Contractor shall include in each of its Subcontracts a provision
granting Owner the same audit rights vis-à-vis Subcontractors that Owner has
with respect to Contractor pursuant to this Agreement.
     10.12 Waiver under Payment Act. To the maximum extent permitted by
Applicable Laws, Contractor hereby waives all disclosures, notices, rights,
claims, privileges, interests, penalties and benefits under the Payment Act, and
Owner and Contractor agree that none of the
*** Confidential Treatment Requested

38

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
terms and provisions of the Payment Act shall apply to this Agreement or the
Work, payment or any Claims related thereto.
ARTICLE 11
PROJECT BUDGET; PROJECT SCHEDULE
     11.1 Project Budget.
     11.1.1 Contractor shall, with Owner’s participation and assistance, prepare
and submit to Owner no later than the Target Cost Delivery Date, a proposed
budget of all costs to be incurred in connection with the implementation of the
Project. Such proposed budget shall: (a) set forth in reasonable detail
estimated monthly itemizations of all costs and expenditures required to be
incurred in connection with the Project; and (b) be in form and substance
reasonably acceptable to Owner. Owner shall review such proposed budget and
Contractor shall incorporate any written comments or changes directed by Owner
until the proposed budget is approved in writing by Owner (such budget, once
approved, the “Project Budget”)
     11.1.2 In the event any anticipated expenses deviate materially from the
estimates set forth for such expenses in the Project Budget, Contractor shall
promptly notify Owner and propose revisions to the Project Budget. Owner shall
reasonably consider proposed amendments to the Project Budget to the extent
necessary to perform the Work in accordance with Good Utility Practices;
provided, however, that the Project Budget shall not be amended to include any
Contractor costs described in Section 10.5.3, and Owner shall not be obligated
to reimburse Contractor for any such costs.
     11.1.3 Subject to the terms and conditions set forth in this Agreement,
Contractor shall not be authorized or required to incur any Reimbursable Costs
in excess of those provided for in the Project Budget. In the event:
(a) Contractor proposes a revision to the Project Budget in accordance with
Section 11.1.2; and (b) the Parties are unable to agree on whether, or how, to
amend the Project Budget based on such proposal, the Parties shall immediately
refer such matter to the Steering Committee for resolution. In the event the
Steering Committee is unable to resolve such dispute and Contractor is unable to
proceed with any portion of the Work as a result of such dispute, the affected
portions of the Work shall be deemed to have been suspended in accordance with
Section 20.1.
     11.1.4 Contractor shall notify Owner in advance of incurring any material
costs not included in the Project Budget, except to the extent such costs are
reasonably necessary to respond to, or avoid, an Emergency.
     11.2 Project Schedule.
     11.2.1 No later than the Target Cost Delivery Date, Contractor shall
provide Owner with a proposed supplement to the Initial Project Schedule, which
proposed supplement shall: (a) be consistent with the Initial Project Schedule;
and (b) be in form, substance and detail acceptable to Owner. Owner shall review
such proposed supplement
*** Confidential Treatment Requested

39

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
and provide comments thereon, if any, to Contractor no later than ten
(10) Business Days after Owner’s receipt thereof. Contractor shall incorporate
any written comments offered by Owner. Contractor shall provide a revised
supplement to Owner within ten (10) days of receipt of Owner’s comments and such
process shall be repeated until the supplement to the Initial Project Schedule
is approved in writing by Owner (such schedule, as approved, the “Project
Schedule”).
     11.2.2 Contractor shall perform the Work in accordance with, and subject to
the timing sequence set forth in, the Project Schedule.
     11.2.3 Contractor shall provide prompt notice to Owner of any conditions
that exist or that Contractor foresees that are reasonably likely to prevent
Contractor from performing any portion of the Work in accordance with the
Project Schedule. Contractor shall prepare proposed amendments to the Project
Schedule as reasonably necessary based on changed circumstances or conditions.
Owner shall reasonably consider proposed amendments to the Project Schedule and
shall not withhold its approval of any proposed amendment to the Project
Schedule to the extent reasonably necessary based on such changed circumstances
or conditions.
     11.2.4 The Initial Project Schedule and all subsequent Project Schedules
shall be prepared by Contractor using Primavera software and provided to Owner
in hard copy and electronic formats.
     11.3 Adjustments Based on Suspension of Work. In the event Owner suspends
the Work pursuant to Section 20.1 other than for cause, the Project Budget and
the Project Schedule (including, if appropriate, the [***] Date) shall be
amended, as appropriate based on Good Utility Practices, due to such suspension,
including any necessary remobilization.
     11.4 Adjustments Based on Force Majeure. Upon an event of Force Majeure,
the Project Budget and the Project Schedule shall be amended to the extent
necessary to address the result(s) of such Force Majeure, based on Good Utility
Practices; provided, however, that adjustments to the Project Schedule shall not
necessarily be equal to the number of days of the suspension. The [***] Date
shall not be adjusted due to Force Majeure.
ARTICLE 12
STEERING COMMITTEE
     12.1 Formation. Within fifteen (15) days after execution of this Agreement,
each Party shall designate one or more representatives (one of whom must be the
president of such Party) to serve on a committee (the “Steering Committee”) to
oversee execution of the Work and performance under this Agreement.
     12.2 Availability. Each Party shall make its Steering Committee members
available to the other Party’s Steering Committee members at any reasonable time
to address matters relating to the Work or this Agreement or to direct
communications to its corporate management.
*** Confidential Treatment Requested

40

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     12.3 Informed Status. Contractor shall keep the members of the Steering
Committee reasonably apprised of the progress of the Work and of significant or
anticipated problems related to the Work.
ARTICLE 13
COMPLETION
     13.1 Substantial Completion. Contractor shall notify Owner in writing when
Contractor believes it has achieved Substantial Completion. No later than thirty
(30) days after Owner’s receipt of such notice, Owner shall deliver to
Contractor either: (a) a Notice of Substantial Completion; or (b) written notice
that Contractor has not achieved Substantial Completion, which notice shall set
forth in reasonable detail the basis of Owner’s determination. In the event that
Owner notifies Contractor that Substantial Completion has not been achieved,
Contractor shall diligently continue performing the Work until Substantial
Completion is achieved.
     13.2 Punch List.
     13.2.1 The notice delivered by Contractor pursuant to Section 13.1 shall
include a list of all minor elements of the Work that remain to be completed but
that do not affect operation of the Facilities (which elements may not include
items that may affect the safety, performance or reliability of the Facilities)
and a proposed schedule for the completion of such remaining Work. After Owner’s
review of such list, the Parties shall confer in good faith and attempt to agree
upon a detailed list of all elements of the Work that remain to be completed and
the schedule for completing such Work (once agreed to or issued by Owner, the
“Punch List”). If the Parties are unable to agree to a Punch List within sixty
(60) days after the Substantial Completion Date, Owner shall issue the Punch
List to Contractor.
     13.2.2 Contractor shall diligently proceed to complete all Work on the
Punch List in accordance with the proposed schedule set forth therein. Owner
shall provide Contractor with reasonable access to the Facilities and Project
Real Property to perform Work specified on the Punch List, but shall be entitled
to schedule such Work in a manner so as to minimize any adverse impact on the
operation of the Facilities. If Contractor does not complete any Work on the
Punch List within the time limits set forth in the Punch List, Owner may
complete (or cause the completion of) such Work at Contractor’s sole cost and
expense. Any costs incurred by Owner in connection with the performance of Work
on the Punch List may, at Owner’s option: (a) if Contractor has posted a
Retention Letter of Credit, be drawn from the Retention Letter of Credit; (b) if
Contractor has not posted a Retention Letter of Credit, be deducted from any
amounts due to Contractor under this Agreement; or (c) if the Retention Letter
of Credit or funds withheld as Retention, as applicable, are inadequate to cover
such cost and expense, be paid or reimbursed by Contractor within fifteen
(15) days following Owner’s demand therefor.
     13.3 Final Completion. Contractor shall notify Owner in writing when
Contractor believes it has achieved Final Completion. No later than fourteen
(14) days after Owner’s receipt of such notice, Owner shall deliver to
Contractor either: (a) a Notice of Final Completion; or (b) written notice that
Contractor has not achieved Final Completion, which notice shall set forth in
*** Confidential Treatment Requested

41

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
reasonable detail the basis of Owner’s determination. In the event that Owner
notifies Contractor that Final Completion has not been achieved, Contractor
shall diligently continue performing the Work until Final Completion is
achieved.
     13.4 [***].
     13.4.1 In the event Contractor achieves Substantial Completion by the [***]
Date, Owner shall pay Contractor [***] which shall be equal to the sum of:
(a) the [***]; plus (b) the [***]. Such [***] shall be due and payable [***]
after Final Completion or, if any [***] is owed as part of the [***], [***] days
after receipt of detailed accounting of all Reimbursable Costs.
     13.4.2 If: (a) Owner applies to the FERC for authority pursuant to 16
U.S.C. § 824p to construct any portion of the Facilities (such Facilities, the
“Delayed Facilities”) and Contractor achieves Substantial Completion with
respect to all Facilities other than the Delayed Facilities by the [***] Date,
then the [***] Date shall be extended with respect to the Delayed Facilities to
the extent reasonably necessary to account for any delay occasioned by the FERC
approval process; or (b) the Facilities are capable of being energized on [***],
Contractor has made a timely request to PJM to permit an outage to allow the
Facilities to be energized and PJM is unable or unwilling to permit the
Facilities to be energized on or before [***], the [***] Date shall be extended
until such time as PJM permits the Facilities to be energized. The [***] Date
shall not be extended for any reason other than as provided in Section 11.3 and
this Section 13.4.2.
     13.4.3 If: (a) the [***] Date is not extended pursuant to Section 13.4.2;
(b) PJM takes formal and final action to extend the deadline for completion of
the Project beyond the [***] Date (such extended deadline, the “PJM Extended
Deadline”); and (c) Contractor achieves Substantial Completion after the [***]
Date but no later than the PJM Extended Deadline, Owner shall pay Contractor the
PJM Extended Deadline [***], if applicable; provided, however, that in no event
shall Owner be obligated to pay Contractor any PJM Extended Deadline [***] if
the Substantial Completion Date is [***] the [***] Date.
ARTICLE 14
SECURITY FOR PERFORMANCE
     14.1 Performance Bond. Upon Owner’s request, Contractor shall cause each
Subcontractor performing Construction Services expected, in the reasonable
judgment of Owner, to cost more than [***] to post a performance bond with
respect to such Work. In the event Contractor directly provides craft labor
Construction Services expected, in the reasonable judgment of Owner, to cost
[***] Contractor shall post a performance bond with respect to such Work. Any
performance bond required to be posted pursuant to this Section 14.1 shall:
(a) be in favor of Owner and Lenders; (b) be in an amount equal to the
anticipated cost of the Work; and (c) be issued by an issuer and otherwise be in
form and substance reasonably acceptable to Owner.
*** Confidential Treatment Requested

42

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
ARTICLE 15
CONTRACTOR WARRANTIES
     15.1 Scope of Warranties. Contractor warrants to Owner that:

  (a)   the Facilities shall conform to the Authorized Design;     (b)   the
Authorized Design shall be free from defects and shall be in accordance with
Good Utility Practices;     (c)   the Facilities and the Work shall comply with
Applicable Laws in effect on the Substantial Completion Date;     (d)   the Work
shall be performed in a competent, diligent, workmanlike manner in accordance
with Good Utility Practices and Applicable Laws;     (e)   all Work shall be
free from defects in workmanship and materials;     (f)   when energized, the
Facilities shall be capable of safe and reliable operation;     (g)   all
Contractor Procured Materials shall be new, unused and of good quality; and    
(h)   title to all materials and equipment comprising the Facilities and the
Work (other than Owner Procured Materials) shall pass to Owner free and clear of
all liens and encumbrances in accordance with Section 22.2.

     15.2 Duration of Warranties. Contractor’s warranties set forth in
Section 15.1 shall apply to all Work until twelve (12) months after the
Substantial Completion Date; provided, however, that such warranties shall
continue to apply to any repairs or replacements undertaken pursuant to
Contractor’s warranties until twelve (12) months after such repair or
replacement or twenty-four (24) months from the Substantial Completion Date,
whichever occurs first (such periods, in the aggregate, being referred to herein
as the “Warranty Period”). The expiration of the Warranty Period shall not
affect any Subcontractor warranties which have been assigned to Owner.
     15.3 Warranty Obligations.
     15.3.1 Promptly upon receipt of written notice of any failure or defect
covered by any of the warranties set forth in Section 15.1, Contractor shall, at
its own cost and expense, promptly commence appropriate action and diligently
continue repair, replacement or re-performance of the Work as applicable;
provided, however, that in the event of a failure or defect which results in a
shutdown of all or any portion of the Facilities, Contractor shall immediately
commence and shall exercise best efforts (including authorization of overtime
work) to complete any repair, replacement or re-performance necessary for the
Facilities to resume normal operation. Contractor shall
*** Confidential Treatment Requested

43

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
provide at the Work Site, at no additional cost to Owner, technical advisory and
support service personnel reasonably necessary during performance of any
warranty repairs, replacements or re-performance promptly after receipt of
notice of any warranty Claims. Contractor shall perform all warranty obligations
in cooperation with Owner and in a manner that reasonably minimizes the duration
of any Facilities being taken out of service.
     15.3.2 If, after notification of any warranty Claim pursuant to the
warranties set forth in Section 15.1, Contractor fails to commence, continue or
complete any repairs, replacements or re-performance in the manner required
hereunder, Owner may perform or cause one or more Replacement Contractors to
perform such Work, and Contractor shall be liable for, and shall promptly upon
receipt of an invoice reimburse Owner for, all costs, charges and expenses
incurred by Owner in connection with such Work. Performance of any Work by Owner
or a Replacement Contractor shall not relieve Contractor of any obligation under
this Agreement.
     15.4 Exclusions. Notwithstanding anything to the contrary in this
Agreement, Contractor’s warranties do not extend or apply to: (a) Owner Procured
Materials (except with respect to Work performed on such Owner Procured
Materials); or (b) damage, deterioration or failure resulting from (i) normal
wear and tear, (ii) failure of Owner to store, operate or maintain the warranted
item in accordance with written operation and maintenance manuals provided by
Contractor to Owner, or (iii) modifications made by Owner. The warranties set
forth in this Agreement are exclusive and in lieu of all other warranties,
whether written, oral, implied or statutory. NO IMPLIED STATUTORY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY. Contractor
does not warrant under this Agreement any product, material or services that
Owner has furnished or purchased (including Owner Procured Materials). Any oral
or written representation, warranty, course of dealing or trade usage not
contained herein will not be binding on any Party.
ARTICLE 16
CHANGE ORDERS
     16.1 Change in Scope. Owner shall have the right to revise the scope of
Work pursuant to a Change Order. No Change Order shall be required other than:
(a) to modify the scope of the Work or the scope of Services; or (b) as
expressly provided for in this Agreement to adjust the Target Cost. A Change
Order revising the scope of Work shall include an equitable adjustment of the
Target Cost and Project Schedule. A Change Order revising the Management Fee
shall include an amended Management Fee Payment Schedule to account for such
revisions to the Management Fee.
     16.2 Equitable Adjustments to Schedule. To the extent any Change Order has
a material affect on Contractor’s ability to achieve the [***] Date, such Change
Order shall include an equitable adjustment to the [***] Date; provided however,
that such adjustment shall not necessarily be equal to the number of days
required to perform the changed Work. Notwithstanding anything to the contrary
set forth herein, Contractor shall not be entitled to a Change Order to address
delays or cost increases resulting from Contractor’s failure to perform in
accordance with the terms of this Agreement.
*** Confidential Treatment Requested

44

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     16.3 Preparation of Change Orders. Upon Owner’s request, Contractor shall
prepare proposed Change Orders. Any such proposed Change Order shall become
effective only if and when approved in writing by Owner.
ARTICLE 17
FORCE MAJEURE
     17.1 Excused Performance. A Party shall not be in default of its
obligations hereunder to the extent its delay in performance results from an
event of Force Majeure, provided that the Party affected by the Force Majeure
uses all commercially reasonable efforts to: (a) proceed with its obligations
under this Agreement to the extent that it is not prevented from doing so by the
event of Force Majeure; (b) remove or relieve any event of Force Majeure or its
consequences and minimize the effects of the delay caused thereby; and
(c) resume performance as soon as practicable after the event of Force Majeure.
The occurrence of an event of Force Majeure shall not relieve the affected Party
of its obligations to mitigate the effects thereof.
     17.2 Notification. A Party affected by an event of Force Majeure shall
provide written notice thereof to the other Party promptly upon the occurrence
of the Force Majeure event, and in no event later than ten (10) days after the
occurrence thereof. Such notice shall describe in reasonable detail the Force
Majeure event, the damages suffered, the activities which are being and will be
undertaken to mitigate the effects of such event, and the length of delay
anticipated to result from such event. In addition, the affected Party shall
timely provide the other Party with written supplemental notices periodically
during the period that the event of Force Majeure continues detailing any
changes, development, progress or other relevant information of which the
affected Party is aware. When the affected Party is able to resume performance
of its obligations under this Agreement, it shall give the other Party written
notice to that effect.
ARTICLE 18
INDEMNIFICATION
     18.1 General Indemnity.
     18.1.1 To the fullest extent permitted by Applicable Laws, Contractor shall
indemnify, save harmless and defend Owner, Owner Nominees and their respective
employees, agents, directors and officers (collectively, the “Owner
Indemnitees”) from all Claims, including reasonable attorneys’ fees, growing out
of personal injury, death or damage to property (including Owner’s property, but
excluding any of Owner’s property not covered by Contractor’s Builders Risk
Insurance) arising out of, or in any way connected with, Contractor’s, any
Subcontractor’s or any of their respective employees’, agents’ and
representatives’ performance or nonperformance hereunder (negligent or
otherwise) suffered or claimed to have been suffered by any Person (including
Owner Indemnitees and anyone directly or indirectly employed by Contractor or
any Subcontractor), except to the extent caused by the negligence of any Owner
Indemnitee. Contractor’s obligations to each Owner Indemnitee for Claims related
to or brought by anyone directly or indirectly employed by Owner or any Direct
Suppliers shall not be limited in any way by any provision of any workers’
compensation act, disability benefits act or other employee benefit act, and
Contractor hereby waives immunity under such acts
*** Confidential Treatment Requested

45

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
to the extent such acts would bar recovery under, or full enforcement of,
Contractor’s obligations hereunder.
     18.1.2 To the fullest extent permitted by Applicable Laws, Owner shall
indemnify, save harmless and defend Contractor and its employees, agents,
directors, officers and representatives (collectively, the “Contractor
Indemnitees”) from all Claims, including reasonable attorneys’ fees, growing out
of personal injury, death or damage to Contractor’s property to the extent
caused by Owner, its subcontractors at any level or any of their respective
employees or agents, except to the extent such injury, death or damage is caused
by Owner, its subcontractors at any level or their respective employees or
agents acting at the direction of Contractor or any of its Subcontractors.
     18.2 Environmental Indemnities.
     18.2.1 To the fullest extent permitted by Applicable Laws, Contractor shall
indemnify, save harmless and defend Owner Indemnitees from all Claims, including
reasonable attorneys’ fees, to the extent arising from: (a) any release or
disposal of (or arranging for the disposal of) Hazardous Substances by
Contractor or any Subcontractor; (b) the existence, use, release, transportation
or disposal of any Hazardous Substance that has been brought onto the Work Site
by Contractor, any Contractor Personnel, any Subcontractor, any employees of any
such Subcontractor or any Person acting on behalf of, or under the direction or
supervision of any such Person; (c) Contractor’s failure to timely notify Owner
of the presence of any Hazardous Substance on the Work Site; (d) Contractor’s
failure to remove or properly dispose of any Hazardous Substance brought onto
the Work Site, or generated, by Contractor, any Contractor Personnel, any
Subcontractor, any employees of any such Subcontractor or any Person acting on
behalf of, or under the direction or supervision of any such Person; or (e) the
failure of Contractor, any Contractor Personnel, any Subcontractor, any
employees of any such Subcontractor or any Person acting on behalf of, or under
the direction or supervision of any such Person to comply with any Environmental
Law.
     18.2.2 To the fullest extent permitted by Applicable Laws, Owner shall
indemnify, save harmless and defend Contractor Indemnitees from all Claims,
including reasonable attorneys’ fees, to the extent arising from the existence
of Hazardous Substances at, on or under the Work Site prior to Contractor’s
commencement of Work on such Work Site except to the extent caused by the
negligence of any Contractor Indemnitee.
     18.3 Intellectual Property Indemnity. To the fullest extent permitted by
Applicable Laws, Contractor shall indemnify, save harmless and defend Owner
Indemnitees from any Claims, including reasonable attorneys’ fees, to the extent
arising from an infringement of patent, trade secret, copyright or other
intellectual property rights provided by Contractor in connection with the Work;
provided, however, that Contractor shall not be liable for any such Claim to the
extent arising out of: (a) the use of such intellectual property rights in
combination with devices or products not supplied by Contractor or any of its
Subcontractors; or (b) the use of such intellectual property rights in an
application or environment other than as intended by Contractor. Should any such
Claim materially impair Contractor’s performance of the Work or continued
operations of the
*** Confidential Treatment Requested

46

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Facilities, Contractor shall, at its own cost and expense, timely procure the
right to continue its performance of the Work and/or the operation of the
Facilities. If any Claim described in this Section 18.3 is held to constitute an
infringement of any intellectual property rights and use of any equipment or
process included in the Work is enjoined, Contractor shall, at its own cost and
expense: (a) procure for Owner the right to continue to use the infringing
equipment or process; (b) replace such equipment or process with non-infringing
equipment or process of equal utility and efficiency; or (c) modify such
equipment or process so that it becomes non-infringing without affecting its
utility or efficiency; provided, however, that Contractor may only elect the
action described in clause (b) or (c) if Contractor and Owner agree upon a
schedule for such action which will allow Contractor to complete such action
within a reasonable period of time without unreasonably interfering with the
operation of the Facilities.
     18.4 Indemnity Against Prohibited Liens. To the fullest extent permitted by
Applicable Laws, Contractor shall indemnify, save harmless and defend Owner
Indemnitees from any and all Prohibited Liens.
     18.5 Defense of Indemnified Claims.
     18.5.1 Within a reasonable time after receipt by any Indemnitee of any
Claim as to which the indemnity provided for in Section 18.1, 18.2, 18.3 or 18.4
may apply, such Indemnitee shall notify the indemnifying Party in writing of
such fact; provided, however, that delay in notifying the indemnifying Party
shall not relieve such Party of its indemnification obligations except to the
extent that it is materially prejudiced by such delay.
     18.5.2 The indemnifying Party shall diligently, competently and in good
faith control and conduct the defense, with counsel reasonably satisfactory to
the Indemnitee, of any Claim as to which the indemnity provided for in
Section 18.1, 18.2, 18.3 or 18.4 applies; provided, however, that the
indemnifying Party may not settle or compromise any such Claim without the
Indemnitee’s consent unless the terms of such settlement or compromise
unconditionally release the Indemnitee(s) from any and all liability with
respect thereto and do not impose any obligations on any Indemnitee.
     18.5.3 An Indemnitee shall have the right, at its option (but not the
obligation), to be represented by advisory counsel of its own selection and at
its own expense and to monitor the progress and handling of an indemnified
Claim. An Indemnitee shall also have the right, at its option (but not the
obligation), to assume the defense of any such Claim with counsel of its own
choosing at its sole cost and expense; provided, however, that an Indemnitee
shall have the right to assume the defense of, and to settle or compromise, any
such indemnified Claim at the indemnifying Party’s expense if: (a) the
indemnifying Party fails to acknowledge, in writing, its responsibility to
assume the defense of such Claim; (b) the indemnifying Party fails to
diligently, competently and in good faith control and conduct the defense of
such Claim with counsel reasonably satisfactory to the Indemnitee; (c) there is
an apparent conflict of interest between the indemnifying Party and the
Indemnitee with respect to such Claim; or (d) such Indemnitee shall have
reasonably concluded that there are legal defenses available to it which are
different from, additional to or inconsistent with those available to the
indemnifying Party.
*** Confidential Treatment Requested

47

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     18.5.4 The indemnifying Party’s obligations to indemnify, defend and hold
each Indemnitee harmless shall not be reduced or limited by reason of any
limitation on the amount or type of damages, compensation or benefits payable by
or for the indemnifying Party or any of its subcontractors under workers’
compensation acts, disability benefit acts or other employee benefit acts.
ARTICLE 19
TAXES AND DUTIES
     19.1 Cooperation. Contractor shall develop procedures to, and shall,
minimize the taxes, fees and assessments imposed on: (a) Contactor,
Subcontractors and any employees of either to the extent Owner is responsible
for payment thereof as a Reimbursable Cost; and (b) Owner, including with
respect to the sale, manufacture, purchase, import or export of Services or
Project Materials under this Agreement. Contractor shall advise Owner on a
timely basis of any actions or filings required to be made or taken by Owner to
minimize taxes, fees or assessments that would otherwise be imposed on Owner in
connection with the Project or the performance of the Work, including providing
exemption certificates and other documentation that may need to be completed or
filed.
     19.2 Payment Obligations. Contractor shall pay or cause to be paid when
due, all taxes, fees and assessments imposed on Contractor and Subcontractor in
connection with the performance of the Work, including: (a) sales, gross
receipts, business and occupation, excise, employment, consumption, use, income,
profit, franchise and personal property taxes; (b) taxes and contributions for
unemployment compensation insurance, old age benefits, welfare funds, pensions
and annuities, and disability insurance; (c) registration fees; and (d) license
fees, taxes and duties on services, construction tools, equipment and materials
(other than Owner Procured Materials) imported or exported by Contractor or any
Subcontractor. Contractor shall promptly notify Owner of all notices and other
communications of which it is aware pertaining to: (i) nonpayment or payment
under protest of; (ii) any claim for immunity or exemption from; or (iii) any
claim for refund of, or credit against, any taxes, fees, assessments and duties
imposed in connection with the Work.
     19.3 Assignment of Rights. Contractor shall assign and transfer to Owner
all of its right, title and interest in and to any and all refunds of sales and
use taxes received as a result of a claim for or entitlement to refund for
materials, supplies or equipment purchased in connection with this Agreement.
ARTICLE 20
SUSPENSION; TERMINATION
     20.1 Suspension of Work.
     20.1.1 Owner may, for any reason, suspend all or any part of the Work by
giving notice to Contractor specifying the part of the Work to be suspended and
the effective date of such suspension. Upon receipt of such notice, Contractor
shall suspend the carrying out of the Work or any part thereof for such time or
times and in such manner
*** Confidential Treatment Requested

48

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
as Owner may require but shall continue to perform any part of the Work not
suspended, if applicable.
     20.1.2 During any suspension of any portion of the Work, Contractor shall
properly protect and secure the Work (including care, custody and control of
Project Materials) in accordance with Good Utility Practices and otherwise as
directed by Owner. Unless otherwise directed by Owner, Contractor shall, during
any such suspension, maintain staff, labor and equipment on or near the Work
Site ready to proceed with the Work upon receipt of Owner’s further
instructions.
     20.1.3 Owner may at any time following a suspension ordered under
Section 18.1.1 give Contractor notice to proceed with the Work previously
suspended and upon receipt of any such notice to proceed, Contractor shall
proceed with the Work previously suspended.
     20.1.4 During any suspension of Work, Owner shall continue to pay
Reimbursable Costs in respect of staff, labor and equipment being maintained on
or near the Work Site and any non-suspended Work in accordance with the terms of
this Agreement.
     20.2 Termination for Convenience.
     20.2.1 Owner may terminate this Agreement at any time, for any reason or no
reason, by giving notice of termination to Contractor specifying the effective
date of such termination.
     20.2.2 Owner shall have the option of having materials and equipment
delivered to the Work Site or, at Owner’s expense, to such other place as Owner
shall direct.
     20.2.3 Upon termination for convenience of this Agreement by Owner pursuant
to Section 20.2.1, Owner shall, as its exclusive liability to Contractor, pay
Contractor: (a) all Reimbursable Costs incurred through the date of termination
plus any additional Reimbursable Costs authorized by Owner to be incurred by
Contractor to perform its obligations under Section 21.6.1; (b) the share of any
unpaid Management Fees fairly allocated to the portion of Work performed by
Contractor; (c) reasonable demobilization costs incurred by Contractor and
Subcontractors; and (d) expenses incurred to terminate Subcontracts. Any amounts
owed by Owner pursuant to this Section 20.2.3 shall be due to Contractor thirty
(30) days after the later of: (i) Owner’s receipt of a substantiated, itemized
invoice; or (ii) satisfaction of Contractor’s obligations under Section 21.6.1.
ARTICLE 21
DEFAULT; REMEDIES
     21.1 Default by Contractor. Each of the following circumstances or events
shall constitute a default by Contractor (each, a “Contractor Default”):
*** Confidential Treatment Requested

49

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

  (a)   a proceeding is instituted against Contractor seeking to adjudicate
Contractor as bankrupt or insolvent and such proceeding is not dismissed within
sixty (60) days of filing, Contractor makes a general assignment for the benefit
of its creditors, a receiver is appointed on account of the insolvency of
Contractor, Contractor files a petition seeking to take advantage of any other
Applicable Laws relating to bankruptcy, insolvency, reorganization, winding up
or composition or readjustment of debts, or Contractor is unable to pay its
debts when due or as they mature;     (b)   any representation or warranty of
Contractor made pursuant to this Agreement shall have been incorrect as of the
date made and shall remain incorrect for a period of thirty (30) days after
notice thereof;     (c)   Contractor abandons the Work and such abandonment is
not cured within seven (7) Business Days after notice thereof;     (d)  
Contractor fails to make prompt payment of any amount due to any Subcontractor
or otherwise repudiates or is in breach with respect to any of its obligations
to any Subcontractor which failure, repudiation or breach (i) could have a
material adverse effect on the ability of Contractor to perform its obligations
under this Agreement and (ii) continues for a period of fifteen (15) days after
notice thereof from Owner;     (e)   Contractor fails to correct any defective
Work in accordance with Article 15;     (f)   Contractor fails to perform any
other material obligation under this Agreement and such failure continues for
thirty (30) days after notice thereof by Owner or, if such failure cannot be
cured in such thirty (30) day period with the exercise of all commercially
reasonable efforts, such longer period as shall be reasonably necessary to cure
such failure, not to exceed ninety (90) days, so long as Contractor diligently
continues without interruption all commercially reasonable efforts to cure such
failure;     (g)   Contractor attempts to make an assignment of this Agreement
in violation of the terms hereof; and     (h)   Contractor fails to achieve any
Material Milestone for a period of one hundred eighty (180) days after the date
designated in the Project Schedule for the achievement of such Material
Milestone.

     21.2 Remedies for Contractor Default. If a Contractor Default occurs, Owner
may exercise any remedy available at law or in equity, including termination of
this Agreement; provided, however, that to the extent this Agreement explicitly
specifies that a remedy is exclusive, Owner shall be limited to the exercise of
that remedy. Without limiting other remedies to which Owner may be entitled
hereunder, Owner may, whether or not this Agreement is terminated, retain a
Replacement Contractor to perform the Work by whatever method that Owner
*** Confidential Treatment Requested

50

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
and such Replacement Contractor may deem expedient. Owner may make such
expenditures as in Owner’s sole judgment will best accomplish the timely
completion of the Work; provided, however, that Owner shall not be required or
expected to terminate, repudiate or renegotiate any agreement entered into among
Contractor and any Subcontractor.
     21.3 Default by Owner. Each of the following circumstances or events shall
constitute a default by Owner (“Owner Default”):

  (a)   any representation or warranty of Owner made pursuant to this Agreement
shall have been incorrect as of the date made and shall remain incorrect for a
period of thirty (30) days after notice thereof;     (b)   Owner fails to pay
any undisputed amount owed to Contractor pursuant to this Agreement for a period
of forty-five (45) days after the date such payment is due;     (c)   Owner
fails to perform any material non-payment obligation under this Agreement and
such failure continues for thirty (30) days after notice thereof by Contractor
or, if such failure cannot be cured in such thirty (30) day period with the
exercise of all commercially reasonable efforts, such longer period as shall be
reasonably necessary to cure such failure so long as Owner diligently continues
without interruption all commercially reasonable efforts to cure such failure;
and     (d)   a proceeding is instituted against Owner seeking to adjudicate
Owner as bankrupt or insolvent and such proceeding is not dismissed within sixty
(60) days of filing, Owner makes a general assignment for the benefit of its
creditors, a receiver is appointed on account of the insolvency of Owner, Owner
files a petition seeking to take advantage of any other Applicable Laws relating
to bankruptcy, insolvency, reorganization, winding up or composition or
readjustment of debts, or Owner is unable to pay its debts when due or as they
mature.

     21.4 Remedies for Owner Default. If an Owner Default occurs, Contractor may
exercise any remedy available pursuant to this Agreement or at law or in equity,
including termination of this Agreement; provided, however, that to the extent
this Agreement explicitly specifies that a remedy is exclusive, Contractor shall
be limited to the exercise of that remedy; and provided further, that prior to
terminating this Agreement based on an Owner Default, Contractor shall deliver
written notice of intent to terminate to Lenders and afford Lenders cure rights
as may be provided in the consent to assignment to be executed by Contractor and
Lenders.
     21.5 Right to Suspend Performance. If Owner fails to pay any undisputed
amount owed to Contractor pursuant to this Agreement for a period of ten
(10) days after notice of such non-payment from Contractor, Contractor shall
have the right to suspend its performance of the Work until such undisputed
amount is paid.
*** Confidential Treatment Requested

51

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     21.6 Effect of Termination.
     21.6.1 Upon termination of this Agreement for any reason, including a
termination for convenience pursuant to Section 20.2.1, Contractor shall:

  (a)   execute no further Subcontracts and place no further orders with any
Subcontractor(s);     (b)   exercise all commercially reasonable efforts to
procure cancellations of all Subcontracts on terms satisfactory to Owner, except
to the extent Owner requests that any Subcontract(s) be assigned to Owner, an
Owner Nominee or the Replacement Contractor, in which case Contractor shall
assign such Subcontract(s) to Owner, such Owner Nominee or such Replacement
Contractor as may be directed by Owner;     (c)   execute only that portion of
the Work as may be necessary to preserve and protect Work already in progress
and to protect equipment and materials at the Work Site or in transit thereto;  
  (d)   deliver or cause to be delivered all uninstalled equipment and materials
at the Work Site or such other locations as shall be directed by Owner;     (e)
  if requested by Owner, provide Owner, an Owner Nominee and/or any Replacement
Contractor with the right to continue to use any and all intellectual property
reasonably necessary for the completion of the Work which Contractor has the
right to use (subject only to the same restrictions and costs as may apply to
Contractor);     (f)   assist Owner in preparing an inventory of all equipment
and materials in use or in storage;     (g)   remove from the Work Site all
rubbish and other materials as Owner may request; and     (h)   deliver to Owner
all design and other information related to the Project as may be requested by
Owner.

     21.6.2 In the event the Agreement is terminated, Owner shall pay Contractor
Reimbursable Costs authorized by Owner to be incurred by Contractor to perform
its obligations under Section 21.6.1; provided, however, that Owner shall not be
obligated to compensate Contractor in respect of Work not performed.
     21.6.3 In the event of a termination by Owner based on a Contractor
Default, any payments owed to Contractor shall be reduced by: (a) amounts
recoverable by Contractor pursuant to Subcontracts, insurance policies, rebates,
tax refunds and other recoveries in connection with the performance of the Work;
and (b) damages suffered by Owner as a result of such Contractor Default
including amounts owed by Contractor
*** Confidential Treatment Requested

52

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
pursuant to its indemnity and warranty obligations hereunder. Owner’s rights
under this Section 21.6.3 are in addition to (but not duplicative of) any other
rights and remedies available to Owner.
ARTICLE 22
TITLE AND RISK OF LOSS
     22.1 Owner Procured Materials. Title to Owner Procured Materials and parts
of the Work supplied by Owner shall remain with Owner at all times.
     22.2 Contractor Procured Materials. Title to Contractor Procured Materials
and Work performed by Contractor shall pass to Owner upon the earliest of:
(a) the occurrence of any event by which, under any Applicable Laws, title
passes from any Person providing such Contractor Procured Materials or Work;
(b) the date of payment therefor by Owner (or the date of exercise of Owner’s
right of offset with respect to payment therefor), notwithstanding any retention
by Owner in accordance with the terms of this Agreement; (c) with respect to
Contractor Procured Materials, the date Contractor Procured Materials are
delivered to the Work Site or incorporated into the Work or the Facilities;
(d) the Substantial Completion Date; or (e) the date this Agreement is
terminated in accordance with its terms.
     22.3 Care, Custody and Control. Notwithstanding the passage of title from
Contractor to Owner or the retention of title by Owner, Contractor shall have
care, custody and control of all equipment, materials and supplies utilized in
the Project, including Owner Procured Materials after delivery thereof to Owner,
until the Substantial Completion Date. Notwithstanding the foregoing, Owner
shall have the right to request in writing that Contractor convey, and upon such
written request Contractor shall convey, care, custody and/or control of any or
all such equipment, materials or supplies to Owner or any Owner Nominee prior to
the Substantial Completion Date.
     22.4 Risk of Loss. With respect to the Facilities and the Work:
(a) Contractor shall bear the risk of loss on all equipment, materials, supplies
and Work that are covered against, or are required to be covered against,
property or casualty loss by Contractor’s Builders Risk Insurance, up to the
applicable policy limits in such Builders Risk Insurance; and (b) Owner shall
bear all other risk of loss with respect to such equipment, materials, supplies
and Work.
ARTICLE 23
REPRESENTATIONS AND WARRANTIES
     23.1 Contractor’s Representations and Warranties. Contractor hereby
represents and warrants to Owner as of the date hereof that:

  (a)   no Permit or other action by, and no notice to, or filing with, any
Governmental Authority which has not been obtained, taken or made is required to
be obtained, taken or made by or on behalf of Contractor in connection with the
execution, delivery and performance of this Agreement;

*** Confidential Treatment Requested

53

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

  (b)   it is a corporation, duly organized, validly existing and in good
standing under the laws of the state of its organization;     (c)   it has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement, which action has not been superseded or modified;     (d)   this
Agreement constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, except to the extent such
enforceability may be affected by: (i) insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors’ rights and remedies
generally; and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law);     (e)   the
execution, delivery and performance of this Agreement do not violate: (i) its
charter, bylaws or any resolution of its board of directors or other committee
charged with the governance of its affairs; (ii) any contract, agreement,
arrangement, understanding or commitment to which it is a party or by which it
or any of its assets or properties is bound; or (iii) any law, rule, regulation,
order, writ, judgment, injunction, decree or determination affecting it or any
of its properties;     (f)   it: (i) is regularly paying its debts as they
become due; (ii) has not filed any petition for relief under the bankruptcy laws
of the United States; (iii) has not made and is not making a general assignment
for the benefit of creditors; and (iv) has not initiated nor been the subject of
any proceeding seeking to have a receiver or trustee appointed to liquidate or
manage its affairs;     (g)   no litigation is pending or, to its knowledge,
threatened which seeks to restrain it from performing its obligations hereunder
or the adverse outcome of which would materially affect its business or its
ability to perform its obligations hereunder; and     (h)   it has not received
non-public information regarding the Project, including information designed to
influence the award of this Agreement or to corrupt the bidding process with
respect to the award hereof other than information provided directly by Owner.

     23.2 Owner’s Representations and Warranties. Owner hereby represents and
warrants to Contractor, as of the date hereof, that:

  (a)   it is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia and the State of
Maryland;

*** Confidential Treatment Requested

54

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

  (b)   it has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, which action has not been superseded or
modified;     (c)   this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except to the
extent such enforceability may be affected by: (i) insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors’ rights and
remedies generally; and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law);     (d)   the
execution, delivery and performance of this Agreement do not violate: (i) its
charter, bylaws or any resolution of its board of directors or other committee
charged with the governance of its affairs; (ii) any contract, agreement,
arrangement, understanding or commitment to which it is a party or by which it
or any of its assets or properties is bound; or (iii) any law, rule, regulation,
order, writ, judgment, injunction, decree or determination affecting it or any
of its properties;     (e)   it: (i) is regularly paying its debts as they
become due; (ii) has not filed any petition for relief under the bankruptcy laws
of the United States; (iii) has not made and is not making a general assignment
for the benefit of creditors; and (iv) has not initiated nor been the subject of
any proceeding seeking to have a receiver or trustee appointed to liquidate or
manage its affairs; and     (f)   no litigation is pending or, to its knowledge,
threatened which seeks to restrain it from performing its obligations hereunder
or the adverse outcome of which would materially affect its business or its
ability to perform its obligations hereunder.

ARTICLE 24
LIMITATION OF LIABILITY
     24.1 Aggregate Limit of Liability.
     24.1.1 Subject to the exclusions set forth in Section 24.1.2, Contractor’s
aggregate liability to Owner in connection with Work performed or not performed
with respect to any Phase, whether in contract, warranty, tort, negligence,
strict liability or otherwise, shall not exceed the total cost of the Work
associated with such Phase (including the portion of the Management Fee paid
with respect to such Phase and a pro-rata portion of the [***]).
     24.1.2 The limitation set forth in Section 24.1.1: (a) shall be in excess
of any recoveries under Contractor Required Insurance; (b) shall not apply to
the extent of liability based on Contractor’s indemnity obligations hereunder,
or Contractor’s gross
*** Confidential Treatment Requested

55

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
negligence, fraud or willful misconduct; and (c) shall not apply to the extent
of any liability based on Contractor’s breach of its warranty set forth in
Section 15.1(h).
     24.2 Exclusion of Consequential Damages. NOTWITHSTANDING ANY PROVISIONS IN
THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY, SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR
EXEMPLARY DAMAGES OF ANY KIND OR NATURE WHATSOEVER, OR DAMAGES ARISING FROM OR
IN CONNECTION WITH SUCH OTHER PARTY’S LOSS OF ACTUAL OR ANTICIPATED PROFITS OR
REVENUES, IN EACH CASE ARISING OUT OF, IN CONNECTION WITH OR RESULTING FROM THIS
AGREEMENT, REGARDLESS OF WHETHER ANY CLAIM FOR SUCH LOSSES OR DAMAGES IS BASED
ON CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR
OTHERWISE.
ARTICLE 25
DISPUTE RESOLUTION
     25.1 Informal Dispute Resolution. Within five (5) Business Days after
receipt by either Party of a written notice describing a dispute between the
Parties arising under or in connection with this Agreement or the Project, the
Project Manager and Owner Representative shall meet, confer and attempt in good
faith to resolve such dispute.
     25.2 Steering Committee. If a dispute is not resolved by the Project
Manager and Owner Representative within ten (10) Business Days after the first
meeting conducted pursuant to Section 25.1, each Party shall be obligated, by
written notice to the other Party, to refer such dispute to the Steering
Committee. Within five (5) Business Days after such referral, the Steering
Committee shall meet, confer and attempt to resolve such dispute.
     25.3 Written Decisions. The terms of any resolution of a dispute by the
Project Manager and Owner Representative or by the Steering Committee shall be
memorialized in writing and signed by each Party.
     25.4 Litigation. If a dispute is not resolved within ten (10) Business Days
after the first meeting conducted pursuant to Section 25.2, either Party may
initiate litigation to resolve such dispute. Any communications between the
Parties in connection with the process described in Sections 25.1 and 25.2 may
not be introduced by either Party in any such litigation.
     25.5 Continued Performance. The Parties shall continue to perform under
this Agreement during the pendency of any dispute hereunder.
ARTICLE 26
INTELLECTUAL PROPERTY
     26.1 Proprietary Information. All drawings, designs, specifications,
databases, computer software and other proprietary information created in
connection with the Project or pursuant to this Agreement or any Subcontracts
(“Proprietary Information”) shall, immediately
*** Confidential Treatment Requested

56

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
upon the creation thereof, become the property of Owner. Contractor shall
procure from each Subcontractor rights to Proprietary Information as provided
for in this Section 26.1.
     26.2 Infringement Claims. Should Contractor become aware of any Claim based
on infringement, unauthorized use or misappropriation of any intellectual
property right used by Contractor or any Subcontractor in connection with or
related to the Project or the Work, Contractor shall: (a) promptly upon learning
thereof, investigate such Claim; and (b) promptly submit to Owner copies of all
documents relating to such Claim and a detailed, written analysis of such Claim,
including the course of action recommended by Contractor with respect thereto,
which analysis shall be updated by Contractor as reasonably appropriate.
     26.3 Use of Trademarks. Contractor shall not, without the prior written
consent of Owner: (a) use the name or any trade name or registered trademark of
Owner or any of its Affiliates in any advertising or communications to the
public in any format; (b) make publicity releases or announcements regarding
this Agreement, the Project or any activities related thereto; or (c) except as
required in connection with the performance of the Work, take any photographs,
video or other recordings of Owner’s property.
ARTICLE 27
CONFIDENTIAL INFORMATION
     27.1 Protection of Confidential Information.
     27.1.1 Contractor shall hold in confidence and refrain from disclosing all
business, technical and other information that is made available by Owner,
directly or indirectly, or developed or acquired by Contractor or any
Subcontractor in connection with the Project or pursuant to this Agreement,
including any such information made available to Contractor prior to the
execution of this Agreement (collectively “Confidential Information”); provided,
however, that Confidential Information shall not include Unrestricted
Information.
     27.1.2 Notwithstanding anything to the contrary set forth herein, all
information pertaining to the Work schedule, including the Project Schedule,
shall constitute Confidential Information.
     27.2 Permitted Disclosures.
     27.2.1 Contractor shall disclose Confidential Information to Contractor
Personnel on a need-to-know basis.
     27.2.2 Contractor may disclose Confidential Information to Subcontractors
only to the extent reasonably necessary in connection with their performance
under Subcontracts and provided that as a condition to such disclosure such
Subcontractors shall execute non-disclosure agreements on materially identical
terms to those set forth in Section 27.1.
*** Confidential Treatment Requested

57

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     27.2.3 Contractor may disclose Confidential Information to its insurance
providers to the extent reasonably necessary to procure Contractor Required
Insurance.
     27.2.4 If Contractor receives legal notice to compel disclosure of any
Confidential Information, Contractor shall provide Owner with prompt written
notice thereof so that Owner may seek a protective order or other appropriate
remedy at Owner’s sole cost and expense. If Contractor is legally obligated to
disclose any Confidential Information, Contractor shall furnish only that
portion of such Confidential Information which it is legally required to produce
and Contractor shall cooperate with Owner and its legal counsel to enable Owner
to obtain a protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information.
     27.3 Contractor’s Use of Confidential Information. Contractor shall not,
without the prior written consent of Owner, use any Confidential Information for
any purpose other than the performance of the Work.
     27.4 Survival. This Article 27 shall remain in effect for a period of five
(5) years from the later of: (a) the Substantial Completion Date; or (b) the
date of termination of this Agreement.
     27.5 Contractor’s Proprietary Information. Owner shall hold in confidence
and refrain from disclosing information provided by Contractor relating to
salaries, wages, overhead costs and employee benefits of Contractor Personnel in
connection with the Project or pursuant to this Agreement; provided, however,
that: (a) if Owner receives legal notice to compel disclosure of any such
information, Owner shall provide Contractor with prompt written notice thereof
so that Contractor may seek a protective order or other appropriate remedy at
Contractor’s sole cost and expense; and (b) if Owner is legally obligated to
disclose any such information, Owner shall furnish only that portion of such
information which it is legally required to produce and Owner shall cooperate
with Contractor and its legal counsel to enable Contractor to obtain a
protective order or other reliable assurance that confidential treatment will be
accorded such information.
     27.6 Contractor Information. Except as expressly provided in this
Agreement, Owner shall have no obligation of confidence with respect to any
information disclosed to Owner by Contractor or any Subcontractor, and Owner
shall be free to use or disclose any or all such other information without
accounting to Contractor therefore, regardless of whether Contractor or any
Subcontractor places any restrictive notices on any information disclosed
hereunder.
ARTICLE 28
MISCELLANEOUS PROVISIONS
     28.1 Governing Law. The validity, interpretation and construction of this
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to its choice of law principles.
     28.2 Notices. Notices delivered pursuant to this Agreement shall be in
writing and shall be delivered by hand or sent by facsimile, certified mail or
recognized overnight delivery service to Contractor or Owner at the respective
Party’s address set forth below:
*** Confidential Treatment Requested

58

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
Owner:
Trans-Allegheny Interstate Line Company
c/o Allegheny Energy, Inc.
800 Cabin Hill Drive
Greensburg, PA 15601
Attn: James B. Kauffman
fax: 724-830-5692
with a copy to:
Trans-Allegheny Interstate Line Company
c/o Allegheny Energy, Inc.
800 Cabin Hill Drive
Greensburg, PA 15601
Attn: Kathryn L. Patton
fax: 724-838-6797
Contractor:
Kenny Construction Company
250 Northgate Parkway
Wheeling, IL 60090-2684
Attn: John E. Kenny, Jr.
fax: 847-541-8358
with a copy to:
Vedder, Price, Kaufman & Kammholz, P.C.
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Attn: Karen P. Layng, Esq.
fax: 312-609-5005
Notices shall be deemed to have been received upon the date of delivery if hand
delivered or delivered by recognized overnight delivery service or on the
delivery date shown upon the return receipt of such item, or three (3) Business
Days after the date of mailing in the event delivery is refused. Facsimile
messages shall be deemed to be delivered by a successful transmission notice
generated by the facsimile machine.
     28.3 Entire Agreement. This Agreement contains the entire understanding of
the Parties with respect to the subject matter hereof and supersedes all prior
negotiations, representations or agreements, either oral or written, related to
the subject matter hereof. There are no oral or written understandings or terms
or conditions with respect to the subject matter hereof other than those
expressly set forth in this Agreement.
*** Confidential Treatment Requested

59

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     28.4 Severability. If any provision or portion of this Agreement shall be
adjudged invalid or unenforceable by a court of competent jurisdiction or by
operation of law, that provision or portion of this Agreement shall be deemed
omitted and the remaining provisions shall remain in full force and effect.
     28.5 Independent Contractor. Contractor and each Subcontractor shall be an
independent contractor for, and not the agent or employee of, Owner. The
relationship of employer and employee shall not exist between Owner and any
Contractor Personnel. Contractor acknowledges and agrees that no Contractor
Personnel shall be eligible to participate in, nor shall they receive, any
benefits from any employee benefit plan(s) sponsored by Owner. Neither this
Agreement nor the performance of the Work shall create or be construed to create
any partnership or joint venture or operation between Owner and Contractor or
any Subcontractor.
     28.6 Assignment. Neither Party may assign this Agreement without the prior
written consent of the other Party and no permitted assignment shall relieve the
assigning Party of its obligations under this Agreement; provided, however, that
Owner may assign this Agreement without Contractor’s consent to: (a) any Lenders
and their successors, assigns and designees in connection with any financing or
refinancing related to the development, construction, operation or maintenance
of the Facilities and, if requested by Lenders, Contractor shall execute a
consent to the assignment of this Agreement by Owner or Lenders in form and
substance reasonably satisfactory to Lenders; and (b) in whole or in part to
Allegheny Energy, Inc. or any Affiliate thereof. Any assignment made or
purported to be made in violation of this Section 28.6 shall be void ab initio
and shall have no legal effect. This Agreement shall inure to the benefit of,
and be binding upon, the successors and permitted assigns of the Parties.
     28.7 Amendments. Amendments to the terms of this Agreement (including any
Schedule or Exhibit hereto) shall only be effective if made in writing and
signed by each of Owner and Contractor.
     28.8 Precedence. In the event of a conflict or inconsistency between terms
and conditions contained in Articles 1 through 28 of this Agreement and the
terms and conditions set forth in any Exhibits or Schedules hereto, the terms
and conditions set forth in Articles 1 through 28 shall take precedence.
     28.9 Remedies Cumulative. The remedies provided for in this Agreement are
cumulative and shall be in addition to other remedies available at law or in
equity.
     28.10 Sole Benefit. This Agreement and all rights under this Agreement are
intended for the sole benefit of the Parties and shall not imply or create any
rights on the part of, or obligations to, any other Person except to the extent
expressly provided herein.
     28.11 Waiver. No waiver by a Party of a right or default under this
Agreement shall be effective unless in writing and signed by such Party. No such
waiver shall be deemed a waiver of any subsequent right or default of a similar
nature or otherwise.
     28.12 Counterparts. This Agreement may be executed in counterparts which,
when signed by each of the Parties, shall constitute one and the same
instrument.
*** Confidential Treatment Requested

60

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
     28.13 Survival. The provisions of Articles 15, 18, 22 and 24 through 27 and
Sections 10.9, 21.2, 21.4 and 21.6 shall survive the termination of this
Agreement.
     28.14 Small Business Investment Act. Contractor agrees to perform the Work
in accordance with a plan agreed to with Owner so that small business concerns
and those concerns owned and controlled by socially and economically
disadvantaged individuals, as defined in Section 8 of the Small Business
Investment Act, 15 U.S.C. § 637, have the opportunity to compete for
Subcontracts to the fullest extent consistent with the requirements of this
Agreement and to make certifications and periodic reports required b such plan.
     28.15 Announcements. Contractor shall not make or issue any press release
or other public announcement or any other disclosure of any kind relating to
this Agreement or the transactions contemplated herein (including the existence
of this Agreement or the terms and conditions of this Agreement) to any third
party without the prior written consent of Owner.
[signature page follows]
*** Confidential Treatment Requested

61

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

 

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
IN WITNESS WHEREOF, the Parties, intending to be legally bound, have duly
executed this Agreement in duplicate originals as of the day and year first
written above.

         
TRANS-ALLEGHENY INTERSTATE LINE COMPANY
 
By:
  /s/ David E. Flitman
 
David E. Flitman    
 
  President      
KENNY CONSTRUCTION COMPANY
 
By:
  /s/ John E. Kenny, Jr.
 
John E. Kenny, Jr.    
 
  President    

*** Confidential Treatment Requested